When the time finally comes and you have the choice of buying or renting a house, you are likely to seize the opportunity. Nothing beats knowing that your monthly payments are going into the property and that you don’t have to pay your landlord. Buying a home is not as easy as you imagine.
First of all, houses are expensive, and you have to save a deposit and pay rent and other costs that the tenant does not incur. Once you own your own home, the repairs and everything you do with the property will be yours.
Should you save for a mortgage or just a deposit, or is there a better option for you, and what about rent? These questions are not easy to answer, but in the end, it comes down to how much you earn. How much a house cost is the first big factor that comes into play, and it’s not that simple.
The inevitable problem with buying is how much you have to do in advance, and that can quickly amount to thousands of dollars. If you are overly aware of these costs, renting is usually the most attractive option. For example, if you want to take out a mortgage, you will need to consider a down payment of around 20% of the cost of a home. Add to that the amount you will have to fork out for insurance, property taxes, mortgage interest, insurance premiums, and taxes on your mortgage payments. And they add up to a total of about $2,000 to $3,500 a year.
To prove your seriousness, some lenders charge serious fees for home surveys. These costs may exceed your deposit and must be taken into account during the purchase process. And don’t forget your monthly mortgage payments when you actually buy the house. You will also have to deal with recurring costs such as insurance and maintenance.
If renting is able to eliminate most of these costs completely, it will gain the upper hand in the long run, but only for a short time. In addition, you do not have to worry about electricity, cable or internet, and the only costs you may incur in advance are the deposit. As a tenant, the apartment is even covered by the landlord’s insurance, for which he is responsible. If something breaks when renting, don’t worry too much about the cost of repairs.
You don’t have to worry about taxes or insurance payments for homeowners, and you don’t have to worry about mortgage interest, property taxes, insurance, and maintenance costs. As a way to accumulate wealth, real estate is one of the most viable options, but if you want to save money in the short term, renting is the way to go.
The average return between 1978 and 2004 was 8.6%, and to put things into perspective, if you bought a house for $150,000 a decade ago, it could be worth $300,000 today. Improve your home and increase attractiveness and value, but not necessarily the return.
It is not uncommon to make millions from a property deal, but even if you improve your home, it is the landlord who benefits, not you. If you originally wanted to build up equity, the idea that you could rent the house out for the rest of your life is the worst way to do it. It’s also one of the worse ways to do it because it increases your spending and leads to more debt.
And make no mistake, children will let you down in the long run, even if it’s only for a few years at a time, not for the rest of your life.
Every business has risks, and real estate is no different, but a great example is the housing bubble of 2006. If you bought your home in 2005 for $490,000, it could lose as much as $150,000 in value over the next 10 years.
In most markets, real estate tends to increase in value over the long term – but not as fast as it did during the housing bubble.
It means a few losses here and there, but owning a home creates great income potential, and it should go unmentioned. If you already own a house, you can rent one or two single rooms in a small apartment or a larger one. Or if you own relatively large houses and feel just as comfortable elsewhere, live in one of the smaller houses and rent out the larger ones.
The rent you earn can then be used to pay your mortgage, taxes and homeowner’s insurance as well as other expenses such as property taxes and insurance.
Remember, however, that renting out your apartment means higher maintenance costs and tenants are rarely as good as they would be if they lived there. Rent is the exact opposite of home ownership – it’s more expensive, but not as expensive as home ownership.
If you are thinking of buying your own home, you will end up giving up money to help your landlord pay your mortgage bills. Saving money and giving yourself a roof over your head is not something to worry about. If you value the freedom to live anywhere, rent is probably the better choice, but at the price it costs, it is certainly more profitable. In this way, you can pack your bags and move to another place that can afford it, or return to your old home.
Homeowners need to be more conservative in their choices, and that’s a fairly lengthy process. When you decide to rent, you have to choose between paying the rent and buying a home.
Rents have risen in recent decades and there is much work to be done, especially in urban areas. Landlords can also increase the rent for their apartments over time, so the choice to move to a cheaper neighborhood is always up to you. If you want to rent a house, remember that growth is unlikely to stop anytime soon. Rents will rise, but not as much as you think – especially if you rent your house in an urban area.
Things you Need to Consider:
- The costs of renting vs. owning
- Generating income
- Freedom to move around
- Increasing costs of housing
- Control over your living situation
If you do not intend to move, this can be a rather annoying issue, but if you rent a house, you can evict yourself at any time if you schedule the required 30 days.
Some landlords prohibit smoking, drinking, or even keeping pets, and others may not allow you to bring guests into the apartment. You may also be restricted in the types of activities you do indoors, such as smoking or drinking. There are a number of other things to worry about when you own your own home, which you don’t have to worry about once you own it.
You can do practically anything in your own home, be it cooking, cleaning, gardening, shopping, cooking or whatever you want. Ultimately, everything depends on your specific needs and you need to consider the financial and social aspects of your life. Should you buy or let a house, or should you rent or buy and consider both?
You want to avoid owning your own home and often hosting lots of friends, so renting is the best option for you. If you want to move somewhere, earn equity from time to time, and invest in the long term, buying is the better option. This is why I tend to rent for a while before I decide to buy, but if I am going to invest and buy long term then buying would also be a good option.