Rent Or Own? Use The Three Ls To Decide
Many people these days are trying to decide if they should rent or purchase their own home
. After the housing bubble burst many people who could afford to purchase a home chose to rent instead. Still, as home prices fall and mortgages rates sit at their lowest level in decades, many are asking a reasonable question: Should I rent or buy my home?
This can be a tough question, but there are some factors you can use to help you arrive at a common sense decision. They are the Three Ls; Location, Length of Time and Lifestyle. Finding a realtor who understands how these factors influence your decision will help you make the right decision.
Before we get into the three Ls there is one more important factor to consider, and that is Mortgage rates. They are at the lowest theyve been since the 1950s. Experts disagree on how long this will last, but everyone knows it will not last forever. This is a unique moment in time, and younger couples considering their first home will probably never have an opportunity like this again. As you try to decide if its better to rent or to own, the mortgage rate factor should be included in your decision making process. Find a realtor who is aware of the mortgage situation in the area you want to live as this information can help relieve some of the headaches associated with this major financial decision.
And now, the three Ls:
Location
Where do you currently live, and where do you want to live? In some parts of the United States, where property values are going down yet rents are holding fairly steady, its better to rent. When you are considering a new piece of property, pay attention to the pricing trends in the city, and even the neighborhood in which you are thinking of buying. If home prices are still headed south, you may want to consider staying in an apartment until the situation is more conducive to purchasing a property.
One advantage to renting is the opportunity to remain liquid in the cash department. While owning a home ties up a lot of your money in one place, renting (at the right price) can allow you to invest your cash elsewhere (such as a retirement fund, or in your own business) or perhaps save up for a sizable down payment which will allow you to buy your future home on the best possible terms.
Keep in mind however that renting is purely an expense without any direct financial dividends; when you pay a landlord that money is gone and it will never return, you will get no tax breaks and never build equity in your living space. You are, in a very real way, paying your landlords mortgage and allowing him to build his future at your expense.
Length of Time
The second factor in your decision making will be the length of time you are likely to stay in a given area. As of this writing, national averages say that it is better to rent if youll be in an area for less than five years, but better to own if you plan to stay longer than five. Keep in mind, however, that this is only an average. Your location will have a lot to do with how long it takes you to see a return on your housing purchase.
The length of time it takes for a housing purchase to pay off should be checked constantly because its constantly changing due to housing market and mortgage rate fluctuates. One thing to keep a close eye on is rental rates in your target area. The laws of market economics can be pretty simple at times: if a lot of people choose to rent, then demand for rental units goes up, and when demand goes up, so does price. In other words, the rent or own equation will change over time.
Lifestyle
The final L is Lifestyle. This ones not about numbers or trends but instead what do you want out of life? If you value the ability to move when and where you wish, use your money to invest where you wish, and the freedom from the headaches of home repair and maintenance, and if youre not bothered by the fact that, at the end of the day, the roof you live under is not your own, then you should rent.
However, if you like the idea of putting down roots, if you derive peace of mind from knowing that your money is building up equity for you over the long term, if you enjoy the ability to make your home your own by painting the walls, adding a deck, and filling it with the things that make it completely and indisputably yours, then you need to consider buying a home for yourself and your family. It might just be the best investment youll ever make.
Once you have an idea what you want to do finding the realtor that understands you and wants to work with you is priceless.
by: Alex Ball
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