One of the ultimate questions in real estate is if someone should get in the game; should they continue to rent or buy. The answer: It all depends on your situation.
Real estate is like a 401(k), the longer you let it grow the more you will get out of it in the end. Real estate is not a quick profit maker. There are many factors that come into play, and they are not always clear from one year to the next, let alone one season to the next.
We spoke with two area financial planners, Paula Friedman with McLean Asset Management Corporation and Rob Robertory at Northwestern Mutual, to help answer questions you should be asking yourself when you are faced with the decision of renting versus buying a home, townhome or condo.
What are the questions you need to ask yourself when deciding on renting versus buying a home?
Paula Friedman: In my experience, many people thinking about buying their first home don’t think about their future plans 5 or 10 years down the road. There are many advantages to purchasing a home, when it makes sense for your situation. People should specifically consider their financial situation, future professional goals, marital plans, if they want to have children, if they may require more space down the road, or if they want to have the freedom to move when and where they want, before locking themselves into a large home purchase. Life happens and it can be tough to pivot quickly when you are tied to a large liability like a home mortgage.
There is no right or wrong answer. The key to the rent vs. buy decision is to evaluate your life today vs. what you expect down the road. The decision ultimately depends on how much flexibility you need.
Paula Friedman, Managing Principal
McLean Asset Management Corporation
Is there a term limit that makes a difference when deciding to rent versus buy? For instance, is better to buy if you will be in the area for more than 3 years?
RR: I think 5 years.
What are the advantages of renting a home?
PF: Renting offers flexibility to people that need it. If plans change and you need to move, go back to school, change jobs, etc., renting offers the opportunity to make changes without the added stress of selling a home. It can be a valuable tool when you need it.
RR: Flexibility
What are the advantages of buying a home?
PF: Purchasing a home can be an excellent investment for people who know they plan to stay in the same location for a long time and have a steady income stream. It provides an opportunity to build your wealth, put down roots, and become part of a community for the long-term.
RR: Stability and home for family
