In the U.S., the American dream is wrapped up in homeownership. People are often told they are throwing away money if they are renters. The truth is – renting is not throwing away money, and in many cases, it is the best option for people. The hard truth is, if you buy a house before you are mentally and financially ready, the dream of ownership will look more like a nightmare. For most people, buying a home is the most expensive purchase we will ever make – and yet, people rush in without considering the true cost of owning and maintaining a home. In this video – 4 questions are proposed to help you think realistically, and objectively, about whether you are ready to rent or buy. Whether renting or buying – proceed with your eyes wide open about all renting or buying entails.
Go to NerdWallet and run some numbers on their rent vs. buy calculator, to see if renting or buying is better for you.
Also – check out the hidden costs of ownership in this market watch article.
If you need a financial coach to help you organize your finances, email me at: or I also do speaking engagements on personal finance.
Follow me on Facebook @achievefc
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I am a financial coach that focuses on improving personal finance behavior. I do not sell investment products or manage investments.
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If you’re thinking about buying or Renting you may want to check out this Video first [Music] What’s up everyone thank you for Stopping by the achieve financial Coaching channel where we believe in Breaking the chains of debt And talking about all things related to Personal finance Today we are talking about whether or Not you should rent or Buy it’s a very personal decision but Today i want to propose four questions And do a quick cost comparison so that You can decide which one works for you Please consider subscribing to the Channel and checking out some of my Other videos as well Let’s get started okay my overall Thoughts there are Four things to consider before you Decide whether renting or buying is best For you The first thing you should do is Consider the overall cost to rent or own Based on the area you live in so some Areas Like the cost of buying a home is just So outrageous renting may be The only option that you have and so you Need to consider that The second thing is how long will you be In the area
If you’re not going to be in an area for Five years or more It’s really not worth buying a house Because startup costs and what it takes To get into a house can actually take a Few years to recoup And you want to be in the house long Enough to recoup those costs and start Building equity And so you may just want to rent if You’re not going to be in an area for Five years or longer the third thing you Want to do is consider do you have A lot of consumer debt if you do this May influence whether you Actually can rent or own so if you have A lot of consumer debt Credit card bills other little things Like before you rent or Own you just want to make sure you go Ahead and pay those things down And get them out of the way so you’re Sort of free from that as you move Forward The last thing you need to ask yourself And be 100 Honest with yourself you know your style You know your personality Are you willing to personally commit to Owning if you want to own Are you going to paint this house or This condo every few years Are you going to keep the yard Maintained and are you even going to
Obey the hoa rules so you really have to Assess whether or not you’re the type of Person That is actually going to obey the rules You’re going to make sure you’re keeping The house up to date So your neighbors aren’t mad at you when You park your car all on your grass Now whether you want to rent or buy you Need to be Able to cover the upfront expenses of Acquiring the property or moving in Putting enough furniture in it so that It’s livable and you still need to Maintain A three to six month emergency fund i Need to call that out If you’re going to be broke after you Move in you may as well stay put And stay in your situation now so Renting or buying After you’re all in and you’re settled You still need to have a three to six Month Emergency fund so when we look at Comparing renting versus buying overall They’re pros and cons for each and so i Just wanted to start off At a high level in this comparison and Show you some pros and some cons for Both So a pro for buying would be the Potential to build Wealth through real estate of course and
Then stability Putting down roots and having stability Is good for community The less transient the community the Better when it comes to renting some of The pros are Low cost of ownership you don’t have to Maintain as much And then you have the flexibility to Move easier and more often Than if you owned so overall there are Some things that are not so great about Owning or renting So when it comes to buying there’s high Maintenance And hidden costs so some things that pop Up when you own a home Are things you may not be able to Predict and then there is always a Chance that you have a hard time selling Or getting rid of the property when You’re talking about renting Rents increase every time you have a Lease Right you renew your lease and your rent Goes up and also You don’t build equity of course you’re Just paying rent and you can’t do any Modifications to the property some Properties don’t even let you Hang pictures on the walls or put holes In the wall to mount Photos so as you can see there overall There are pros and cons to both
