In 2019, 36% of households rented their homes. That number is expected to increase because of the pandemic.
The real estate market continues to rise, with many markets experiencing double-digit growth. At the same time, the country still experiences economic uncertainty.
Inflation rose, and costs should increase more because of the war in Ukraine.
These circumstances lead many to ask, “Is it better to rent or buy?”
It’s a legitimate question because there are several risks and benefits in buying and renting.
What’s the best solution for you? Well, we have a way to help you decide. Keep reading to find out if renting or buying is the best solution in these uncertain times.
Advantages of Renting Now
There are advantages to renting a home now. You get the flexibility to move and change jobs without having to unload a home.
You also get to avoid paying for repairs. That’s the landlord’s responsibility. In economic uncertainty, the last thing you need is to try to pay for a roof replacement or some other expensive repair.
You also avoid the potential pitfalls of buying in this market. Prices can fall just as quickly as they went up. That could leave you with an underwater mortgage.
These listings show that you can still get a great rental and enjoy it.
Advantages of Buying Now
On the other side of the coin, prices could continue to climb, so your home may carry extra value.
One of the best reasons for buying a home is tax incentives. You can take deductions for mortgage interest, some property taxes, and you can save on capital gains taxes when you sell the home.
You have an investment that has the potential to grow. That creates more wealth for you and your family.
The other advantage to buying now is that the property is yours. Unless you live in an HOA, you can pretty much do whatever you want with the property.
Disadvantages of Renting Now
The big issue with renting is that you’re paying someone else’s bills with nothing to show for it. The average rent in 2021 soared to $1,877 per month, a 14% increase.
To make matters worse, you pay your landlord’s bills and they get the tax breaks from owning property. Renters can’t get a deduction for property taxes and mortgage interest.
Spend Extra Income
You could save money renting a home rather than buying it. To come out ahead financially, you need to save money and invest it wisely.
You can invest in mutual funds and other assets that will grow over time. The problem that renters have is they lack the discipline to invest.
They end up spending that extra income or they have other surprise expenses to deal with.
Rental Increase
Let’s say that you rent for a year and love the location. You’re ready to sign a lease for another year, but the landlord increased the rent by 10%.
Some laws govern how much a landlord can increase the rent, but not every location has these laws.
Improve the Property
Do you want to repaint the walls or add a garden in the backyard? You need to get permission from the landlord to do anything in the home.
There are limitations as to what you can do and what you can’t do.
Disadvantages of Buying Now
The reason why buying might not make sense is the current real estate market and economic conditions. Home values may be inflated in some locations.
You’ll also pay more for the home in repairs, insurance, and property taxes.
Is It Better to Rent or Buy?
Deciding between renting vs. buying is a tough call. It’s up to your situation and how much risk you’re willing to take.
Let’s start with your financial situation. If you’re in a stable job that has no chance of evaporating anytime soon, that’s a good sign.
However, if you’re in an industry that’s been volatile over the last couple of years, there’s no way to know if you’ll be able to pay the mortgage every month.
Lifestyle Needs
Look at your lifestyle, too. Do you like to live in different places and experience other cultures? You’ll be better off renting.
That gives you the flexibility to move. If you owned a home, you’d either have to rent it or sell it.
It takes time to prepare and sell a home. It’s also costly. You may need to sell the home at a loss and absorb the costs.
You’ll still have to pay for a mortgage, insurance, and property taxes if you decide to keep and rent the property.
Long-Term Opportunities
Buying a home makes sense if you’re buying in an area that’s sure to grow. You won’t find these opportunities in major cities.
You’re likely to find these opportunities in smaller markets.
There’s market saturation in larger markets, and prices should correct themselves. In other words, the prices are going to drop at some point because they’re overvalued.
They’ll also see other shifts due to increased housing costs. You’ll see the quality of life go down as the cost of living increases.
Take a look at the local economic plan and vision for a city. Most cities keep a 10-year plan.
Decide Between Renting a Home or Buying a Home
It’s not an easy choice to decide between renting a home and buying a home, especially in times of economic uncertainty.
Is it better to rent or buy? It depends on your personal situation and the real estate market. This guide showed you how to examine your options and make the decision that works best for you.
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