Assuming the real estate market remains reliable and appreciates, buying your own home is a far better investment than renting. When you rent an apartment, all you’re doing is handing over bushels of money for the privilege of living in someone else’s property, right?
Actually, no, not always.
Having your own home comes with many additional monthly expenses. Most mortgage lenders require proof of homeowner’s insurance before they’ll even talk to you. That can cost some pennies. You must pay city and state property taxes. You still have to pay your own utilities, except now you have a larger space (at least hopefully so) to heat and cool. Upgrades, lawn care, pest control—all on you. Something breaks, you fix it (or pay someone.) Stack these additional expenses onto your mortgage payments, and renting suddenly seems a lot cheaper.
Also, buying a home is one of the more stressful undertakings you could ever choose. When I was a real estate salesperson, I worked with clients whose demeanor was so calm that I couldn’t even imagine them making an angry face, even in jest. These same people became howling volcanoes of demonic rage, just from the process of buying a home that actually went smoother than most.
You will look at a hundred homes, and not one of them will be what you had in mind. It will then dawn on you that maybe you don’t have the budget for what you hoped. Or you’ll make an offer on your dream home, only to be outbid by an all-cash buyer. Your offer will be declined for reasons that no one seems willing to tell you. Or your offer will be accepted, but the appraisal of the home will come back too low and the bank denies your mortgage. You’ll find the perfectly priced coop, get ready to remove all of your belongings from self-storage, but a financial review shows that the coop is teetering on bankruptcy. Basically anything, absolutely anything can go wrong.
Owning a home even limits your mobility. What if the sudden need arises to change cities? If you’re renting, you can simply find someone to take over your lease, or wait out the lease term if it’s nearly finished. However, if you own a home, you must find someone to buy it, then use a storage unit to stash your own stuff out of the way. You could also rent your home out to someone who will actually pay rent on time and not destroy the place. Guess which is easier...
Remember when I mentioned “assuming the housing market remains reliable and appreciates?” Assumptions have caused some of the largest disasters in history. Any half-way educated adult is already aware that a housing market (any market) is prone to bottom out occasionally. If you find yourself truly needing to sell your house during this time…Well, there goes your investment.
Lastly, real estate isn’t the only smart investment in life. Instead of dumping that nest egg you nearly killed yourself for into an exorbitant down payment for a home, why not use the money on yourself? Invest in YOU. Write that novel you always had inside you. Use the money as capital for that business idea that keeps pulling at your sleeve. Make a rock-n-roll concept album. Go crazy. There’s rarely anything wrong with doing what makes you happy.
Despite undeniable constants, the right decision on whether to rent or buy depends on the individual and their situation. If you can afford the time, the money, the frustration, and are convinced that buying a home is truly what you want to do, then by all means go for it. You just have to know what you’re getting yourself into.
Lee Anderson is a writer out of Park Slope, Brooklyn. He keeps a music review blog called "Alphabet Pony".
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