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How to Actually Know if You Should Rent or Buy

There are a zillion 'Rent or Buy' financial calculators out there. They all work under the premise that you may actually save money, or potentially make money, by purchasing a home instead of renting one.

And while often times, especially in high-rent areas like Center City Phila, that is the case - you CAN save more a month and turn a profit on increasing equity in a home purchase - that's not the only factor in deciding to purchase your first home.

Savings. Ok, this is included to some extent in a lot of calculators and is certainly a financial decision but if you don't have a nice amount of savings in the bank, taking care of the initial costs to purchase a home (think down payment plus closing costs) simply may not be doable. There is no easy calculator here as there are several factors, like down payment options and tax rates, but purchasing a home is pricey up front. And you can't take all your savings and throw it at a new home. You need to have reserve savings when that furnace goes or you need to replace your car's transmission. Not to mention you might want to actually leave your new home to eat out every once in a while. When renting, your up front costs are generally limited to 3-months up front.

Lifestyle. There are a couple points here: First off, lets just point out that its a lifestyle change to own a home - it means less mobility and more responsibility. If your finances change significantly, subletting and moving to a less expensive place is a pretty easy path. Selling your home and trying to not lose money on the sale is a whole different ball of stress-filled wax.

But there is also the difference in what your money can afford. Its a rarity that the rent for a 2 bedroom loft in the heart of downtown is the same as the mortgage payment you can afford. Thus, when a lot                                                       of first-time home buyers purchase, it means a shift in lifestyle - a                                                         new neighborhood, different style home... different style life.

                                                      If you are pining for the yard a small suburban fixer-upper presents,                                                       for example, then perhaps the switch, if financially appropriate, is                                                         right! But any future home buyer has to know the change that                                                                 comes with the shift in location and responsibility.

Know yourself. Do you want to call your landlord when a light bulb goes out? Or have you called your landlord 12 times to notify them of changes you want to make the bathroom tile?

When you are a homeowner, there is no landlord to call (unless you purchase a condo with a high condo fee and a lot of amenities) so if the prospect of fixing things, or at least finding and paying someone to do it for you, scares the living daylights out of you - buying your own home may not be the best move for you. There is nothing wrong with renting - just find a space that saves you money every                                                         month!

                                                      However, some people itch to make their own paint choices and                                                             wait in anticipation of getting to reno a kitchen. If the initial                                                                   purchase makes financial sense, a little sweat equity can go a long                                                         way and may make a home purchase the right decision.

Life changes. Sure, owning a home can be fun, and it can certainly be a goal for you in life, but make sure you purchase in the right time frame. Perhaps you see the right house at the right price now, and you can afford it, but you know you are looking at a job change in a year - then buying now is probably not the smartest investment. Similarly, if you are looking at 1 bed condos now but know you want to have kids, and a second bedroom, in 2 years, then the potential investment seems risky and may not be a good idea.

There is nothing wrong with waiting, regardless of current opportunities. A home purchase has to fit into your timeline, not the                                                       other way around.

Deciding whether or not purchasing makes sense for you now, let alone for you as a person, rests in several decisions, not just your current finances. While owning a home can be a rewarding aspect of life, so can renting and enjoying the freedom that comes with.  

The long and short of it is that buying a home is about where and how you live, not simply about a potential investment. 

For more information on the pros and cons of renting and buying, please email me, call me or text at


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