Deciding if homeownership is right for you is one of the biggest choices you’ll make in your life. . There are pros and cons to both owning and renting. Although it may seem that everyone and their mother has an expert opinion on what young people should be choosing, the reality is that this is a deeply individual decision. Only you know your own lifestyle and whether home ownership suits you or not.
There’s a reason millennials have been referred to as “Generation Rent.” More people rent today than at any time in the last half a decade. This is against odds with the traditional advice that says to buy a home as soon as you can afford to because you’ll be investing your money in something that’s yours.
The truth lies somewhere in the middle in today’s economy, and the decision about whether to buy a home or rent indefinitely depends on a wide variety of personal decisions and factors. Here are some points to consider that will allow you to make a decision that works for you.
1. Local Housing Costs
Your local housing market has a huge impact on whether or not you should buy. In some areas, houses have been refurbished and sell for more than is affordable to the first-time home buyer. When you add in property taxes, cost of upkeep and yard maintenance, the monthly costs may be more than you can afford compared to renting.
On the other hand, in some areas, revitalization is just beginning. Houses are for sale for a fraction of what they could be worth if refurbished. Rent in the area may be higher than a mortgage payment would be. In these cases, it makes sense to go ahead and buy.
2. Your Personal Handyman Skills
When you rent, maintenance is typically taken care of for you. If your garbage disposal breaks, the landlord comes and fixes it or sends their handyman to do so. This is a good situation for someone who has no skills in this area or works long hours and can’t find time to do repairs.
If you are good at fixing things and don’t mind some sweat equity, purchasing a home allows you to have something of your own and improve it over time. A house with an outdated kitchen alone goes up in value if you revamp the kitchen with new cabinets and countertops.
However, don’t rule out buying because you aren’t handy. You can always hire someone to do the work or purchase a condo where maintenance is part of the HOA package. You will pay more, but you’ll also gain access to other amenities in the condo community.
3. The Lifestyle You Want
Have you ever heard the term “house poor?” Even if you purchase a home that your lender says you can easily afford, the many costs involved with home ownership add up. You may find that the money you wanted to use to travel the world is eaten up in buying a new furnace or roof or any number of other things that are required for regular home upkeep.
While buying a home makes sense on paper when you look at the historically low interest rates and historically high urban rent rates, the reality isn’t so black and white. Take a look at the things you want to do in the next five years, such as travel, entertainment, or even other big purchases (vehicle). How much wiggle room do you have if there is a major home repair?
4. Your Income
Experts also advise that millennials stretch themselves a bit to afford a home purchase. They point to the fact that most millennials will get raises as they are just starting in their careers. However, it’s critical to assess your own career stability and opportunities. If there is a severe economic downturn, you may find that your salary remains stagnant over time. Unless you want to get a second, part-time job and spend all your time working rather than enjoying that new home, you may want to not stretch your budget too far.
Before investing in a home that stretches your budget, make sure you have a good-sized emergency fund in savings and that you can afford any major repairs that crop up. Base your decision on which homes you can potentially buy on what you make today and not what you expect to make in the future.
Other Factors to Consider
There are many other factors you should look at before choosing to purchase a home of your own. For example, if you expect to move for your job in the next few years, keep in mind that selling a home isn’t always immediate and this may limit your flexibility to transfer or impact your finances negatively while you wait to sell. If you hate your neighbors, you’re probably stuck with them for a while. You’ll also lose bonuses such as a community swimming pool or workout area.
Still, owning your own home is rewarding and gives you something that belongs to you. At the end of the day, you’ll know the effort you put in went toward something that is all yours rather than someone else’s. Factor all of this into the equation and choose the best option for your lifestyle at the moment. Although it’s crucial to seek information about your finances, only you can decide which housing situation suits you best.
Holly Welles is a real estate writer passionate about sharing tips for the inexperienced homeowner. You can read her latest tips on real estate and home improvement on her blog, The Estate Update, and follow her on Twitter @HollyAWelles.