The current housing market has many people asking themselves whether they should keep renting or if it's time to buy a home. In my opinion, regardless of what kind of market we're in, there are important questions that you should ask yourself to determine the right choice for your situation.
How long am I living in the home or the area?
If you're looking to stay in a home for the long-term (say more than 5 years), then buying a home for your family would be a great option to consider for setting roots down. Great schools and an overall community vibe will give your family the opportunity to make long-lasting memories.
If you're someone who tends to travel a lot or gets antsy staying in one place, then renting would be ideal for your lifestyle.
What am I buying a home for?
Not everyone has the opportunity or the resources to buy a home right away, so renting is a way to save before making the big purchase. If you're considering buying a home or property, it's important to know your "WHY". For many in the BIPOC community, buying a home means building generational wealth for their current and future generations to come. You may consider buying a home to generate an additional source of long-term income through collecting rent. Others purchase property to:
- build equity to use for financial goals down the road (ex: purchase another property)
- short-term rentals (think AirBNB)
- potentially earn a short-term profit (ex: flipping homes)
No matter your reason, it's important to work with the right professionals to understand potential tax implications (hello, CPA!), how buying fits with your financial goals and making sure you have the tools and resources in your decision-making.
How much can I afford?
Renting may be more affordable than buying a home. It also comes with less financial responsibilities like home maintenance. However, keep in mind that you don't have control over your landlord's decision to potentially increase rent.
Buying a home is a long-term commitment and requires that you have enough income to pay your mortgage and other bills tied to that home on time. Even if you're thinking about buying a home to rent out, keep in mind that YOU are still responsible for liabilities and debts on that property. Here are some tips in preparing yourself for your home purchase:
- Review your income and expenses; is a mortgage payment (including taxes, insurance, maintenance, etc.) something that fits into your budget?
- Save for a down payment OUTSIDE of your emergency and retirement savings. Just because you have money already set aside, doesn't mean it's a good idea to use most or all of those resources towards your down payment.
- Consult with your financial advisor for additional strategies and to guide you in the process (buying a home can be an emotional thing for many!).
- Work with a mortgage broker to see what you qualify for. Typically, they'll give you an estimate of what your monthly mortgage payment will look like.
There's no right or wrong decision in whether you should rent or buy a home. It all depends on your financial goals and overall financial situation! If you're still unsure, schedule a complimentary Discovery Call with our wealth team; we're happy to help you talk through the process.