Rent or Buy?
When I first moved to the area I live in now, my wife and I rented for the first year. It was a time when the market was very hot. Houses were only on the market for one day and would have multiple offers. So many times, we could not even get in to look at a house before the agent for the seller would tell us that an offer had already been accepted. In some ways, it was a frustrating time. We ended up purchasing a new construction home through our Realtor within that first year (This was before I became a Realtor myself).
Something amazing happened after that. The housing market started another upward motion and the new house we purchased appreciated in value at such a rate that we could easily sell it and make an additional $75k within a few short years. Rents in the area also started skyrocketing. They went so high that it almost didn’t make sense for most people to rent anymore because they were spending as much on rent as they would to actually own a home. Frustrating again for renters.
Market conditions change all the time. In 2008, the housing bubble burst and the value of homes decreased at a dramatic rate. People were upside down on their mortgages. This means that they owed more than the house was worth. Many people abandoned their property and the bank took them back with a huge inventory of homes.
Sure enough, the banks needed to unload this burden and sold houses at a huge discount to get them off the books.
That was 2008-2012.
Since that time, the housing market has been restored and home prices are moving up at record rates.
Even if you had purchased a home in 2007, it would be worth more today than it was then.
So what’s the point of all this?
In any given 20 year period, the housing market has tended to increase the value of property.
If you bought a house in 1988 and sold it right after the bubble burst, you would have still probably made money on the house compared to what you purchased it for. If you bought a house in 2009, you would have seen a huge increase in the value of your home in just ten years.
For some people, renting is what they want. For others, renting just doesn’t make sense. If you plan on being in your house for any length of time, it makes sense to buy one.
Don’t worry about the daily ups and downs of the real estate market. Look at it as a long-term investment. It will pay off in the end.
Renting makes sense for some people. If you know you are only going to be in a specific area for a couple of years, it might make sense. In just a year or two, you may not be able to have the property appraise in value enough to cover the costs of selling the property. Typical costs to sell a home are about 6-7% of the sale value. That means that for a $300,000 house, the closing costs could be as much as $18-20k.
Of course, there are some discount brokers that would offer to sell the property for less. Depending on how much they do, the house could be on the market for an extended period of time. Another option is to sell your house to a company that buys it directly from you. There are usually pretty hefty fees associated with those companies. The advantage is that you get to choose the date you are moving out and don’t have to do any repairs. That’s a huge advantage. That might also be a good choice if the decision to move comes suddenly. For example, if you have a sudden change in job locations or even a layoff where you need to leave right away.
The cost of renting has gone up quite a bit. I recommend that everyone do an in-depth comparison between renting and buying. A realtor can help get you some information about that. You can also talk with a financial person and they can break down the numbers for you.
Ultimately, the decision to buy or rent is up to you.
My wife and I do not regret taking the time to rent before purchasing. We ended up purchasing our home in the same town we had been renting. It gave us time to look around different neighborhoods and towns to see where we wanted to settle.
One more advantage of renting. It’s possible to rent an apartment for as little as 3 months. Maybe it won’t take you nine months or a year to figure out where you want to live. If you get serious about the process, you can figure it out quicker.
The disadvantage is that the rental rate is usually higher for short-term leases.
Something to think about.
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Patrick O’Connor, Ebby Halliday, Realtors, Plano, TX
My first priority is to help you understand the real estate process.
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