4 Signs Its Time To Buy Versus Rent
Most Millennials start out renting and taking advantage of the lower monthly costs and flexibility that renting provides. Many remain tenants for the same reasons. Others, however, reach a point at which buying a home makes more sense than paying a landlord a monthly fee. Do you want to build equity or let your landlord do so?
How do you know if you’re at that point? By taking a look at your financial picture and your plans for the future.
Through my years as a Realtor in the Raleigh area, I have worked with many people living in rentals for a variety of reasons, some as young as 22, some near age 30 and even older, retired folks who thought renting would be easier. These clients include couples, single mothers, single men, and single women. In each case, these clients made their decision in large part based on two things. Personal need for more space or a home they could make their own and a belief that they were throwing away their money to rent.
Many Millennials in Raleigh start out renting and taking advantage of the lower monthly costs and flexibility that renting provides. Many remain tenants for the same reasons. Others, however, reach a point at which buying a home makes more sense than paying a landlord.
How do you know if you’re at the point at which buying a home makes more sense than paying a landlord?
By looking at the numbers and your plans. Knowledge is power. Find a trusted Realtor with local market knowledge. Local market data and price trends are a key component in beginning a home search. Getting connected to a trusted and reputable local lender is also very important. This will help you focus your efforts and not waste time.
Andrea and Adam, rented an apartment in Raleigh for 1 year after graduating from and moving from Texas. This couple quickly realized the potential of home ownership in Raleigh, a rapidly growing area of the US. They also realized that paying rent was not going to help them build wealth. With plans to renovate the basement of this fixer upper and rent it out, this home is both a solid investment, and a source of income to offset their monthly mortgage payment. I am happy to have helped Andrea and Adam find this home quickly and guide them to closing just weeks before their lease was set to renew.
1. Same or greater cost
Andrea and Adam’s monthly rent and the cost of their mortgage payment on the property is about the same per month. Yet with a mortgage, this couple can build equity in an asset — a home. The home is more than three times the size of their previous apartment.
When the cost to rent is the same as or more than the cost to buy a home, it’s time to seriously crunch the numbers.
2. Acquiring equity for future homes
A more important reason to buy is the need for assets. The equity in this starter home will provide a basis upon which Andrea and Adam can then borrow to move up to a larger home in the future. As their family expands, they anticipate they will need a larger home with a yard for children and a dog.
“We knew we wanted to stay in the area we were renting in but didn’t think we could afford to buy in that area. We budgeted for our mortgage payments to be around the same cost as our apartment to not suffer a huge lifestyle change. With Raleigh’s progressive real estate market, we knew we had to jump on something fast, especially in the area we wanted with homes selling within 2-4 days on the market. We found our home and had an accepted contract within 4 days, thankfully, and surprisingly without a bidding war, for which we were very grateful as first-time home buyers. We see our home as a wise investment, not only for future resale, but because of the ability to rent out a portion. We are both handy individuals and knew from the moment we started looking at houses, we wanted something dated but livable, so we can make it our own while building equity.” they explain.
If you foresee the need for a larger home in the future, buying a starter home in a rapidly appreciating area can make a lot of sense. If you are “fixer uppers”, you can build some sweat equity, too, just like Andrea and Adam.
3. You are financially able
Until you’ve got steady income and have met with a mortgage lender to determine your lending ability, committing to a home purchase is risky. Andrea and Adam, fortunately, had done both.
“It makes all kinds of sense,” say Andrea and Adam, since they are beyond worrying about survival; they both have good jobs and steady income in a position within their respective fields that are unaffected by economic cycles or seasonality. If you have a consistent income stream and an interest in building personal wealth, investing in a home may be a wise move.
4. The need for a home is fixed and stable
People experiencing or anticipating changes in their jobs or family situations that will cause a changing need for more or different space or in a different location may want to stick to renting. If your need for space is subject to change in the near term, committing to a set location or housing may not be appropriate. One of the major advantages of renting is the ability to move or expand in sync with your needs. Once you buy a home, your flexibility is reduced.
Only when your personal plans have stabilized, or your need for space, amenities, a yard, garage, home office, etc. will be met by settling in, should buying a home be considered. Then look at the market. Download my FREE Market Update by Size, Price Point and Location by clicking below. Or, for a free individual consultation and custom home search complete with a dedicated Realtor, call or text me! 919-600-3208. I would love to hear from you.