Submitted by Chris Johns for On Q Financial
Twenty or thirty years ago, if you asked the question, “Is investing in real estate a good idea?”, the answer was most likely a “Yes”. With the great depression long faded from memory, it wasn’t until the crash in 2008 that people began to question whether a real estate purchase was always the right thing to do.
I am the first to admit that buying is not always right for everyone.
But there are times when buying a home is an undeniably better option than renting. I’ll discuss those below to help you determine if now is a good time for you to invest in a home.
When You’re In It for The Long Haul
The New York Times says buying is better than renting after five years. If you plan to stay in your house at least five years, then the best option for most people is to purchase a home. Conversely, if you want to be able to pick up and go every few months, buying might not be the best choice for you right now.
If you plan to put down roots, look into how long it will take for buying to be better financially than renting. Check out an interactive rent-buy calculator to see if it’s a better value to buy based on how long you intend to be in your house.
When You Don’t Want to Pay More
If you’ve been in the same rental house or apartment for a while, you’ve probably seen prices increase. In fact, last year, rental prices rose twice as fast as inflation. This isn’t likely to slow down anytime soon. Rental vacancies are the scarcest they’ve been in 20 years, according to a Harvard report. The increasing number of renters has driven down the supply of rental properties, which has in turn increased prices for rentals.
If you don’t want to continue to pay more for the same rental property, you should consider purchasing a home. When you buy, your equity increases as you pay down your debt, rather than your payment increasing as is happening with rentals.
When You Can Afford It
Use On Q’s mortgage calculator to determine what your mortgage payment would be. Of course, affording a home purchase isn’t just about being able to make the monthly payment. You also need to have money to cover a down payment, closing costs and other fees.
If you are looking at buying a $250,000 home, a 20% down payment is $50,000. Not all buyers require a 20% down payment, however. In fact, many can pay 10%, 5%, or even 3% down on that same $250,000 home.
Not only that, but Washington State has some Down Payment Assistance options that many buyers may qualify for.
So, can you foot the bill and afford to purchase a home? If so, now is likely a good time to buy a home. But don’t empty all your savings to do it. Even new homes will require fix-ups and maintenance over the first year, as well as homeowners’ insurance and property taxes. So make a purchase that allows you to keep an emergency fund in your savings.
It’s also important to note, you may be able to deduct the interest you pay on your mortgage from your taxable income. This will help offset some of the costs of home ownership.
When You’re Up for the Maintenance
Owning a home requires more maintenance than renting. However, if you don’t mind doing some small maintenance on your home (or you have a good handyman), now is a great time to buy. Perform your own preventative maintenance like painting the siding every few years, cleaning your air ducts, and tuning up your plumbing, and you’ll save bundles down the road.
Chris Johns – On Q Financial
(360) 347-8000
chris.johns@onqfinancial.com
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