Renting vs. Buying a Home: Which Is Best?

Considerations include your age, stress level and investment outlook.

Is it better to rent or buy a house? That's a question virtually all adults ask themselves at one point or another. So before you answer the question, here are some other questions you should ask yourself first.

Is it important that your house is an investment? If it's very important, you might want to rethink your future living arrangements. Americans were used to their homes being a store for wealth – something to liquidate in retirement and downsize. Unfortunately, this is no longer the case. Houses can go down just as easily as they go up.

Prospective homeowners should also think about the health of the city they want to live in before taking out a mortgage. Bankrupt municipalities can't put out fires. They can't stop thieves. They can't pick up trash or maintain roads.  You have to think about how much would your house be worth if your municipality was in that situation?

This isn't to say your house won't be worth more someday versus when you bought it. But if you want a strong investment portfolio more than you want to buy a house, talk to a financial adviser instead of a real estate agent. Additionally, if you believe you're going to be in a house less than five years and want to sell it at a profit, most experts suggest it's safer to stick with renting.

Have you crunched all the numbers? Real Estate Experts say the biggest mistake future homebuyers make is comparing a month's rent to a month's mortgage payment. Many people don't have all the numbers and do not understand the expenses that go along with home ownership. There are many additional fees you need to include to make a fair comparison: the principal interest, property taxes, property insurance, homeowners association fees and maintenance."

The maintenance, in particular, can't be underestimated!  If your furnace goes out or a pipe leaks, you have to fix it yourself or hire a professional. And there are other ancillary costs as well. You may find you suddenly need lawnmowers and snow shovels and new furniture. It all adds up.

Can you handle the stress?  Most people just weigh the financial aspects of buying versus renting, as they should, since it's the biggest financial decision most people will make. However, one big factor to consider when buying a home is stress

The Holmes and Rahe Stress Scale, a landmark stress study conducted in 1970, ranks many events that go along with buying a home in the top 43 most stressful circumstances in life. Four events are specifically home-related: change in financial state (No. 16), large mortgage or loan (No. 20), change in living conditions (No. 28) and change in residence (No. 32).

If someone has recently made other life changes such as marriage, which is No. 7, switching careers (No. 18) or having a child (No. 14), it might be wise to postpone buying a home.  Stress overload can lead to missed payments, which can result in destroyed credit or even losing the home. It's better to rent if your life is in flux, and then buy when your stress levels are lower.

How old are you? If you're in your 20s or even your early 30s, there are some excellent arguments for not buying a house. Not that you aren't responsible enough to be a homeowner, but you're young, and who knows where life will take you? If you have a house, however, you may find that life can't take you to all that many interesting places.

For instance, a recent study from Dartmouth College in New Hampshire and the University of Warwick in the United Kingdom found that when countries start seeing a climb in home ownership, unemployment rates start trending upward within five years. Why? It may have something to do with homeowners not wanting to move somewhere else to find a job.

The decision to own versus rent is very much a lifestyle decision as it is an economic decision. In most cases, it is driven by household formation – people getting married, starting families and being able to afford to do so.  Less than 40 percent of people under 35 years of age own homes, over 60 percent of people over 35 years of age own homes, and over 80 percent of people over 65 years of age own homes.

So what's the answer to whether it's smarter to rent or buy? It probably won't be a surprise to most people, especially those with several decades behind them. But as a general rule, the older you are, the more likely that it's smarter for you to buy a house. The younger you are, the better off you are being a renter.

Everyone’s situation is different! It is one of the largest financial decisions of your life and you should always implement the assistance of professionals to ensure that you make the best decision for you! If you have questions about renting versus buying in the San Antonio area, call me at 210-717-6690 or email me at morganbertram@realtyexecutices.com for more information or for referrals to other professionals who can help you make the best decision for you.

Oh by the way…I am never too busy for any of your referrals!