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This is one of the more common dilemmas that we evaluate with clients. Everyone is eager to dive into the numbers, but the numbers are the easy part.
The shorter the time horizon, the stronger the case for renting. Nobody can consistently predict what the real estate market will do in the short term. If you decide to buy and find yourself moving shortly afterward, you take the risk of losing money on the property when you sell. Unless you are okay with that risk (or the idea of renting if needed versus selling), keep it simple and continue to rent.
If you have a stable job (or you can find another job easily in the same area), you can likely manage the added risk that comes with owning a home.
Others, however, know that they are at the top of the payscale and worry about their current employer’s future. Or maybe they are working at the only place in town that could employ their skillset. If they lose their job, they will have to move. For this latter half, renting may be worth it for the flexibility.
Even if you buy a house that is mostly done, there will be projects. If you are the type of person who enjoys that, you may love homeownership and the ability to customize your living space and learn new skills.
Others prefer being able to call the landlord with issues and having someone else responsible for fixing (and paying for) the problem.
Many people love renting until the landlord decides to sell their house, leaving them scrambling for a new place. Children and pets add a new layer to this challenge. You may prioritize keeping your children in a particular school district with their same friends. For that reason, buying a home may outweigh uncertainty in other areas of your life.
The numbers are essential – you have to see how a house purchase impacts your financial goals – but it is only one piece of the puzzle. Honest conversations about how long you plan to live somewhere, how invested you are in an area, and how much time you have to commit to house projects can help you solidify the best choice for you.
originally published 10/28/2014
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.
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