Should You Buy or Rent? 6 Factors to Help You Decide

The American dream of owning a home is powerful and prevalent, but like that dream you once had of a piloting a rocket ship made of strawberry ice cream, it doesn’t always make good sense in the light of day. When deciding whether to launch yourself from the rental market into homeownership, you’ll want to keep your eyes open and your feet on the ground so you can make decisions that are right for you and your family, both now and down the road. Here are 6 things to keep in mind:

 

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1. Crunch the numbers.
Buying vs. renting isn’t solely about comparing costs, but that’s still a huge part of the process. The Allstate Rent vs. Own Calculator can help you see the big picture from a baseline financial standpoint.

2. Know the market. If you don’t know the difference between a “buyer’s market” and a “seller’s market,” now’s the time to educate yourself. Is low inventory driving prices up and making buyers more competitive? Or is there a glut of homes for sale, giving buyers more leeway to cut deals? In either case, how is the rental market responding? Are home prices trending up or down (i.e., will the places you’re looking at likely be worth more or less in five or ten years)? You can’t predict the future, but you should look at current trends and make informed decisions based on what’s happening now.

3. Itemize your costs. The financial difference between renting and owning is much more than simply the upfront difference in price between paying rent vs. mortgage. Don’t forget to account for property taxes, homeowners insurance, HOA fees, maintenance, and repairs/renovations. (If the fridge stops working, you can’t just call your landlord; you will need either fix-it skills and a can-do attitude or money to hire a pro.) In the plus column, homeowners get a sweet tax break and enjoy the value of building positive equity, neither of which you get from renting.

4. Get real about job stability. One major consideration of the “to buy or not to buy” question is whether homeownership makes sense with your job. Can you count on maintaining at least the same level of income in the years you plan to own the home? Will your job allow you to stay in the same city or state for more than a few years at a time? Will you lose income if you choose to stay home with children? If your career is subject to change, don’t discount the benefit of renting a place that’s easy to leave if you need to relocate or reduce expenses on short notice.

5. Consider the kids. Many people decide to buy homes specifically to accommodate building a family. Questions to ask yourself include: Can you afford to live somewhere with schools that meet your needs? Is there room for not just your current family but also any family members that might join you in the future (not just new babies but aging parents)? Will the features of your house adapt to your family as it grows/grows up?

6. Search your heart. Do you even want to own a home? Or do you think it’s just what you should want? If owning a home and all that comes with it -- the good and the bad -- isn’t something you’re excited about, don’t sweep that feeling under the rug. Owning a home can be awesome (pride of ownership! increasing your net worth!) but it’s not for everyone. You do you.        

How did you decide whether to buy or rent your current home?

For more advice on buying your own place, check out Allstate’s guide for first-time homebuyers.

 

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