Should You Buy or Rent Your Next Home?
With home prices continuing to fluctuate and job security becoming a distant memory, it's more common than ever for people to rent rather than buy. In the millennial crowd especially, less than 40 percent of those between 25 and 34 owned their own property. In the 1970s, the number was 30 percent higher! Renting is sometimes more practical than owning, but the answer is a little more complicated than it was 40 years ago. See what criteria to use before choosing to either buy or rent in locations like the Pacific Palisades.
Maintaining a property is not only expensive, it's also extremely time-consuming. Even DIY experts may be shocked at just how much money they spend on home renovations and repairs. There are few things more rewarding than taking care of your own property, but there are many people out there without the will or the resources to do it all properly. To really get the most out of an investment, homeowners need to be willing to handle each malfunction that arises on their own.
People can expect to change jobs every few years in this shifting economy, and those job changes often come with location changes. If a person is only going to be living in a home for 3 to 4 years, it usually doesn't make financial sense to buy. The tax incentives for homeowners are highest when people stay in the home for at least 5 to 10 years. In addition, it takes time to generate a significant amount of home appreciation. So even if an owner sees a slight gain on their home in the short time they own it, the seller usually still takes a loss after real estate agent's fees, closing costs, etc.
No matter how fool-proof a property seems, buying a home is not always a good decision. This is why the official advice is to think of a home as a major purchase and not an investment. Between home depreciation and major renovation expenses, owning a home can end up being a true money pit for some unlucky buyers. Just one incidence of mold, for example, can cost an owner up to $6,000 to remove. Since water damage isn't usually covered on an insurance policy, the burden is left entirely up to the homeowner to shoulder. Areas that seem hugely popular at the time of purchase may experience a mass migration due to any number of unforeseen reasons.
Experts say that people should be spending around 28 percent of their income on housing. To get the best possible financial incentives, buyers should be ready to put down a full 20 percent of the home's purchase price in cash. If the demand for homes in an area are low because most people are only in the city for a limited time (e.g., university, etc.), then it can be a financially sound decision to buy. But if an area has extremely high demand overall, then it's usually cheaper and more practical to rent.
Hopefully, it's clear by now that renting isn't always a bad move, nor is it a means of throwing perfectly good money down the drain. The key to officially deciding is to put aside all of the conventional wisdom and to assess your financial details, economic fluctuations, and lifestyle preferences. The good news is that neither choice is permanent, and renters and buyers are free to move around as the market allows.