Should I Buy A House Or Rent? (Your Advice)

There is rarely a single answer in personal finances that fits for everyone. Due to this, issues that you always assumed were easy to answer may be more difficult that your thought. That is a question I received from a woman wanting to know whether or not purchasing a house was the right move for her.

I am having a hard time deciding what I should do and I’m hoping that I can get some help from you. I always thought that one of the best investments that you can make is to purchase a home, so I have planned to do that for the last few years. I have been saving my money for a down payment and should have enough for one to buy a house in the next year or so. Everything seemed perfect until I started doing some reading that says that buying a home is not necessarily a very good investment. I’m really confused and I’m not sure what I should believe. Here is my situation:

  • I am single and I have no plans to get married in the near future.
  • Buying a house to get out of an apartment is not a major goal of mine. I would be just as happy living in my current apartment as I would in a house. The main reason that I was going to purchase was because my father has always said it was a good investment.
  • The cost of rent and what my mortgage payment would be are about the same in my area.
  • I like living alone and although the house that I would purchase would have a few extra rooms, I don’t think that I would enjoy having roommates.
  • I’m not very handy with the do-it-yourself projects so buying and older house that needs a lot of work is not an option for me.
  • I have no current plans to move and expect that I will be in this area for the foreseeable future.

With my current situation, does it really make sense for me to purchase a house? Or does it make more sense for me to continue to rent? I’m really confused about the whole situation and could use any advice that I can get to lessen my confusion

With the information she spells out above, do you feel that it makes more sense for her to continue to rent or to go ahead with her initial plans to purchase a house? Since she is looking for additional advice, what other factors would you recommend that she consider that she hasn’t mentioned above?

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7 Responses to Should I Buy A House Or Rent? (Your Advice)

  1. Scanner says:

    I think the last comment of “I have no current plans to move and expect that I will be in this area for the foreseeable future.” is the clincher.

    Based on that, yes, I think buying and making it past the initial stages of the amortization schedule for a mortgage and taxes would be a better financial move than continuing to rent.

    As far as the other stuff, being single or married isn’t really germane to the financial issue and wanting to live alone isn’t really an issue one way or the other.

    But, based on those two factors, a small condo/townhouse would be the best investment all around given she will have to outsource her repairs and/or maintenance.

  2. Teri says:

    Agreed. We owned a condo for a short while out of desparation to due to very high cost of living and we absolutely loved it (unexpectedly). A condo is much easier to maintain. Get an end unit in newer construction – you should never hear your neighbors. We will probably retire in a condo.

    My only question reading this is how old are you??? The benefits of buying a home are much more pronounced in your youth.

    Also interest rates are still low, good long-term investment. I never buy those “buying a house is bad” articles if you are looking for somewhere to live for the long term. But age (or wanting mobility) are the exceptions I would consider.

  3. Spokane Al says:

    I think one should buy a house primarily because he/she would enjoy living in that house. He/she enjoys taking care of a house and the yard and painting and updating and it adds to the quality of their life. A secondary factor in appreciation over the long term.

    The truth is while we hope a home is a good long term investment, it is not the best choice when purely looking for an investment.

    It is illiquid, there are a great deal of ongoing expenses, and it is time consuming and expensive to sell. It can also be a great deal of work to maintain.

    Many people, when trying to calculate their profits on their homes tend to not consider the additional expenses that eat away at that profit i.e. upkeep, insurance, taxes, and even your own time.

    So to me, at least, the question is why you want to buy a home. If you are looking for a home of your own, that you can take care of and nurture and enjoy and yes, continually pour money into, then you should buy.

    But if you are looking to buy purely as an investment, then an emotional, analytical, tempered analysis could show numbers that would make the home purchase not the very best investment you could choose.

    Remember, the high home value appreciation over the last few years is not normal and you should not expect the same level of high single or double digit increases going forward.

  4. Debbie says:

    I want to caution that although the cost of rent may equal the cost of a mortgage, that doesn’t mean your monthly payments would be the same.

