If you find yourself at a point in your life where you need to change cities due to a new job, relocation due to job or family reasons, or simply changing houses for the purpose of upsizing or downsizing, the following question will definitely pop up: should I rent or buy?
The decision is often very difficult as both incur monthly costs. As long as they are both affordable for your current financial situation, both options have upsides and downsides which you should carefully consider before making up your mind. Pick carefully as this could be one of the most important financial decisions you’ll ever have to make!
While the monthly rent is sometimes considerably lower than the mortgage payments for the same property, owning real estate also has its perks. When you buy a real estate property you are in fact acquiring a valuable asset whose value could increase up to 5% or more per year. Other obvious advantages are: taking advantage of tax breaks, redecorating and renovating as you please, or being able to use the equity in your property as a guarantee for a loan or a mortgage. Among the disadvantages: having to pay your taxes, paying for repairs and other costs, homeowners insurance, utility services and so on.
On the other hand, if you rent a real estate property, it will always be easier to move out when you need to relocate. If the nature of your job involves frequently relocating, a rental may just be your best bet. Not having to pay for maintenance, taxes and not having to own an asset which could depreciate are also an important consideration. Of course, a tenant is not allowed to redecorate, does not build equity and does not receive tax benefits. You also must consider your privacy and if you wish to deal with neighbors being above, below, and beside you.
A very helpful approach prior to taking this decision is doing the math and calculating the monthly costs for both buying and renting. Check on-line sources for “Buying VS Renting Calculator” in order to have an accurate financial picture. Some reputable sources include the Ney York Times and Forbes websites.
Owning real estate can be one of the best investments you can make. However, if you are frequently moving to accommodate your career or family renting may be the best option. My own view is that this is a very personal choice that involves careful consideration, so choose wisely!