Buying a Home
When should you consider renting a home instead of buying? P.S. There are multiple reasons.
When should you consider renting a home instead of buying? P.S. There are multiple reasons.
Rent when:
(1) You are not going to live there for at least 5 years and you would be wise to extend that to 10.
(2) You don’t have 20% to put down on the home for the down payment, forcing you to pay private mortgage insurance.
(3) You haven’t put much time into planning and preparing for this BIG life changing event.
(4) Your credit score is low. Be patient and work at getting it to 760 before asking for a loan. You will save THOUSANDS.
(5) You have not learned how to save consistently on a monthly basis. Mom and dad are not a bank!
(6) Your job is not so safe. You could lose it and you don’t want to be stuck in a home when job searching. Stay flexible.
(7) Your relationship is not so great right now. Buying a home is MORE stressful, don’t add to a rocky marriage.
(8) You are thinking about a starter home that you don’t really want. Wait until you can afford the home you do want.
(9) You are buying because it is a good investment. It is not. A home is a poor investment after considering all costs.
(10) You think rent is throwing money down a gutter. In many circumstances, renting can be the right move at the right time for thousands of people. NEVER let anyone push you into buying a home before you are ready. Be patient, prepare and buy when and only when you are ready with that 20% down payment, high credit score, solid relationship and job. This will be one of the biggest financial decisions you will make in your life. Make it a smart one!
Another great list. Thanks for sharing. A follow up question:
9) Why isn’t a house a good investment? Everyone and their mother says that a house is a great investment. If a house isn’t a good investment, would you recommend rental properties? Or possibly Airbnb?
9. The house is a poor investment once the yearly costs are factored into the equation. You are looking at 6 – 10% per year of the cost of the home per year and that overrides the appreciation and any possible tax benefits. Buy a home to raise a family, not as an investment. That is the key takeaway from this discussion.
Everyone says this erroneous comment because they have been brainwashed by the real estate industry who requires people to buy and sell homes as often as possible to make the kind of money they require to pay their bills.
Rental property is different because of the yearly income (rent) it produces. That is something a personal home will never do. I personally prefer to own a passively managed REIT Index fund instead. I see nothing wrong with Airbnb, but I have never used their services myself.