Again we find ourselves facing another financial dilemma: should I rent or should I buy? And just like many other financial quandaries, we have seen the example of our parents and perhaps friends but have little true professional knowledge to base our decisions on. We get a lot of advice from those around us, which is VERY tempting to listen to, but should we? For me the answer is "Don't ask a butcher how to bake a loaf of bread!" It's a good idea to listen to everyone you meet in your life, but it's an even better idea to consider who is giving the advice when you're faced with a decision.
Whoever you take advice from should consider your individual situation, have experience, and be able to prove his/her point with solid evidence. In the case of should I rent or should I buy, Russell Gray (co-author of the book Equity Happens) would say "Do the math!" In other words, everyone's situation is unique and often times math is the solution to get an objective opinion (in this case, numbers) about what choice to make in the rent vs. own debate, at least from a financial standpoint.
Intelligent decision arises when you do careful examination of both buying and renting. Having said that, I will spell out some considerations here, which you might find useful. Moreover, since I am not aware of your current financial condition - I will not belabor you with countless rhetoric anymore. In renting, all you need to add up are the costs of your rent, some additional fees, and other utilities.
Buying your own home, on the other hand appears to be more complicated. With the help of a professional, a calculating device known as PITI are added together to determine your expenses. PITI stands for "principal" or the amount of money paid towards the principal of your loan, "interest" or the amount of money paid toward the interest of the loan, "taxes" or the property taxes to be paid, and "insurance" or that which pertains to property and/or if possible, mortgage insurance.
Owning a home also covers utility expenses plus other maintenance outlay aside from the PITI. In the case of renting, while it is compelling that you only pay the same amount on a monthly basis; you can go back and determine what your previous payments could buy you a home for. Monthly monetary costs are important aspects in deciding what to choose between owning and renting but it is also equally significant to look at the long-term benefits.
If you are the type of person who favors long-standing gains over the immediate, then buying a house is for you. Renting will perhaps save you some of the costs apparent to the other but after several years of paying, you still do not have a title to call your own. In addition, your monthly rental becomes higher as time goes by. On one hand, the cost we pay to home ownership remains constant through the years except for some expense that inflation affects (i.e. utilities, insurance, etc.). What's more exciting here is the promise of equity from all the payments you made towards your owning a home!
Subjective feelings usually come into play as well, like the pride you feel in owning a home, or the enjoyment of painting your walls whatever color you'd like without having to get permission. These feelings might swing your opinion towards renting, too; no lawn to mow, minimal maintenance, etc. These subjective items are things you must consider as part of the overall package when making your rent or own decision.
The decision to either buy or rent a home requires balance in your personal feelings versus financial considerations. As an example, renting saves you resources that you can use for other necessities like home appliances. Unlike when you buy a home -- you still need to think of property taxes and more expenses that perhaps reduce other benefits into small or minor significance. For instance, having to paint your walls with the color you like appears negligible when you factor in the horrendous property taxes to be paid. Between financial and subjective considerations, the former outweighs the latter since numbers do not usually lie.
There are two main points you should take out of this article. First, always enlist the help of a professional to help you weigh all the options and do the math. Second, don't simply look at the monthly expenses of owning vs. renting. The gains of ownership often appear over the long-haul and will not be immediately apparent on a monthly cost comparison. Remember that we are currently in a buyer's market and this will often favor ownership over renting.
Alexandria P. Anderson is a licensed Minnesota Realtor that uses the Minnesota Home Listings to help her clients to find and purchase MN Property.
