Should You Buy Or Rent?
But, housing prices are down, interest rates are low and there has been a flurry of rent vs buy articles in various places (including last week’s NYTimes article about lucky kids whose parents buy them condos/co-ops as investment). So, we thought it’s time to do our take on that big decision. Also, because everyone has so much extra green lying around right now, right? Recession. . . what?
Seriously, though, it may make more financial sense for you to buy vs rent, depending on a few factors including:
Planned Length of Stay:
If you are sure you want to live in, for example, Boston for the next 10 years – it would likely make sense for you to look into buying property. The NYTimes has a fairly involved Buy Vs. Rent calculator that can help you calculate all your specifics (from property tax to renter’s insurance) – but on the whole they recommend buying if you plan to live anywhere more than 5 years. If you want to move to Thailand in 2013 to teach English. . . not so much.
Where You Want to Live:
CNN did a piece earlier this year, listing 12 cities and whether it made more financial “cents” to buy or rent. For instance, if you are looking to live in Las Vegas – BUY. If the city of your heartstrings in NYC – RENT. The article goes into detail, for instance, explaining that as the recession improves – rents can respond more quickly than condo prices. However, some individual cities are also recovering more quickly from the housing dip than others – which should also factor into your decision.
If infographics are more your speed, check out this neat one from Credit Sesame. Definitely very helpful food for thought!
Your Life Stability:
Are you single and happy? Single and looking? Married and happy? Married and. . . ?!
Buying property is a big deal investment. If you think you may be adding a new partner in the next few years, consider waiting on buying a condo. Or, consider buying a 2 bedroom and renting out one of the rooms. If you can afford it, it’s often better to buy a larger space than have to jam two people into a small studio. A friend of mine recently moved into her BF’s small 1 bedroom condo because he’s having trouble selling it in this market – even though she had an awesome 1+ bedroom. Adios, personal space. . . Ouch.
Ability to Save:
Right now there are pretty low-interest rates across the board, which makes this category slightly less dire than it used to be – but it’s still mega important. Heck, it’s what got the country into the housing mess to begin with – so listen up.
Don’t bite off more than you can chew – er pay off without going into unreasonable debt. Aim to pay at least 20% down when you put down your offer. Otherwise, you will be regretting it down the line. Consider whether you have a steady, reliable job – and whether you would bet your credit rating and a whole lot more on being able to swear that your bi-monthly paycheck is safe.
And keep in mind that as an owner you are responsible to fix anything that goes wrong with your place. When you call that handyman to plug a leaky sink, it comes out of your pocket, so make sure there’s room in your budget for some repairs and maintenance.
Deciding whether or not to buy an apartment can be incredibly stressful – so hopefully the above sources will make that decision a touch easier. It’s important to get a lot of input before making this decision. Ask your friends and family who are home owners for their advice.
This is very likely a case where mother/father knows best.