Your home. Your rules.
When you own a home, it’s yours. You can improve it, decorate it to your liking, and generally speaking, you set the rules as to what’s allowed. For instance, many pet owners get fed up with landlord’s rules about what pets are allowed, or even what size dog they can bring with them, and turn to home ownership simply for the love of their pets. Others want to decorate and design a home that fits their unique style and vision, which may require anything from new paint to knocking down some walls. Some like to tinker, so many do-it-yourselfers are drawn to home ownership to have their own live-in workshop. (Note: for condos, pay attention to condo association bylaws as often there are more restrictions than when owning a single-family home)
Easy living.
On the other hand, many people don’t want to deal with the complexity of home repairs and maintenance and would rather a leaky faucet be someone else’s problem. Especially if you live alone and are not comfortable taking on the responsibility of taking care of repairs and the home by yourself, then consider renting until that mindset changes.
Uncertainty.
If you’re unsure about how long you might live in a particular place, thinking about going back to school, or are not clear about which direction your career is going just yet, renting is the way to go until you get those sorted out. Don’t let the roots of a purchased home keep you from doing what’s important to you. Renting allows for flexibility in this area that purchasing does not.
Tax incentives.
Who knows what will come out of Washington in the coming years but as of now, there are great tax incentives for homeowners. Mortgage interest, a huge portion of the monthly payments in the early years of a 30-year mortgage, is deductible, as are property taxes. When you sell, you can keep $250,000-$500,000 of profit from the sale, depending on your marital status.
Building equity.
One of the most common reasons people buy is to build equity, and the likelihood of this goes up the longer you plan to stay in your home. However, if you’re planning on selling in under five years, then owning a home simply for equity won’t work. Now, if you plan to stay in your home longer than five years then you have a much higher likelihood of building equity in your home over that time. Your decision around equity being a factor should be strongly tied to the duration you plan to be in the home.
Location. Location. Location.
There are some crazy markets out there, some that appear undervalued and some, like San Francisco or New York, that appear on the other end of the spectrum. There are places where rental inventory is hard to come by, so owning becomes the only option. There are also places where owning might open up new income streams. Services like Airbnb make it easy to earn money from renting out space in your home, which is a newer consideration for buyers. If you’re in a location where hotel prices are high, or rooms are hard to come by during certain times of the year, owning could provide a viable source of revenue.
However, considering the location is important even if you’re not interested in creating a new source of income. Is this location worth the price tag that comes with it? Can you see yourself being here long-term? If so, then buying is a valid option. If not, don’t even waste your time looking!
Buying a home is a big decision. Make sure to consider your current situation and plans, and like with any investment, there is risk. So don’t assume, like your parents may tell you, that buying a home is a great investment. It can be, but it’s not necessarily a lock.