To buy, or not to buy — when it comes to where we rest our heads, cook our meals and spend our downtime with friends and family, it's kind of a big question. It's hard to know when the time is right to commit to home ownership and when sticking with renting is the wiser safer bet.
We chatted this week with David Weliver, the founding editor of Money Under 30, to get his input on home ownership. Below, he offers smart suggestions for making the big decision.
Unless you’re confident you’ll stay in your home for at least four to five years, rent.
Many people buy a home and then upgrade within a few years, choosing to become a landlord by renting out the old home. This could be a savvy long-term choice, but it’s harder in the short-run than most people realize. It can be challenging to get two mortgages (even if you find a tenant), and many people are surprised when the rent doesn’t cover their mortgage and other expenses, costing them a few hundred dollars a month to hang onto the old house.
Yes, it is possible to be successful and earn passive income as a landlord, but the guys who are good at this are super-selective about the properties they buy, because they know ahead of time that they can get positive cash flow from the rental. The homes that we would choose for ourselves might not fall into that category.
If you’re financially ready and you find the right house, buy.
Most of us want to own a home. The problem is, we can get so eager that we start to compromise on things that are important — really important.
For example, you may find a house you love and buy sooner than you planned — perhaps putting less money down or settling for a higher interest rate because your credit wasn’t as good as you hoped it would be.
On the other hand, you might reach a financial situation where you can buy a house, but not a house you’re going to be happy with. Most of us will always have financial limitations on the kind of homes we can buy, but don’t get too pressured to buy just because the market is hot.
They key is not to compromise too much — to find the right place at the right time. Know what you're willing to give up, and what feels non-negotiable, whether cost, location, layout or timing. Don't rush it.
If you don’t want to be a homeowner, rent.
Even if you’re financially ready to buy a home, you might just not want one. There’s nothing wrong with that. If you’re hyper-focused on career or travel, taking on the responsibilities of owning your own place might not make sense. Renting is not necessarily an unwise financial decision; at the very least, you’ll have some money left in your pockets that homeowners are giving to the appliance guy and Home Depot.
p.s. If you need a change of scenery but you're not ready to commit to a new place, how about a remodel?