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    Q: Should I Rent or Buy?


    Today I’m discussing how to decide whether to rent or buy a house.

    A question we receive regularly is: “Should I rent or buy? How do I know which is right for me?” There are two essential factors to consider:

    1. Your financial situation. You need a down payment to buy, though it only has to be 3.5% (or, if you’re a veteran or physician, 0%). You also need an emergency fund. So, in addition to the mortgage payment you’d make each month, you need a $1,000 emergency fund that you add to every month. Often, your mortgage payment will be less than a monthly rent payment.

    Here’s what I suggest: If you have a down payment plus $1,000, buy a house. Then, save the difference that you would otherwise pay in rent to the emergency fund. That emergency fund will help you pay for a new HVAC system, roof, etc, when the time comes to replace them.

    2. How long you’re staying in the area. If you plan to stay in the area for more than a year or two, consider buying. If you may be in the area less than two years or so, rent. Living in the area for a short time is not worth the risk of the market changing; you may be able to sell the property, but you might end up losing money.

    Some people feel that when they move to a new area, they should rent first to get to know the different parts of town, and that’s logical. However, if you partner with a team that gets to know you and what your life is like, you may not need to do this. It may be a better idea to live in a short-term rental while you work with a real estate agent. That’s one of the best things about Airbnb being so prominent—you can find a rental for just a few months while you find out what you want to know most about the area. That way you aren’t committing to years of higher rent payments that could go toward the home you buy.

    If you have further questions about renting versus buying or real estate in general, reach out to us via phone or email. We would love to help you.

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