Whether you rent or buy, there’s no “right” decision. It’s subjective, changing from person to person, from situation to situation, and while homeowners will likely advise you to save for a down payment, it isn’t such a simple choice. You have to account for many different variables before arriving at a conclusion.
When you’re working through the details, there are a few things you’ll need to consider. Among the rising cost of homes, and the expenses associated with ownership and maintenance, you might find you have valid reasons to rent an apartment instead of purchasing a property — and this option is no less practical.
Consider the three scenarios below, and see if the reasoning makes sense within your unique set of circumstances.
1. You’ve Taken a Short-Term Position
The average person changes their job 12 times during his or her career. Whether it’s due to a lack of upward mobility or poor working conditions, you could find yourself searching elsewhere for employment and, in that regard, flexibility is essential. A lease allows for this flexibility, enabling you to move.
In truth, buying a home limits your available job opportunities. You might find the perfect position in a distant city and have to cross it off your list, having committed to paying off your mortgage. When you choose to rent, you only have to wait until the end of your lease, at which time you’re free to leave.
2. You Can’t Afford to Wait and Save
The median down payment for homebuyers hit an all-time high in 2018, with an average cost of $19,900 nationwide. Depending on your current living situation and annual income, it could take a long time to save enough money to reach that figure, and not everyone has time to spare. Your schedule might not allow for it.
While this is troubling, the median down payment and minimum down payment are two separate things, and you might be able to afford the latter. Still, you could end up paying mortgage insurance if loan-to-value ratio rises above 80 percent. If you’re unsure, use an online calculator to determine your financial situation.
3. You’re Investment-Oriented
If you’re financially minded, you might find that renting an apartment is a better option than purchasing a property. According to recent data, renting and reinvesting, on average, outperforms ownership and equity in terms of wealth creation. Naturally, those who are investment-oriented will see the appeal.
This may or may not be advantageous, depending on your experience with investing and knowledge of your options. That said, you can take the time to study and learn the subject, and build a skill set that will allow you to capitalize on current trends. Choosing to rent provides both convenience and opportunities for growth.
The Best Course of Action
To reinforce an earlier point, whether you rent or buy, the “right” decision changes depending on your circumstances. If you’ve taken a short-term position, can’t afford to save for a down payment or plan to pursue other investments, you’ll likely find that renting is the best course of action.
Moving forward, evaluate your budget, your goals for the future and how you want to achieve them. You’ll have a better understanding of your situation, and when you take the next step, you can feel confident. It starts with planning and preparation, so review your options today.
Like Us? Sign Up!
Subscribe to get the latest budget buzz via email.