To rent or to buy? What to consider when deciding between a house or apartment
Financial and lifestyle factors heavily weight into the decision of renting vs. buying
Compass founder and CEO Robert Reffkin breaks down the housing market on 'The Claman Countdown.'
To rent or to buy? It is a common thought that renting is always a waste of money, but it's not that simple.
There really is no correct answer to whether to rent or buy, because it varies from person to person depending on their wants and needs.
Consider these factors when you are deciding between renting and buying.
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Before making the huge decision to buy a home, there are many factors you'll want to consider. (Loren Elliott/Bloomberg via Getty Images / Getty Images)
1. Your financial situation
The very first thing you need to look at before even considering buying a home is your financial situation. Even though buying a home has the potential to be a great investment, if your finances aren't in order, homeownership can quickly lead you down a road of debt.
There are certain financial checkpoints you'll want to hit first before buying a home, like being debt free, having an emergency fund set aside, and having enough for the down payment, according to Rachel Cruze per the Ramsey Solutions website.
The emergency fund is one factor people often forget about when buying a home. Keep in mind that any renovations you want to make, or unexpected, but inevitable damage that heads your way, is going to be your responsibility to cover. If you spend all your savings on the down payment, one small, yet costly repair can put you in a lot of financial stress.
Moving into a house can be a long and costly process, from making an offer, plus having your down payment and closing costs ready to go. Moving into an apartment or renting a home is typically a much faster process, where you will not need as much up front to move into the space.
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From a financial standpoint, it costs a lot less to move into a rental space than it does a house. (iStock / iStock)
2. The lifestyle you live
Even if your finances allow you to buy a house, there are other lifestyle factors to consider.
Living in a rental has its own set of lifestyle perks, like not having to shovel the driveway after a snowstorm, or not having to worry about hiring a plumber when your faucet starts to leak.
Apartments usually have community areas for residents to spend time, gyms on the property, sometimes even a dog park, café or pool. If these are amenities you're looking for in your life, renting might be the way to go.
On the other hand, if you love hosting guests and enjoy the luxury of your own private dwelling and land to accompany it, having a house will provide these things for you.
3. Your job
In a workforce full of remote workers, many have opted for apartments or rentals for the main purpose that they never really spend too much time in one place. If you have a job that allows you (or requires you) to be on the move often, an apartment can give you that flexibility.
With more and more people working remotely, it's easier for individuals and couples to move around a few times before deciding on the place they want to settle down. (Stefan Wermuth/Bloomberg via Getty Images / Getty Images)
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If you have a job where you know you'll be in the same place for the long term, it's not a bad idea to buy property in that location.
One thing to keep in mind with renting is that it isn't as secure as buying a home, which is a pro for some and a con for others. If you are the type of person who moves around often, this won't really be a problem. When you rent a space, at the end of your lease, it's possible that your landlord won't renew it, and you'll have to move to a new location. Additionally, when your lease ends, rent may soar to a price you can no longer afford, sending you back on the apartment hunt.
4. What's important to you?
What this decision really boils down to (besides your financial situation) is what's important to you. If you are at a stage in your life where you want to put down roots in one place and begin to grow equity, then buying a home might make more sense for you.
If you aren't sure where you want to settle down, want to keep exploring and need more time to set aside money for things like a down payment or an emergency fund, renting can help you do that.
Remember that buying a home gives you a lot more freedom for renovating and redesigning a space. When you rent, ultimately, what you see is what you get. (iStock / iStock)
The factor of redesign and renovation is another thing to consider. If you really want to increase the value of the home, as well as make it more to your liking through renovations, then you'll need to a buy a property for this to happen. In a rental, you can make it your own through decoration, but you won't have the same renovating and design freedoms you have with a home you buy.
Buying a home is an enormous purchase, so there are a lot of factors to weight to reach an informed decision. It's vital to make a financially sound choice and also one that fits the lifestyle you want to live.