Rent Vs Buying A Home

Rent vs Buy?

Have you ever been in a situation where you are moving to a new area for what ever reasons, and sometimes you find yourself in a tug of war as to what you should do.  Should you Rent or should you Buy?
It's hard when you don't know the area, or even if you do you just don't feel comfortable, or maybe the available inventory just isn't cutting it for you and you can't find what you like, but you have to make a decision.
Would it be easier to just rent a place for a year so you can get a feel for the lay of the land and at the same time keep your eyes open for that perfect home?  What if you have concerns that you may be moving again in a few years?

These are the types of questions I get asked more often than you would expect.  And to hopefully help answer that question I would like you to ask yourself a few questions instead, because you may already have the answer.

What Do You Need To Consider If You Decide To Rent?

How long are you planning to rent - should you go Month to Month or Lease? 

-Month to Month doesn't give you much sense of security, as the landlord may decide to do something different with the property and if you are on a month to month... well you could be out looking sooner than you had planned.

-Lease gives you some sense of security, but what if you find the home of your dreams?  Will you be able to get out of your lease?  Can you sub-let? Do you want to be bothered with that responsibility?

Legitimate questions and ones that need to be considered very thoughtfully.  I've seen situations just like this where folks found a place to rent, but the owners wanted a lease.  Thinking that if they did find a house they could just find a new tenant for the house they were renting.  And when it actually happen, there was no provision in the lease for early exit or sub-letting and their landlord wouldn't let them out of their lease.  Long story short, they lost the house they really wanted to buy and were saddled with a lease for another year.

Do you need the tax deductions 
- When you rent, your rent is not tax deductible (unless you are self employed and use a portion of your home for business {in some circumstances}).

Will Interest Rates Stay Where They Are?
-As of this post- Interest rates were  still below 4% - Who knows where they'll be next year

How About Pets? 
-Depending on where you live, finding a rental that allows pets can be a challenge, don't forget about the pets.

Cost to Rent
It has been suggested that if you pay 35% less in rent than you would in owning (this includes the cost of the mortgage, taxes, insurance…) then it may be smarter to rent.

Buying Considerations:

How long do you plan to live in that house?
If it’s less than say 4 years you may want to consider renting. When you buy or sell you have what is called “Closing Costs” - This is the cost to get the transaction done. Transfer Tax, Deed Prep, Title Search, Appraisal, RE Commission, Inspections, Pre-paids, Loan Fees, Attorney fees,  just to name a few..) These costs are over and above the price of the home. If you are selling your home you will have similar costs when you sell.   Depending on the market when you go to sell quickly, you may not be able to recapture those costs. Also, if you stay less than 2 years you may also have Capital Gains to consider.

What Is The Current Lending Landscape Like For Getting A Loan?.
Are you planning to get a loan on a home when you DO buy? Interest rates are at historic levels right now. Are you confident that they will be at attractive levels when you to decide to buy? If they go up, how much house will you be able to buy or not?

Are there Tax Advantages? 
Buying a home with a mortgage, you can write off the interest (as well as improvements when you sell). Do you need the tax deductions that the interest mortgage payment allows? Renting doesn't give you this option. Something to think about.

Pride of Ownership/It's Your Home.
It’s yours and you can do what ever you want to it, if you want to change it up, redecorate or remodel you are not (in most cases) limited to what you can do with your home (unless you buy in a historic district or a developments with a home owners association and restrictive covenants).

Profit Making
When you do decide to move and you own your home, again depending on the market at the time of you sell, you may enjoy a profit which when you rent is just money spent.

So, What Should You Do Buy or Rent?

 These are just a few of the things you need to consider, I'm sure there are more.  And only YOU can decide what is best for you.  However, I do recommend that you align yourself with a knowledgeable and professional local Realtor® who knows the market.  This is what they do for a living.  There are benefits to this relationship that you should take advantage of.  Ask them to share with you the market dynamics and local trends in housing where you plan to live.  Is the market appreciating, flat, depreciating?  Is it a buyers market or sellers market? What do Comparable sales tell you?  These and many other buying or selling decisions can be discussed and will give you a sense of good direction in whatever decision you ultimately make.

You might also want to talk to  your accountant as well to get the lowdown on your personal situation, there may be other tax advantages to buying over renting that you can explore.

Buying a home is a very big decision. Renting a home can be just as big a decision. At the end of the day however it's a decision you will have to live with.

(Any questions regarding your personal tax situation should always be discussed with your accountant)