Is it better to simply rent an apartment or buy a house? This is the question that many individuals face at some point in their life. If you find yourself facing this conundrum, you need to figure out which choice is best for you.
Just like many personal finance problems, the answer to this depends on your preferences, lifestyle, and your financial situation. The truth is that there is no right or wrong answer, nor there is a clear way to compare the cost of renting an apartment to the cost of buying a house. It is best to first examine your goals and financial state. Here are a few questions you need to ask yourself when choosing between buying and renting.
Are You Planning On Settling Down?
You need to understand that purchasing a property involves a lot of expenses, including insurance, agent fees, closing costs, and so on. Depending on where you choose to build your dream house, it will take at least 5 years for the property to appreciate enough value to get a good return on your investment. If you are willing to settle down in one location for at least 5 years, purchasing a house is your best option; however, if you tend to move around due to work or other circumstances then renting is your best choice.
Do You Have Enough Cash For Downpayment?
How much is your savings? Keep in mind that when purchasing a house, you have to pay for at least 20% of the purchase price to avoid taking on mortgage insurance. This is a considerable cost. If you don’t have enough cash to pay for the downpayment, you will need to look for a cheaper house or you can consider renting instead.
Are You Ready To Take On Other Expenses?
When choosing between buying and renting a house, you also need to think about the additional expenses. For instance, if you decide to buy a property, you will have to pay for the repair and maintenance costs, homeowner’s insurance, and property taxes on top of the monthly mortgage. If you choose to rent a house, you won’t have to worry about these expenses; thus, this option is probably a lot cheaper.
Do You Want To Be In Control Over Your Property?
If you want to be able to change the interior design of your home without asking permission from the landlord first, you might want to buy your own home. Buying a house means getting complete control over the property. You can change the interior, renovate the house, or you can improve the yard. This is one of the major advantages of owning a property. Keep in mind that you will give up the freedom to do what you want with the house if you choose to rent instead.
Monthly Cost of Renting Versus The Cost Of Buying
Whether you choose to buy or rent a property, you need to consider what your monthly payment will be. When comparing the cost of renting versus the cost of buying, the amount you pay for every month must be in the same ballpark. For instance, if you can rent a house for $1,000 a month and it costs you around $3,000 monthly mortgage to own a similar property, you will save more by simply renting. You must also take into account the amount of appreciation when comparing the two values. This means that if the house appreciates at $2,000 every month then it is smart to purchase the property, but that is a rare case.
About The Author
This guest post is written by Kris Hopkins. She offers these guidelines for her readers who are still undecided. Real estate agents can also use these guidelines to help their clients. She also encourages those who want to take on a real estate career to visit http://www.brooklynrei.com/ (http://realestateforme NULL.blogspot NULL.com/2013/07/cash-flow-on-investment-properties NULL.html) .