When Is It Best To Rent Not Buy
Q: Is buying always better than renting? Sandy, Linden, NJ
A: The first thing to consider whether you rent or buy is affordability—what can you reasonably afford? In some places like Manhattan or San Francisco, homeownership may be out of reach for many people because the price of land is so high. Overall, the benefits of homeownership certainly add up over time (tax deductions, wealth or equity creation etc.). It is unwise to think of renting vs. buying in a one size fits all way. As with all important life decisions, before considering whether to rent or buy, you should look honestly at your current personal situation—your income, your debt, your marital status and most importantly, your goals-short term and long term and how those things may change over time. As with any asset, there are certain risks associated with buying real estate and owning real estate reduces your mobility to an extent. You can’t be sure whether the value of your home will increase or decrease in the short term so if you buy a home to live in it it’s best to do so as a long term commitment. If you’re only staying in a particular location for a short time or are not sure how long you will stay, buying a home may not make sense because if you need to sell quickly, you’ll have 2 sets of transaction costs—when you buy and sell that you’ll have to pay for. Buying a property that can be rented if you have to move mitigates that risk to some extent. Renting provides flexibility, predictable expenses, and a landlord to handle repairs. In addition to the tangible benefits of equity creation and tax deductions, homeownership also provides intangible benefits like pride of ownership. The answer to your question is that it’s not always better to buy—in some cases it’s better to buy and in other cases it’s better to rent depending on your personal circumstances, outlook and goals. Thanks for your question, Sandy.
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