Should You Rent or Buy? Some Tips to Help Decide
People have always safely assumed that if they had the money it made sense to buy a home rather than rent. But the last two years have proved that assumption wrong and people are now faced with more difficult decisions than ever in the real estate market.
While the super-low interest rates and plummeting housing prices seem to make a great case for buying a home, more and more consumers are looking to rent or rent-to-buy opportunities. But evaluating such a scenario can be tricky.
So, as a matter of practice, when is it right to buy, rent, or rent to own? I have found 5 principal components to the decision:
1. Credit Score. Unless your credit score is near perfect, getting a mortgage loan in the current environment will be very difficult. You may want to rent-to-own in that circumstance, which will allow you to build your credit history over time and still build equity. On the other hand, if you have a great credit score, you may be able to get a loan at the lowest interest rates our country has seen in fifty years.
2. Cash Flow Needs. "Cash is King" rings especially true now, and those with immediate cash needs shouldnt, and likely cant afford to, front a large chunk of cash for a down payment. Rental rates on average are lower than a mortgage payment, which frees up a persons cash to ensure other expenses are covered and credit isnt damaged.
3. Employment Concerns. I recently read an article by Forbes.com Real Estate columnist Matt Woolsey, in which he said "Given the state of the job market right now, the anchor of full ownership is a heavy one." I find this to be so true with many of my clients, who are worried they might lose their job. If this is a concern for you, not having to worry about having trouble making your mortgage payments and potential credit damage and foreclosure is a big pro for the rent or rent-to-buy scenario.
4. The Flee Factor. If youve recently relocated, or want to or need to move, locking into homeownership isnt always ideal. Renting provides the luxury of scoping out new areas without the burden of having to sell a home in a depressed market (and avoiding a potential loss).
5. Market Unpredictability. Even in markets like Denver, which was recently named the No. 1 city on the verge of recovery from the real estate slump by Barbara Corcoran on NBCs Today show, data is mixed on when the housing market will actually recover. As such, renting is appealing as a wait-and-see approach until the forecast clears.
There are definitely arguments for each choice and the essential component is that you learn all the options to make the best decision for you. An experienced real estate professional can help you ask the questions and discover the answers for you. There are some new and unique options that folks may have not investigated in the past that might be just right in your situation.
While the super-low interest rates and plummeting housing prices seem to make a great case for buying a home, more and more consumers are looking to rent or rent-to-buy opportunities. But evaluating such a scenario can be tricky.
So, as a matter of practice, when is it right to buy, rent, or rent to own? I have found 5 principal components to the decision:
1. Credit Score. Unless your credit score is near perfect, getting a mortgage loan in the current environment will be very difficult. You may want to rent-to-own in that circumstance, which will allow you to build your credit history over time and still build equity. On the other hand, if you have a great credit score, you may be able to get a loan at the lowest interest rates our country has seen in fifty years.
2. Cash Flow Needs. "Cash is King" rings especially true now, and those with immediate cash needs shouldnt, and likely cant afford to, front a large chunk of cash for a down payment. Rental rates on average are lower than a mortgage payment, which frees up a persons cash to ensure other expenses are covered and credit isnt damaged.
3. Employment Concerns. I recently read an article by Forbes.com Real Estate columnist Matt Woolsey, in which he said "Given the state of the job market right now, the anchor of full ownership is a heavy one." I find this to be so true with many of my clients, who are worried they might lose their job. If this is a concern for you, not having to worry about having trouble making your mortgage payments and potential credit damage and foreclosure is a big pro for the rent or rent-to-buy scenario.
4. The Flee Factor. If youve recently relocated, or want to or need to move, locking into homeownership isnt always ideal. Renting provides the luxury of scoping out new areas without the burden of having to sell a home in a depressed market (and avoiding a potential loss).
5. Market Unpredictability. Even in markets like Denver, which was recently named the No. 1 city on the verge of recovery from the real estate slump by Barbara Corcoran on NBCs Today show, data is mixed on when the housing market will actually recover. As such, renting is appealing as a wait-and-see approach until the forecast clears.
There are definitely arguments for each choice and the essential component is that you learn all the options to make the best decision for you. An experienced real estate professional can help you ask the questions and discover the answers for you. There are some new and unique options that folks may have not investigated in the past that might be just right in your situation.
About the Author:
Joyce Kelly specializes in assisting national clients with executive relocation services. She is the owner and co-founder of DenverRentAHome.com, providing to Castle Rock, Colorado and outlying areas over 75 years of combined experience in the residential rental and property management profession. Visit their site to find out how DenverRentaHome.com can help you find or fill your home today.