Should I Buy or Rent?

To buy or not to buy?  That is the question that plagues renters.  Whether ‘tis better to suffer the whims and rent raises of landlords or to stake all on the ability to pay a mortgage?  My husband and I, who have always been renters, have decided that this is the year we are going to change our status to that of homeowners.  A number of factors have contributed to this decision ranging from the need for the tax break to the overwhelming desire to have walls that are not white or that even more hideous cream color that most landlords prefer.

With the current crisis in the mortgage industry it might seem like insanity to even think about buying right now.  For those who can swing it, though, this is a great time to snag a house for a lot less than you would have paid a year ago or might pay a year from now.  For anyone trying to decide whether to rent or buy there are several factors to take into account.

Intention to remain in the same place – Do you intend to stay in the same area for a long period of time, or do you only plan on staying for a couple of years or as long as it takes to get that undergraduate or graduate degree or put another line on your resume or save up the money to move?

Price – What will be the price difference in your area between renting and buying something?  Shop around.  If you can rent a two bedroom house or apartment for $1,000, but a mortgage on a similar sized two bedroom place will run you $2,000, then you need to seriously consider whether or not owning that place is worth paying twice as much a month to you.  For some the answer is yes, for others no. 

Stability - Is your income 100% predictable and are your expenses fixed so that you know each month what’s coming in and going out?  If so, then buying, if you can afford it, is going to be an attractive situation, especially given that you are investing your money in the property.  However, if you have income or expenses that are more unpredictable, you might want to opt for the cheaper rent so that when one of those low-income, high-expense months comes along (and they always do) you don’t have to dip into savings or borrow from a relative or friend to cover your housing costs.  There’s a lot to be said for being able to be independent.

Likely future change in your housing needs – If you know that there are events coming up in your future that will drastically affect your housing needs, then you might want to consider renting until then.  When you know exactly what you need in a house in terms of space, location, and amenities, then you’ll be able to make a more informed purchase.  If renting just doesn’t appeal to you, you can still purchase, but do so with an eye to what you are going to need five years from now and not just five months from now.  Likely future changes include planning for children or downsizing for retirement.

Amount of time and money you have – They say that when there is a problem you can throw either time or money at it.  When something goes wrong with the house you own, you have to fix it which means spending money, spending time, or in all likelihood, both.  When you rent and something goes wrong it is your landlord’s job to spend their time and money fixing the problem.  If you need to find a plumber on a holiday weekend it’s good to not be the one footing the bill.  On the other hand, not all landlords are as responsive as we would like or need which can mean extra time living with something that’s broken before it gets fixed.  It can also mean that you have to be something of a nag to get things done.

Amount of control you need – If you are the type of person that needs to exercise a lot of control over your environment then you’re going to want to buy.  When you own something you get to make all those decisions that landlords do when you rent.  This ranges from cosmetic things (like what color to paint the walls) to more important things (like when to schedule appointments you need to be home for).  I have some friends who are very happy with the layout of the apartment they are currently renting, but have serious problems with the level of control exercised by the management.  At least once a month the landlord schedules different events (inspecting sliding glass doors, etc.) without regard for anyone else’s schedule.  My friends, like many people, don’t like strangers walking around their place unattended, and often must take unpaid time off from work to be present for these maintenance calls.  Ideally, they need to either find a place to rent where they can exercise more control over their space or they need to buy a house.

Buying a house is a huge step, and certainly isn’t for everyone.  If you decide to take that plunge, make sure you get a real estate agent or broker you trust (HINT – the good ones won’t make your skin crawl!)  Research the area to find the best deal that’s right for you.  Know what you can do today and what you will need to do down the road to keep the house once you get it.  Happy house hunting!

Related Links:

• How much are your payments going to be?  Check out this online mortgage calculator.
• What do I need to know if I’m looking at buying a bank-owned house? 
• As a renter, what rights do I really have?