Buying a home is a big financial commitment, considering you’ll be on the hook long-term for a mortgage, property taxes, maintenance, and repairs . When you rent a house, all of these things are someone else’s responsibility.
Although owning your home carries a larger responsibility, there are benefits that make owning a better choice than renting. However, only you can know which option is correct for you.
If you’re still on the fence about buying vs. owning, here are some helpful things to consider when making your decision.
- Are you looking for a luxury home?
Are you looking for a luxury home? Do you want to live in a large space, by the beach, or in an expensive area? No matter what style of luxury you enjoy, experts say it’s better to rent a luxury home than to buy one. This advice is usually given to real estate investors, but if you ever decide to sell or rent your luxury home, it will become a consideration for you as well.
In real estate, many investors subscribe to what they call the BURL method. This stands for Buy Utility, Rent Luxury. In other words, when you follow BURL, you buy basic utility homes to rent to tenants while you rent your own luxury home.
The BURL method helps you increase your ability to generate higher returns without sacrificing your desire to live a luxurious lifestyle.
This method works out well, especially in light of other rules investors follow regarding the purchase price of a home. For instance, it’s common for investors to only buy properties when the monthly rent is equal to, or less than one-hundred times the monthly rent. This ensures a good return.
Following BURL, an investor wouldn’t buy an $8,000/month rental property for more than $800,000. This makes it hard, if not impossible, to buy rental properties in expensive areas like Los Angeles and San Francisco. You can buy the properties, but you’ll generate better returns by owning less expensive properties.
- Do you want to live in the area long-term?
Are you looking at homes in a particular area that you’d like to stay in long-term? Or are you looking for a temporary home while you search for your ideal location?
If you’re not convinced you want to stay in an area long-term, it’s probably better to rent your home than buy it and get stuck with a mortgage. Yes, you can always put your home on the market later, but your timeline may not work out that way.
For instance, you might get the opportunity to buy your dream home, but need to sell your existing home first. Will the real estate market be hot? Will your home sell for asking price? What if you have to move out of state on short notice after landing your dream job? How will you sell your home from a distance?
If you have plans to leave the area, consider renting instead of buying. Once you get the opportunity to leave, you might struggle to sell your home. On the other hand, if you’re renting, all you’ll have to do is give the proper notice and move out.
- Do you buy investment properties?
Are you into real estate investing? Do you buy properties to either fix and flip or rent? If you’re looking to acquire more properties, there are pros and cons to buying and renting the home where you live.
For instance, if you’re interested in buying property in a new area, you may want to rent a home in that area until you acquire your properties and establish a strong relationship with a property management company. Once you know your properties are covered, you can buy a home anywhere you want.
On the other hand, if you only buy local properties, you may want to just buy your home. If you decide to move later on, you can turn your former home into a rental property fairly easily.
Weigh the pros and cons before deciding
Whether you buy or rent your home, weigh all the pros and cons before making your final decision. Be sure to consider the future as well. For instance, renting might seem like a waste of money, but it’s worth the cost if your long-term goals would make it difficult to sell a property.
You can’t predict the future entirely, but you can make choices that will support your long-term goals.
