When it comes to finding your perfect home, there are plenty of options — the least of which is the choice of renting vs. buying. This article explores the benefits of renting or buying real estate to help you decide the best path forward. But first, there are some key considerations to think about when deciding where you want to live and if you want to leap into homeownership.
Before starting a house or apartment hunt, consider these three critical factors that will inform your decision to rent or buy.
Overall, you will need strong credit, enough money for a down payment, job security or other steady income, and a history of financial responsibility to get a mortgage to buy property. Buying a house means taking out a massive loan, and without the proper standing to finance, you could be looking at high interest rates or being denied loans which then puts a halt to your home purchasing journey.
A buyer’s market exists when there is more supply than demand for homes, and therefore many homes are on the market. Conversely, a seller’s market has little supply and high demand, so home values tend to rise. A real estate agent can help you find out which market you are in and give you an idea of what potential buyers are looking for.
When considering renting vs. buying, you’re likely to stay in one place longer as a homeowner. So, if you want to buy a house or apartment, you can expect to settle down for the next 3-5 years of your life. Are you happy with your job? Do you like the city you live in? Are you attached to your social circle? Consider these questions before making the leap into a purchase.
As a homeowner, you’re going to assume complete responsibility for the property. From unavoidable home maintenance tasks to budgeting for taxes to general upkeep and much more, buying will keep you busy. When you rent, on the other hand, a landlord or property manager takes care of all this for you.
When buying a house, there are many expenses to take into account before closing on your new property, including home inspection fees, title insurance, transfer taxes, legal fees, moving expenses, closing costs on the new property, and more.
Then, when you own the home, you’ll need to pay property taxes, homeowner’s insurance, repairs and maintenance, home updates, more utilities (water, trash, HVAC), and more! These costs can add up quickly, and if you aren’t planning ahead, you can get over your head pretty quickly.
There are many reasons to buy real estate vs. continuing to rent an apartment. They include:
You can deduct mortgage interest as well as your property taxes. As a renter, you won’t receive this benefit. Additionally, if you meet certain requirements, the IRS won’t charge a capital gains tax on the profits made when you sell. You can keep the first $250,000 in profit you make when selling the home if you’re single or the first $500,000 if married.
As an owner, you’re actively investing your money into the ownership of your home, increasing the amount you own with every payment. When you rent, you could be losing that money with every payment that could be invested into a home instead. Also, you can borrow money against your home’s equity to pay for major purchases, or, when the entire mortgage has been paid down, borrow to fund major purchases like a vacation home or a child’s college education.
In an apartment, you’re stuck with what you get. When you own, you can do whatever you want — tear down walls, add a deck in the backyard, paint the front door. It gives you complete creative control to do what you want.
If you live in a house, you can decide how to approach maintenance, either doing it yourself or picking your own contractor. If you live in a condominium or homeowners’ association, you may pay a monthly fee to have maintenance work covered by the association’s contractors.
Raising a family in an apartment is completely fine, but you can sometimes be limited to how much space you have, and many people may prefer to have a larger home with more space, a yard, and more flexibility to expand than in an apartment.
There are also many reasons to continue renting an apartment or home, many of which alleviate stress and worry by having a more hands-off living situation.
Renting gives you the ability to try out a new neighborhood or city without committing to something long-term. Usually, you’ll sign a year-long lease, giving you the time you need to decide whether or not the area is right for you, without forcing you to stick around if you don’t like it.
Most people understand that the down payment you make on a home is anywhere from 5 to 20 percent of the total cost, which can be a pretty hefty amount. But when you rent, you often only need a small deposit, usually equal to one month’s rent—which is refunded upon move-out after major repairs, damage, or maintenance fees are taken out.
If you don’t have outstanding job security, that can seriously hamper your attempts to own a home. However, renting gives you the chance to save up and cost less than owning a home should you lose your job unexpectedly.
As stated earlier, your credit score is a huge factor in your ability to borrow from a bank. Creating a history of on-time rental payments can help you build the sort of credit you need to qualify for a mortgage.
When you experience a burst pipe or a broken air conditioner, you don’t head to the hardware store, you simply contact the property manager, and he’s required to fix it. This is one of the biggest benefits of renting—never having to worry about fixing anything. But, of course, the downfall is you are on someone else’s timeline, which can be annoying if you can’t use a part of your apartment because it’s broken.
Your decision to rent or buy will depend on your personal circumstances and desires, plus maintaining a particular lifestyle. No matter what, renting and buying real estate takes up a significant portion of your income, so it deserves careful thought and consideration. There are many advantages and disadvantages to each path, and you will know your end goals more so than anyone else.
If your lifestyle and financial situation show that renting is a better decision, don’t let generic statements like “you’re wasting money when you rent” or “buying a house is what every adult does” change your mind. Often, it’s simply a better choice and will put you in a better position to buy in the future. And we love providing our future residents with an apartment home they’ll love, even if it’s just until they’re ready to buy a home.
So if you’re looking for a place to rent in the Twin Cities, contact the experts at Bigos Management! We will help you find an apartment that feels like home. Contact one of our team members today by emailing firstname.lastname@example.org or check out our available units online.