Published: June 27, 2017
It’s part of the American dream to one day own that perfect house you’ve always imagined. While it’s common for people to bring up the financial benefits of buying a house, there are many other factors to consider that go beyond deciding between a rent or mortgage payment.
So how do you know whether it’s time to ditch the landlord life and buy a house? Start by asking yourself these questions:
Are you considering buying a house solely for financial reasons?
It seems like there’s no financial argument against buying a house when you think of either writing a $1,000 check to your landlord every month or using that money to pay off a mortgage. All that money you put towards your house payment will eventually come back to you in the future when you sell, right? (Hopefully even more so if your home has appreciated in value since you bought it.) However, this may not always be the case or your best option.
“You could very well earn a better return on your down payment by investing it in a diversified portfolio of low-cost index funds instead of a half-acre plot. Stocks rebounded much more quickly than home prices after the Great Recession, and over the long haul there isn't that much evidence that homes provide a decent return for your money,” Taylor Tepper says in his article with Time.
While it's still very possible to make your money back and more when you sell your house, don’t get caught up in thinking it will be a sure-fire appreciating asset. You may find there are better ways to invest that money and see even greater, safer returns.
Are you prepared for the additional cost of home ownership beyond mortgage?
A huge advantage of renting a house is that when something goes wrong — the hot water heater breaks, the toilet clogs, etc. — it isn’t your responsibility to get it fixed. When you’re a tenant, the task of finding someone to do the repair, scheduling a time they can come to your house, and then paying them falls on the landlord. It’s easy to overlook just how expensive and time consuming it can be to maintain a house.
According to Credit.com, “you can expect home maintenance costs to equal 1-3% of your home’s sale price each year. Then there are homeowners’ association fees and new utility costs such as trash collection and water.“
With this in mind, anyone about to purchase a home should keep an emergency fund for unexpected costs. Sometimes it can come down to repairing the roof of your house or taking a beach vacation that year. While these extra costs are worth it to many, it’s still worth considering before leaving that rental property with fixed rate utilities and a terrific landlord.
How long before you would be looking to sell your house?
For those thinking long-term, it’s easy to see the draw of buying a house now in order to begin putting down roots. But those not as certain about where their futures will take them may run into problems. Jobs relocate, families grow, life takes a twist and you find yourself looking to move shortly after purchasing a home.
The amount of money you make from selling a house is largely dependent on how long you’ve lived there. Realtor fees, closing costs — these make a significantly larger impact on your profit when it’s only been a few years since you purchased the home.
Tom Anderson from Forbes warns that “the transaction costs of buying and selling property are very high, (it can average about 10% of the sale price, according to Zillow) and they could wipe out any gains you made from appreciation if you don’t stay in the property long enough.”
Life is never 100% predictable, but don’t let this keep you from fulfilling your dream of homeownership. However, be confident you’re ready to put down roots before you buy.
Is it more conducive for your lifestyle to have a short-term or long-term housing commitment?
There are many who choose to rent even when they can afford to own. Finances aside, the decision to buy or rent should revolve around your own lifestyle. Do you want the ability to travel often? Are you still hunting for that dream job?
For some, it’s key to have the flexibility to follow whatever opportunities arise, and owning a home severely limits this flexibility. A recent story in The New York Times focused on those who chose the renter’s lifestyle for these very purposes.
On the flip side, homeownership gives the stability that many seek out. There’s no concern over having to find a new rental property after your lease is up. You can personalize your living space to exactly your style and begin making lifetime memories. Maybe you love to cook and have always wanted a large, modern kitchen. Owning a house means you can make that dream a reality.
Choosing between renting or buying is no easy decision. There are financial and emotional factors to consider and both options offer pros and cons.
Whether you’re about to fulfill your dream of buying a house or ready to settle into your next rental property, UNITS Moving & Portable Storage is here to make your move convenient and easy.