    When I bought a house eleven years ago, I had a one-bedroom apartment for $395/month or could have had a two-bedroom apartment for about $550/month. My mortgage on my 2-bedroom + study house was $505/month. However, my monthly payment was about $625 (including taxes and insurance) and I also saved $100/month for repairs and maintenance and I wished I’d saved $100/month for remodeling.

    Now my monthly payment is $800 and I save $150/month for repairs and $100/month for remodeling. (I want a screened-in porch in back and I’d like a separate laundry room with room for a dryer rather than just a washer in the kitchen.) I have weatherized the house, replaced the roof and central AC/central heat and done a few other less pricy things, no problem.

    I would now have to pay about $900 for a two-bedroom apartment.

    In six years, my house will be paid off. That will subtract $505 from my monthly costs. Woo-hoo!

    In conclusion, buying a house will give you more headaches and will cost a bit more for a while, then it will cost about the same (at least if you have a fixed-rate mortgage because only the taxes and insurance go up). Then for the rest of your life it will cost less (because you will only be paying for taxes, insurance, maintenance, and repairs).

    Also note that most people, once they buy a house, suddenly want to spend money on things they never spent money on before. Of course you have to buy a refrigerator, but you may start wanting to paint your walls and have fancier furniture, etc.

    And your utility bills will probably go up. Even if you’re currently paying for your own electricity, water, and perhaps gas, there are a few other costs that might get added on that are currently included in your rent such as trash pick-up and street maintenance. Also, with a bigger place, you’ll be heating and air conditioning a larger area. Also, with a free-standing house, you’ll have less insulation and free heat/AC from your neighbors.

    As an investment, I’d say it’s not great, not terrible. Since I don’t feel like we have very many investment choices (stocks AND bonds!!!), I think of my house as a way to diversify my investments. Not as a real-estate investment where I get all excited when the value goes up (I don’t–because then my taxes go up), but knowing that this will reduce my costs once it is paid off. All my other money is in the “better” investments, and that’s good too.

    In your position, I’d look for a place that didn’t have “a few extra rooms.” You don’t need them, and they will just increase your costs. It’s not easy to find small places, but they do exist, and you’re in no big hurry.

    I’m not a big fan of condos because the condo fee is huge and never goes away and can change at any time (one place I was looking at got sued, so they raised the fee astronomically for six months).

    One last thing. Everyone always talks about the tax deduction. Yes, you get an income tax deduction. And yes, it will probably be higher than the standard deduction, so it will save you a small bit of money. But unless you are already itemizing your deductions or your itemizations would already be almost as big as your standard deduction, it’s really no big deal (especially if you do find a smaller place).

  5. Brad says:

    The fact that mortgage payments and rent payments are similar in your area, and that you don’t plan to move out of the area for some time make this a no-brainer if you ask me. Taxes, insurance, maintenance . . . yes, there are extra expenses. But the small gains in equity and the more substantial gains in the property’s value are more than worth it for most people in your circumstances. Where I live, more than 70% of people own their homes . . . because it just makes financial sense to stop renting and do it.

  6. Raven Knight says:

    I need some advice in regards to buying a new home in Las Vegas or should we rent.
    Me and my fiancee will get married next year 2008 and by 12/2009 we are moving to another country, we cannot decide if we should rent or if we should buy a house. We found a brand new house here in Las Vegas, we both like the house and its 3 bedroom. We also looked at the apartments with 2 bedroom and it’s cheaper than paying a mortgage. We want to buy the new house but were afraid that we might not be able to afford the payment, Were thinking that if we moved to another country to rent the house or sell it, but what if no one buy’s or rent the house, If we rent its affordable, but it’s not tax deductable. Market Value in some areas in Las Vegas are down instead of going up. We are so confused and we don’t know what to do. Were still coming back to Vegas again someday, we just don’t know when….please give me some advice…

  7. pfadvice says:

    You should rent…don’t even consider buying until you return and are planning to stay put for awhile.

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