Real estate can be confusing, and one of the biggest questions is among the thorniest. Owning or renting a home is an important decision, and the right answer will depend on your own lifestyle and goals. David Weliver, a personal finance expert and founder of Money Under 30, spoke to Bankrate about what to consider when considering your options. His answers have been edited for length and clarity.

How should people in this market weigh the choice between renting and owning? What are the advantages and disadvantages of each?

Much of the advice I have always given applies to this market. Buying a home is about putting down roots. You want to see it that way, as opposed to any kind of financial investment. Your home, your primary residence, is not an investment even if your uncle says. The reality is that a home is not a great investment because you put a lot of money into the costs, mortgage interest and taxes and all of those things. It appreciates over time, but part of that appreciation is inflation anyway.

It really is a place to live, and there are many great things about owning property, including some advantages over renting, but you pay a lot to live somewhere. If you can rent and don't depend on these overheads, maintenance, and taxes, you can put that money into investments or savings. There are many benefits to renting that are also overlooked, especially flexibility.

I encourage people to think of it less as a financial decision and more as a lifestyle decision.

House prices have skyrocketed in many parts of the country. It increases the entry point to owning, which can not only result in people breaking their budget, but they could also be pressured to choose a home that may not be the best for them. Maybe they'll move early.

Part of my rent-versus-buy advice is how long you are going to stay there. When do small financial advantages arise from owning a home? In any case, you have to stay somewhere for at least five years, and for many it's closer to 10 years.

One of the big factors here is the transaction cost of moving. Combine that with the fact that the market is so hot, are these prices sustainable? When considering whether to buy at all, this can be taken into account.

What factors are important when considering your options?

There are a couple of things. One is the cost of owning versus renting, which is the biggest. The market is one of them, it seems counter-intuitive, but the buying market, the real estate market, doesn't move perfectly with the rental market. New York City could be very different from LA, maybe very different from Omaha, Nebraska. Where I live in Portland, Maine, there aren't a lot of rentals; There are lots of Airbnbs out there, and it tips the scales towards buying.

Mortgage rates have been low for some time, but when they start to rise it adds to the cost of the purchase.

One of the foundations for some financial stability is having some money in the bank. When you are a homeowner, your need for financial cushion increases. That can be a significant expense. You need to save for a down payment, but then you need money for everything else that goes with home ownership.

With low interest rates and high prices, is now a good time to buy?

You consider the fact that interest rates are low as a good thing and the fact that prices are high as a neutral thing. Money you pay for your home is money that may be equity. Even if prices go down over the long term, they could still go up and we don't know where we are in this cycle. Maybe there will be a little slump and it will keep going up, or maybe this is the new normal and here are the prices now. Money you pay for your home has equity in your home, but money you pay as interest is out the window.

Can you explain how spending under 30 people can help with this decision?

Money Under 30 is a website that I started in 2007. I was in my early twenties and all of the advice I wrote was aimed at a certain type of consumer who was older and wealthier than me. There was no information for someone in their twenties or thirties struggling financially with all of their startup challenges.

The advice in place was all written for those who already had a significant 401 (k) balance and were starting to contemplate retirement, not those who need financial advice for the first time. Never before compared a credit card, never weighed that decision to rent or buy. We approach these issues in a way that many other outlets do, but for people who are building the financial foundation of their lives.

Anything else?

One thing I wanted to add is that when I talk about this decision it should be clear that it is about buying a single family home or just your primary residence. One of the options people might want to consider is buying an apartment building or a semi-detached house. That changes the whole equation if you live in one unit and can rent the other or more than one. If you can and do afford it, it makes a lot of sense to buy as soon as possible. This is only the case when you have units to rent for cash flow.

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source https://seapointrealtors.com/2021/08/13/qa-a-finance-experts-advice-on-whether-to-rent-or-own-your-home/

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