Owning and renting now let’s do a quick Cost comparison Let’s assume we are renting or buying Spaces of similar sizes In an area with an average cost of Living and we’ll break the cost down Into three categories Upfront cost ongoing cost and closeout Costs So let’s start with the upfront cost When you are buying You have inspection fees earnest money You have to put down That does eventually go towards closing Costs but you have appraisal fees Closing costs a down payment and you Have moving costs When you’re talking about renting you Have application fees Your first and last month’s rent and a Deposit you also have moving costs the Ongoing cost For buying is a mortgage payment this is A pretty long list Homeowners insurance property taxes Pmi and that’s private mortgage Insurance so if you don’t put 20 percent Down On a house you have to pay private Mortgage insurance to perfect Protect that lender this goes away after Your balance reaches 80 percent of your original purchase Price also
One thing to think about people think Mortgages don’t go up But they can if your taxes and insurance Are escrowed inside of your mortgage Payment And let’s say the property is you know Increasing big time and so your taxes go Up and you may also need to Increase the amount of insurance you Have so it’s not true that mortgage Payments can’t go up they can adjust Slightly Up or down actually so then to continue With What you have to deal with with ongoing Costs as a homeowner you have your gas Or electric many homes have both your Trash Your alarm monitoring lawn care can’t Forget about that furnace or ac I’ve had recent experiences with that Also your time people don’t think about It but all that time you spend Fixing things yourself doing it yourself That counts as well Pest control appliance repairs and Anything Else that breaks according to a 2018 Market watch article Hidden costs can be as much as ninety Three hundred dollars per year on Average That’s about six thousand and sort of Necessary necessary costs
Things like taxes and homeowners Insurance and utilities but another Three thousand In just basic maintenance it can be even More Depending on where you live so when you Look at renting with ongoing costs you Have your rent You also um oh one thing to understand Is on average Rent is actually higher than a mortgage On average especially now with with the Mortgage rate so low But rent also adjusts with each new Lease So you also have your renters insurance Renters insurance is Dirt cheap so if you are renting you Need to get renters insurance and then You also have your utility bills like Gas or electric A lot of places don’t have both and also Water Is free in a lot of apartment complexes At least where i live in the atlanta Metro area so to wrap this up this Comparison up let’s talk about closeout Costs you’re now ready to move Out of that apartment or that house You’re renting or that house that you Own When you think about someone who owns to Get out of their home and move You have closing costs which could be as
Much as 10 percent of your final sales Price When you add in all the fees any repairs Based on A potential buyers inspection you have Staging costs and you have moving costs When you look at the closing costs for Someone who is renting You have to repair of course any damage That you’ve done And if you haven’t done any you may get Your deposit back And then you also have moving costs Okay now that we’ve proposed these Questions that you need to ask yourself And we’ve Done a little bit of a cost comparison If your heart is really set on renting If you’re not renting now maybe you’re Staying With someone you have a roommate you’re Staying with parents or whatever if You’re considering renting Or if you consider considering buying i Would do a very quick exercise it’s a Three-month exercise that i like to Recommend And what i would do is i would forecast What the expenses would be To rent or to buy whichever one you’re Thinking about doing And i would forecast those costs and Then i would actually pretend that i Have those
Costs for three months so i would take That money if it was just to use a round Number a thousand dollars I would take the one thousand dollars i Would put in an account And not access it i will pretend it’s Not there and i would do that for three Months at the end of three months you Asked yourself and be honest with Yourself How did that feel can you actually Afford to rent can you actually afford To buy If no you may want to go back to the Drawing board you may want to save a Little bit more or think about making Some other moves if yes Then move forward and take the money That you have been saving by doing this Three month exercise And put it towards your moving expenses Or your closing costs Or your first and last month’s rent if You’re going to rent Take your time with making a decision Especially when you are Buying a property buying is the largest Purchase we’ll ever make and you do not Want to mess this up So take your time think through it and Don’t rush into it You can achieve much greater things than Where you are today if you’re willing to Put into work
Conceive it believe it and achieve it I’ll see you next time if you enjoyed Today’s video Please consider subscribing to my Channel and checking out some of my Other videos as well You can also follow me on facebook at Achievefc Looking forward to seeing you in the Future thanks for checking out the Channel
