Should I buy my home? Series Part 2 – Factors to consider

Should I buy my home? Series Part 2 – Factors to consider

In the first part of this series we discussed that there are no right answers to the question of renting or buying, only what answer is right for you.

So let’s consider the factors that might go into getting the right answer for you.

Location

Does where you live matter to you? You might want features such as proximity to the coast, a farm, or the bustle of city life. If so, compare the cost of renting or buying. If you want to live in a certain area where house prices are huge, it may often make more sense to rent than buy. If the costs of mortgages and rents in the same area are commensurate with each other, then buying may be better.

Lifestyle

Are you likely to change jobs? Do you want to travel? Are you keen on working overseas? If so, are you likely to be out of a certain location for a while? If buying a house makes you feel tied down, or leads you to turn down opportunities in other locations, renting may make more sense. Otherwise, if you leave your purchased home for a while, can you rent your place out – is there a market to do that, and would you be happy for someone else to live there?

Security

Is being secure important to you? Do you plan on living in one area for a long time? What are the rental laws like in your area? If you can be kicked out of a tenancy relatively quickly and the law favours landlords, buying may satisfy your need for security. If however you live in an area with powerful tenancy laws and long leases, renting can be a good option too.

Commuting

This is such an important factor that is often overlooked. Remember to factor in the time it takes to get to work or school, and the number of commuting options you have (e.g., if your car breaks down, can you cycle or take public transport to work). Long commutes can be exhausting. Or you may gain peace of mind being further away from work. Either way, it may not make sense to buy the home you can afford out in the sticks if you only get to see it in the dark after leaving early and arriving back late.

Property size

If you have several family members, it may pay dividends to rent a home with more space over buying an apartment, for example. Conversely, there may be no need for you to buy or keep that three bedroom home if there’s only one of you living there. If you have pets, how will space (or lack thereof) affect them? Do you need a bit of green space to keep you from going crazy or does a garden sound like more housework?

Cashflow

Does that beautiful home come with a mortgage monster that sucks you dry? Let’s say you’ve run the numbers and you can afford it – if you keep your job, work weekends and never get sick, and interest rates never go up, and you stock up on baked beans…If you can rent in the same or another place for less, that’s likely to be the preferable option. Being house rich and cash flow poor may lead to sleepless nights, and the bricks and mortar aren’t going to wipe your tears away.

Future needs

It often makes sense to make decisions about what you need now rather than in the future, but if you decide to buy, it’s usually for the long term. It makes no sense to secure the deposit on that cute little one bedroom apartment and then adopt giant huskies that tear it apart. Have a think about how a place might address your future requirements. If in doubt, you can rent.

Renovations

Ah, real estate agents know how to sell anything. I worked with someone who bought a property that the ad said just needed ‘a little TLC’. Six months and six full skip bins later they had only just cleared the back yard of rampant cacti and discovered the water pipes were all broken and needed replacing. Suddenly their ‘cheap run-down house in a great location’ had become their mega mortgage – and they couldn’t even move in. Your move on this one. Do your research before renovating an ‘DIY dream’ – renting might be a lot cheaper.

What about costs?

Now we’ve covered some of the important factors, we need to look at the numbers. This is a qualitative as well as a quantitative decision, so I’ve covered the factors first. But in a couple of future posts, we’ll look at when it may be better to rent or buy from the numbers perspective. Stop shuddering. I promise I’ll make it palatable.

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