This is why some prefer to initially rent or lease, and then decide whether the neighborhood is right for them. But they could also miss out on the opportunity to buy when the price is more affordable.
So should you rent or buy your first home? The quick answer to this question is it depends. The decision to buy or rent depends on so many factors that varies per individual: your lifestyle, finances, future plans, and even the current real estate market.
What is right for one person may not be suitable for another. For instance, a newly married couple whose career plans include moving abroad would be in a totally different position from a large family with an entrenched business in a specific location.
There are pros and cons for each option. Here’s a run-down of the upsides and downside of buying and renting.
Buying a house means being able to hold on to a hard asset that almost always appreciates in value.
It also lets you and your family establish roots in the community.
Plus it allows you to plan out your life--where your kids will study, where you will work--for the long term.
But expect this to put a dent on your cash flow, since you will need to put in equity, which could go anywhere from 20-60% of the property value.
It also means paying real estate taxes and maintenance costs.
Should you need to dispose of it at some point, you will find this may not always be easy, and you could be at the mercy of market conditions.
Renting is easier on the pocket--you only need to worry about a downpayment and security deposit.
It also gives you a measure of flexibility. If you’re unhappy with the place or your landlord, you can simply end your contract.
It also means not having to worry about taxes and maintenance costs, which are the landlord’s concerns.
However, property rentals rise, and it means you have to be ready to deal with increasing rental fees, depending on market conditions.
Rent is an outright monthly expense, and does not enhance your asset base.
You have to live with the terms set by the landlord. For instance, the landlord may prohibit you from keeping pets, or may not allow you to drill holes for your pictures on walls.
Still not decided? Look at each of these five factors for more help:
1. Your current life stage and lifestyle. How old are you? The younger you are, it’s more likely that your options are wide open. Career-wise, there’s a possibility of finding a new job, within or outside the city you are now in, which means renting might be better for you. Are you single or do you have a growing family that needs more space? If it’s the latter, consider how owning or renting a home affects their lifestyle.
2. Your future plans. Do you have any plans of moving abroad? If so, then you might be better off renting a starter home. Otherwise, you will have to deal with selling off your home when you leave the country. This may not come easy when you’re about to migrate, and this may not even be at a price acceptable to you. Don’t forget your significant other, if you have one. If you purchase that starter home, do you think your prospective spouse, whose parents live far away, would be happy to move there?
3. Your financial status. Can you afford to pay the down payment for the starter home that you want? If you are thinking of taking out a loan for this home, do you have enough income to support the monthly payments? Note that your expenses as a homeowner will not be limited to just the mortgage payments, but will also include maintenance costs, real estate taxes, and in some cases, condominium dues and homeowner’s fees.
4. The neighborhood where the property is located. It’s been said that there are three things to consider when you buy property, that’s location, location and location. Let’s say you have identified the neighborhood where you intend to stay for the medium term. Evaluate the neighborhood and determine if it has good potential to become a growth center. What are planned developments being undertaken by the government and other private companies in the area? If the area’s potentials look promising, and if your finances permit, then it may be worth purchasing your starter home here. On the other hand, if the neighborhood is riddled with problems such as flooding, security issues, and urban blight, you may wish to simply rent a place for the time being.
5. The current real estate market. Don’t forget to consider the current real estate market before deciding if you would purchase or just rent a property. It is always better to buy when it is a buyer’s market than a seller’s market. Plus, look at interest rates if you intend to take out a loan for this purpose. The lower the rates, the cheaper it is to buy a starter home.
source: www.abs-cbnnews.com
