Many young people who are looking to leave their family homes and move in with their partners are nowadays faced with a difficult question: should I rent or should I invest in a home of my own? To some, this is a no-brainer, and whatever they choose, it’s a good decision. But for the majority out there who are trying to figure out what’s best for the long-term financial stability of their future families, making this decision will be a complex and daunting task. Sure, you could try to get a mortgage to buy your own home, but is that really what you need, or what fits your lifestyle?
The answer will depend on a number of key variables, all of which will ultimately revolve around your financial stability and your ability to improve your net worth in the long term. Try using a net worth calculator to see where you stand currently. With all of that in mind, let’s take a look at the five key considerations to help you decide whether to rent or to buy a home
1. Investing in a home builds equity
The first and most obvious consideration is: where is all of your money going? If you decide to rent, then your money is definitely going to the landlord, which means that it’s not generating a return on investment. And that’s perfectly fine if you choose to take that route, because there are more variables in play. But keep in mind that choosing to buy a home builds your long-term net worth, your equity.
Each time you make a mortgage payment, you are pouring money into a property that is yours, and yours alone. This means that you can choose to do with it whatever you want. You could even sell your house for cash down the line for a drastically greater price, provided that you keep it in excellent shape and seize market opportunities.
2. Renting lowers upfront costs
That said, buying a house is a cumbersome, financially-frightening task. Unless you’re the heir of a Saudi King, you can’t really expect to buy your ideal home with cash, so you will need to apply for a loan in order to gather the finances for the down payment, as well as the rest of the capital – that’s without taxes, subsequent fees, or upkeep.
On the other hand, you don’t have to worry about these financial difficulties if you’re renting, nor do you have to commit to a mortgage plan that you’ll have to pay off no matter what. There’s no telling what might happen in the years to come, and should you lose your spouse’s revenue stream for any reason, you can expect to encounter severe financial difficulties and troubles when trying to meet your payment deadlines.
3. Finding the right property
Of course, all of this means that you really have to go the extra mile to find the right kind of property, which means that you need to research opportunities from both groups, in order to see which option has a better ROI potential for your lifestyle, finances, goals, and current and future needs. Who knows, maybe you’re leaning towards renting a home or an apartment, but then you come across a home that’s selling for an excellent price.
That said, you can’t hope to find the best deals on your own, which is why homebuyers regularly talk to a reputable real estate consulting firm in their region in order to use their insights and experience to get to those hidden gems in the real estate market. Find a consultant in your area, tell them what you’re looking for, ask every question that pops in your head, and keep an open mind – maybe you’ll find a truly unique deal.
4. Upkeep costs
Another important consideration you need to keep in mind is that owning a home has greater long-term upkeep costs. When you sign a contract with your landlord, part of the responsibility and upkeep falls on their shoulders, which can make it easier to save money on repairs, remodels, and other upkeep fees. That said, owning a home means that you get to choose when and how you’re going to invest your money, and you wouldn’t have to wait for your landlord to fix a nagging issue.
5. Flexibility and financial freedom
And finally, remember that renting gives you the freedom to move at will. That said, some people don’t like to move and want to stay put and build a true family home, so this advantage also becomes a rental property’s biggest drawback.
When it comes to financial freedom, investing in your own home ties your money up to the house, but a rental gives you the opportunity to leave at will. But it also means that you’re handing your hard-earned money to a landlord instead of investing it your own place of residence.
Over to you
As you can tell, there is no simple answer to this important question, but there are some key considerations that can help you shape your mindset, figure out your long-term goals, and make the most cost-effective decision down the road. Use these tips to decide whether it’s better to rent or buy a home, and you will be one step closer to ensuring financial stability for your family.
Derek Lotts is a Sydney based writer and researcher, a regular contributor at Smooth Decorator blog. He writes about décor, gardening, recycling, ecology and business. He thinks all of these topics fall under the self-improvement category. He believes in the power of sharing ideas and communicating via the internet to achieve betterment.