An upcoming move gives you a unique position when it comes to a new home. Choosing between a purchase and a rental is a complex and personal decision that shouldn’t be rushed. Take a look at these main points when you’re considering either a rental or home purchase. Everyone will have a different answer.
Add up the Numbers
In many cases, choosing between buying and renting is dependent upon income. Your chosen area may not be affordable from a purchasing perspective, such as a home by the ocean. Renting in these areas, however, might be a better option. The monthly payment can be hundreds or even thousands of dollars lower than buying that same property.
Before your move, take a hard look at your income. According to Nerd Wallet, the general rule is 30 percent of your income should be for housing. Consider your other expenses too, including student loans, car loans and other responsibilities. Stick to a reasonable budget as you compare buying versus renting.
Think About Lifestyle
You might know exactly where you want to move. The neighborhood matches your personality, and your family lives nearby. In this case, purchasing a home makes sense. You’re ready to put down permanent roots in a known area.
In contrast, you might be a retiree who wants to live close to grown children. They might move pretty soon because of their jobs and other life events. The AARP suggests renting when you aren’t sure if you’ll be staying in the area for longer than a few years. You can finish out an annual lease and move whenever you like.
Research a New City
It’s not uncommon to move to an entirely new region because of a job promotion. You’ll need to live in the new area as quickly as possible. Choosing a rental for this scenario is the best way to keep your options open. Regardless of the amount of research, new residents won’t know an area very well until they’ve lived there for awhile, reports Zillow.
Ideally, rent a home when you first move. Get to know the area over the next year. You’ll have a good idea of the neighborhoods so that a purchase can be made in the near future. Buying a home in an unknown area is taking too much risk at first.
Consider the Amenities
Buying a home requires its maintenance on a regular basis. Plumbing repairs, structural updates and overall upkeep will take time and money. If you want a pool, caring for this amenity is considerably expensive too.
Renting a property with desirable amenities, such as pools and tennis courts, gives you the freedom to use them without the additional cost or time. This consideration is especially important if you’re a busy professional or retiree. There may not be any time to truly care for a property if it’s mortgaged. Renting is a much better idea in these cases.
Look at the Tax Implications
There are key differences between buying and renting a home when it comes to tax law. Property owners typically reap the benefits of multiple credits on their federal tax return. Property taxes and mortgage interest, for example, are usually deductible. You can possibly save hundreds of dollars in taxes with a purchased residence.
Renters have fewer options in the tax area, reports Chron. If your lease specifically lists property taxes being covered by your rent, they can be used as deductions on your taxes. In fact, some states offer a renter’s credit on state returns as well. Depending on the region, there can be some tax benefits to renting. However, its convenience is the main attraction, whereas homeownership provides the greatest tax advantage overall.
Moving several times in a lifetime is normal. The transition is full of choices, and wrong turns are possible. However, you can make the best out of your move by weighing all the factors that are important in your life. The perfect answer will present itself in time.