Should you rent a home or buy one? I have four questions that will help you make this important decision.
Should you rent a home or buy a home? There are four things you should consider when deciding what to do:
1. Can you afford it? In many cases, it’s actually more expensive to rent in Phoenix than to own a home if you look at the monthly payments. You might say, “I know that but I don’t have anything saved for a down payment.” If you are looking in certain price points, you may qualify for a down payment assistance program that will gift you 5% of the purchase price up to a certain amount. It’s a great program but we don’t know how much longer it will be there, so call me if you’re interested.
2. Is it better to rent or buy? It really depends on your personal circumstances. Are you self-employed or a W-2 employee? How much can you write off on your taxes due to owning real estate? Your rental payment may be close to a mortgage payment, but that tax return can make a big difference. Check in with your CPA and see if it may be more affordable for you to own a home.
Other things like home warranties hedge your risk on things breaking in your home when you own the property.
3. How long are you willing to stay put? What’s your exit strategy? Again, most homeowners stay in their home for about five to seven years, depending on the market cycle and whether or not they have equity in the home. If a market correction occurs and the market goes down, people may stay in their homes a little longer.
4. Are you ready to be a homeowner? You will be responsible for the property. If something breaks, you need a home warranty or money set aside for improvements and repairs. Your HVAC system and your roof both have a lifespan. Will you need to replace them?
You can get a home warranty for about $70 that will cover the vast majority of big issues. Homeowners insurance will also cover repairs and costs anywhere from $400 to $800 a year.
Hopefully, these four questions help you determine whether you should own or rent a home. If you have any other questions, just give me a call or send me an email. I would be happy to help you!