At different times throughout history, there have been times when it was far better to rent than buy a home, and then other times where buying was so profitable that you would have to be a fool not to. The biggest problem with most of these assessments is that they are quite easy to see looking backwards in time, but in the present and future things aren’t always so clear. Let’s take a quick look at some reasons why you would personally want to buy, sell, or rent a home.
If Your Life And Employment Is Unsettled, Renting Is Usually Better
One aspect of buying or selling a home is the cost of the transaction. Most real estate agents charge about 7% of the total cost of the home, and there are other fees like title insurance, escrow fees, repairs, inspections and who knows what else. If you add them all up, you have to keep a home for 7 to 10 years in an inflationary period to equal what you pay just to buy and sell a home.
If you’re not settled at your job and could possibly face being transferred to another area, layoffs, downsizing, or quitting for a better opportunity, then the high costs of selling one home and buying another would make renting for a few years look cheap.
If you rent a home or apartment, you can usually pack up and move with about 30 days notice and not lose any money. Even if you leave early, you still won’t lose more than a few weeks worth of rent that you’ve paid in advance. This is an instance where renting saves plenty of money and tons of inconvenience in selling a home.
On The Other Hand, If Real Estate Is Booming, Then Buying Is Far Better
At certain times in history, there are areas that have experienced rapid inflation in the prices of real estate. Sometimes owning a home for two years can net $20,000 to $40,000 dollars or more. In those cases paying the real estate commission and other fees is negligible compared to the profits that can be made.
One huge problem with this scenario is that it’s sometimes hard to predict based on looking at past real estate performance. Real estate goes up and sometimes down depending on the economy, job market, local political factors and many other things.
If You Like Amenities Then Renting Makes Sense
If you would like to have a home with a gym, pool, Jacuzzi, playground, movie surround sound theater and other nice amenities, then get out your wallet because it’s going to cost you a fortune. On the other hand, you can many times rent a medium priced apartment in a large complex and get all of those great features and more.
Additionally, if you actually owned all of those things, you’d be spending a huge amount of your free time maintaining the pool, mowing the playground, and adding to your gym equipment. In an apartment complex, all of that is done for you and the cost is spread among the hundreds of tenants that only use each feature a short amount of time per week.
Well, for each person the question of rent, buy or sell will have a different value depending on your lifestyle, the economy, employment, love life, and family needs. By taking the time to write everything down and prioritize your needs you can make a more informed decision and then take action to accomplish your goals.