Several significant life decisions often appear as if they’re already set in stone, even though they are options that you can choose from. Consider the typical path of getting married, purchasing a home, and having children. Although societal norms concerning marriage and parenting have evolved, the urge to own a house remains quite influential.
Like any other major life choice, deciding whether to rent or buy property requires careful thought; you must consider several factors and make essential enquiries. This article outlines all the things you must consider when choosing between becoming a homeowner or remaining a renter.
Focus on What You Want
You might have heard that renting is a waste of money and that owning a home is a better investment. But these ideas are not always true and depend on your situation. To figure out what’s best for you, ask yourself some of these important questions, “Do you plan to move soon? Are you going to have a bigger family? Do you want to work from home or at an office?”
Some of these questions might not have easy answers, but it’s really important for us to think about these short pieces of advice we hear about renting versus buying, considering how they fit with our own lives,”
Simply put, don’t pay too much attention to what others say you should do. Focus on what you want. There’s no one-size-fits-all way to decide where you live and how you pay for it.
Consider Your Life Situation
Many financial experts challenge the idea that renting is always a waste of money. They emphasise that having a place to live is a fundamental need for everyone, hence renting isn’t necessarily throwing money away. The decision to buy or rent a house isn’t black and white; it depends on your financial situation, needs, and where you are in life.
For people still saving up to buy a house or prefer not to deal with property maintenance, renting can be a smart choice. It’s also beneficial when exploring a new city or a different neighbourhood because it gives you flexibility. Sometimes, the freedom you get from renting makes up for the monthly money you spend.
Ultimately, whether to rent or buy isn’t just about the numbers. It’s about your personal circumstances, how much money you have, and what kind of life you want.
Crunch Some Numbers
If you aim to choose the most economical option, it’s crucial to analyse the figures involved. Acquiring a home has the potential to reduce expenses associated with yearly rent and monthly costs. In the same vein, iit is possible that the money paid for the house might be more expensive than the equivalent rent for a similar space.
For instance, Chydee, who purchased a house with the intention of owning a valuable asset, shared his perspective: “Let’s assume I spent ₦35 million on buying the house and an additional ₦10 million on finishing it. In January 2021, this was over $100,000. Had I invested this amount in the Fixed Income plan on Risevest, I would have gained a yearly return of $10,000. This sum is sufficient to rent a superior house compared to mine, situated in a more convenient location. Meanwhile, I would retain the compounded $100,000 (now worth about ₦80 million), without the responsibilities and expenses tied to maintaining a house. This also offers the flexibility to relocate without excessive contemplation.”
Consequently, the argument that renting is wasteful and buying a house is an investment is nullified. Stock market investments generally yield an average annual return of around 10%, while home prices typically grow by approximately 4% each year.
Given this, if you’re advising an average individual who’s debating between investing in the stock market and gradually building equity through homeownership, a direct comparison of the two numbers reveals a discrepancy.
Determine Your Readiness to Own a Home
Dreaming about having your own home can feel wonderful, but it’s important to know that owning a home comes with more than just the initial cost you pay.
There are other things like property taxes that you need to think about, and these can add up over time. If you’re not ready or interested in handling these responsibilities independently, renting might be a better choice.
However, having your own home also has its special side. You can paint the walls any colour you like or even put in a door for your pet. This can be really nice. But if you’re ready to take on the not-so-fun parts of owning a home, like fixing things and keeping everything in good shape, it might be a good time to consider buying a home seriously.
Assess Your Financial Standing
When you’re thinking about buying a home, there are a few important things you should do. First, you need to make sure your finances are in good shape.
This is the most important step, and it’s never too early to start getting organised with your money. Also, take some time to ask yourself some important questions. Are you confident that you’ll keep earning a steady income? How are your finances overall? Are you dealing with a lot of high-interest debt?
Even though the answers to these questions won’t give you a definite “yes” or “no” about whether you should buy a home, they can help you figure out what you need to do to get ready financially.
Take Your Location Into Account
Sometimes, you might be ready to buy a home financially, but the place you live might not be the best option. For instance, you could have enough money to afford a house in a town like Abiriba, but the same amount might only get you a much smaller property in a city like Port Harcourt.
On the other hand, if the homes in your current area are too expensive, you’ll have to consider moving to a cheaper place to fulfil your dream of owning a home. Alternatively, it’s more important to stay where you are and keep renting, even if it costs more. It’s a decision that depends on how much you can afford, what kind of lifestyle you want, and what matters most to you.
Explore Renting and Buying
Sometimes, you don’t have to limit yourself to just one choice. If you’re in a good financial position to buy a home somewhere but are not ready to give up your city rental lifestyle in a more expensive area, there’s another option to consider.
You could buy a property in a different location and still keep your rental where you are. Another idea is to invest in a property that you can rent out. This way, you’ll have another source of income, and you’ll also be building ownership in a property while still renting your own home.
Buying a property with the intention of renting it out can provide a better return on your investment than simply buying a home to live in. Think about it this way: when you look at the investment portfolios of wealthy people, you’ll often find that their main source of wealth isn’t the house they live in.
It’s usually the real estate they own and rent out to others. This distinction is important. It means that a home can be seen as an investment if you’re renting it out, but if you’re living in it, there are many additional costs to consider.
Determine Which Choice Might Set You Up for Future Success
Many believe owning a home is a great way to build wealth over time. However, this isn’t always the case, and it’s important to make smart choices instead of just following what everyone else does.
There’s a common idea that you’re only a real grown-up when you’re living alone in your own house. But being a responsible adult also means managing your money and planning for your future, like retirement savings.
True adulting involves owning a home and caring for your future self. If owning a home actually makes it hard for you to save for the future, then that’s not really being a responsible adult. It’s more like putting yourself in a tough situation that will be difficult to get out of later on.
In the end, whether your preference lies in purchasing a home or renting, there’s an opportunity to consider. You can explore the Risevest real estate plan, a way to invest in property, particularly in the US and regardless of your chosen path. Click here to be a homeowner.