Buy or rent an apartment?
Make a choice between buying and renting housing – this is one of the most important decisions for every American. This decision was influenced by different factors, for example, financial situation and the person’s lifestyle. Make your choices is not easy, because at stake is very large sum of money. We try to give you a few tips that will help solve this complex issue.
Lifestyle factors
The U.S. labor market is known for strong competition and the ability to change quickly. Employer may face financial difficulties and to resort to job cuts, forcing employees to find another job. Development of new technologies makes many jobs redundant. People also often get tired from long work in one place. In many cases, professional interests compel people to move from one city to another.
Owning your own home makes it difficult to quickly adapt to changes in the labor market. Depending on the situation in the real estate market, selling a home can take a long time, while people may need to move urgently in connection with operating necessity. Man, tenants have more freedom and can move at any time.
Young people usually prefer to rent a house or apartment for as long as does not decide the permanent place of work or will not create a family. Lonely people postpone buying a house before marriage as the spouses may have different views on what should be their home, and where it should be. Older people also sometimes prefer not to live in their own homes and in special complexes for the elderly, providing various social services.
However, many people are determined to buy their own home. Live at home, change the landscape and interior design of their own taste, feel, independence and security of ownership of their own plot of land – this is a great pleasure. It is known that the owners of their homes usually are more involved in public life, for instance, better contact with the school than the people who break the housing (although this is not always the case). Tenants, on the contrary, usually feel the temporary nature of the current situation and do not care much about the place where they live.
Financial factor
Buying a home – a good thing, but if you buy a property with the purpose of enrichment, then there is no guarantee that such value for money is successful. Just a couple of years ago in the United States experienced rapid growth in housing prices. This encourages people to acquire additional property to be used as a tool of investment. Investment in real estate was considered a safe and promising. But today, the cost of housing in the U.S. plummeted. Buying a property was the same unreliable tool, as well as other types of investments.
One of the advantages of buying a home in the property is to provide state tax benefits. Besides, over time you build net worth (paid increase cost houses), which someday will be used for other financial transactions. Buying a home, if you repay the loan in full, providing your financial security. Even in the case of worsening economic conditions rightful property owners at least have a roof over your head. No one can take you home (unless a war or a tyrannical government).
In contrast, the employer is a removable housing to constantly give their hard earned money to someone else. He will never be able to save your own home equity. Money spent on rent, never to return to the tenant. Even if the tenant will help the house owner to pay property taxes, he can not deduct these payments from their taxable income. In addition, the rent may increase from year to year, even if the salary is not changed. Finally, a home owner may at any time require the eviction, even if the tenant is not ready.
What financial factors should be considered?
If you do not take into account the lifestyle, then you can do a simple calculation to determine what you profitable – renting or buying. For the calculation should use the following data:
1. Amount by which the annual rent increases.
2. Amount by which the house price will rise (or fall in price) over time.
If the cost of housing is growing rapidly, say by 10 percent per year (not common), it is much more advantageous to buy a home than to pay rent. But during the recession of housing prices are falling, and the benefits of rent increases.
Normally the U.S. economy is quite stable. If we assume that the increase in rent will be 3% per year (about inflation), and the value of the home will also increase by that amount, the tenant will be in a better position than the buyer, for about six years. However, after six years, the financial benefits of buying a house will greatly predominate over the benefits of the lease.
It is obvious that time, the increase in rent and changing value of the house – not the only factors that should be taken into account. Interest rates on the loan and its repayment period also played an important role. But usually to choose between buying and renting is sufficient to consider only the mentioned parameters. The current economic situation where property prices are historically low, is beneficial for those who wish to purchase a house. However, if you are interested in buying property for investment, not just to live, we should consider the possibility of further price declines.
In addition to self-assess the situation, you can also seek advice from an independent financial planner.