Housing

Renting Vs. Buying

It’s not always easy to tell what’s best to do — renting or buying a home. We tend to assume that buying is always better, and the American Dream is, at least historically, built on that all-important goal of owning your own home.

Yet if the housing crash and recession of the last several years have taught us anything, it’s that owning a home isn’t always all that it’s cracked up to be, and renting can protect you against some of the downsides of the commitment of home ownership.

With all of that in mind, here are some guidelines to consider whether renting or buying is best for you:

Length of Time

Look at the time that you’re planning on spending in one place. Most experts advise that if you want to buy, you need to plan to be in the home at least five years, and that t ime period might be longer depending on market conditions. Think about how committed you are to being in a particular neighborhood, town or state, and use this as your first guide to whether you should buy a home there or not.

Available Funds

Buying a home, especially in today’s market, can require a significant down-payment, often 20 percent or more of the purchase prices. You need to have this amount saved up — above and beyond any other savings or emergency funds you might have — and ready to put down on the house. If it’s a stretch, or if you’d rather have that cash on hand for emergencies, college money, vacations or other uses, you might want to think twice about buying a house at this point.

Hidden Costs

Owning a home has many hidden costs, including maintenance, upkeep, landscaping, and utilities. Some of these are big expenses indeed, such as a new furnace, a new roof, new flooring or remodeling. Homeowners once could rely on home equity loans to cover such costs, but as home values have dropped, equity has shrunk, and it’s harder to get such loans. When you own a home, therefore, you need to have enough cash on hand to cover these kinds of expenses so that you don’t end with credit card or other high-interest debt. Renting a home or apartment relieves you of the responsibility for covering such expenses, though it does leave repairs in the hands of landlords, who may or may not be reliable. One benefit of owning a home, therefore, is that you must count only on yourself.

Investment Potential

Unlike renting, home ownership is an investment. You own the home, and if it goes up in value, your investment grows. Homes don’t always appreciate in value, however, and sometimes, as recent years have shown, they can depreciate significantly, leaving homeowners underwater, unable to make payments, or in the unenviable position of being foreclosed upon. When evaluating the investment pote ntial of home ownership, therefore, you must take into account the home you’re thinking of buying, the market, and the price you’re getting the home for. Consider meeting with a financial adviser to go over the figures and determine whether buying a house is a good investment for you or not.

School Districts

Often, the best schools are those that are in settled neighborhoods composed primarily of single-family homes. If you have school-age children, it’s important that you consider the neighborhood, the quality of the school, and the relationship between those factors and buying and renting. Sometimes you can find homes and apartments for rent in good neighborhoods, but it’s not as easy to do, so often buying a home is sometimes a better option for the sake of the kids.

Intangibles

In addition to all the tangible concerns regarding money, investment, and repairs, there are intangible benefits to consider when it comes to home ownership. Feeling like you’re part of a community, having a neighborhood, and putting down roots are all tied to home ownership. You’ll need to ask yourself how important these factors are, if at all, as you consider whether home ownership’s for you or not.

Choosing whether to rent or buy is one of the most important decisions in your life, so make sure to take time and consider all factors before making it. Home is where the heart is, and you can make a happy home anywhere — whether you rent or own.

Vivian Wagner is a freelance writer in New Concord, Ohio. Vivian blogs via Contently.com.