Millennials And Gen Z Decide Whether To Rent or Buy A Home
Most people desire property ownership. Why rent and end up paying someone’s mortgage when you can own your own home? There are pros and cons to renting accommodation as a young adult. There are also many advantages to making some sacrifices to get onto the property ladder as soon as possible. In this Property Talk blog, we look at the pros and cons of renting a home as a young adult versus property ownership and other factors, including:
When you are a young adult, lifestyle is a priority. What do you want to achieve now you have completed your education, and you’re making headway in your career?
Knowing if you want to travel the world as a young person with few responsibilities or find a partner and settle down to create a family is the starting point to knowing if renting or buying a home is right for you.
Both traveling the world and buying a home require savings. You will need to earn an income and save a percentage of it regularly, and you may also invest your savings so your money makes money and you reach your target savings amount quickly.
What’s essential about saving and investing is paying a regular amount to another account. It is a commitment and shows future lenders that you can be trusted to make regular mortgage payments.
One way you can make your savings go further is to buy an investment property as soon as you save enough for a downpayment. With an investment property, you are getting onto the property ladder, but your tenants’ rent pays the mortgage – you are free to rent and travel.
You may stay at home with your parents while renting out your investment property and use the money you don’t spend on rent to create a travel fund.
When you have saved enough, you can take your overseas sabbatical to see the world before taking on personal commitments like a partner, starting a family, and buying a home.
With an investment property, you have the beginnings of financial security. Your tenants are paying your expenses, including your repayments, while your rental is increasing in value. The property cycle determines when there is a market rise in the value of real estate. There can be a surge of regular increases in the ‘boom’ phase at the top of the property cycle. While in the ‘bust’ phase, property values drop. Over the long term, property beats the rate of inflation i.e. it goes up in value.
Owning a home is financial security and means you have somewhere to live. Being a tenant, the landlord (property owner) can terminate the lease and tell you to move out. This unforeseen event is stressful as you need to find another rental property to move to, and there is no security that you won’t be asked to move out at some time in the future.
To Buy Or Rent?
Not sure if you should purchase a home or keep renting? Let’s take a closer look at renting and homeownership and explore their pros and cons.
Deciding between renting versus owning a home is not always easy. While each choice has pros and cons, it’s essential to look at your unique situation and consider what options make the most sense. This article now explores the advantages and disadvantages of rental properties and homeownership to help you make an informed decision.
Benefits of Owning a Home
Owning a home can come with many rewards. Homeowners can benefit from tax deductions for mortgage interest and property taxes. Homeowners also build home equity through their monthly loan payments, which can add to their financial security when they choose to sell in the future. Additionally, owning a home provides more stability as renters often face rent increases while homeowners have more control over their housing expenses.
Challenges of Homeownership
The responsibilities of home ownership come with a few challenges. Homeowners must be prepared for unexpected repairs and maintenance costs, such as replacing an HVAC system or fixing a plumbing issue. Additionally, homeowners must budget for the various associated costs of owning a home, such as homeowners insurance and taxes. Moreover, there is no guarantee that the market value of your home will increase over time; suddenly, you may find yourself “upside down” on your mortgage with debt more significant than the value of your home.
Advantages of Renting
They are renting offers the freedom to move with minimal hassle and costs. Moving expenses are generally less expensive when you rent since there is no large scale associated with selling a home. Furthermore, renters avoid most repair and maintenance costs; instead, they can contact their landlord to make any needed fixes or updates within the rental property. Additionally, renters can often enjoy flexible rental terms, such as 6-month leases, which provide more flexibility than long-term mortgages.
Disadvantages of Renting
The main disadvantage to renting is the lack of autonomy. Your monthly payments do not accrue equity towards an asset you own like they would if you had purchased a home. Additionally, renters can be subject to unpredictable rent hikes and are much less flexible in making home changes or improvements, as landlords must sign off on any modifications. Furthermore, since tenants aren’t liable for repairs, landlords may take longer to respond to repair requests than if the homeowners handled them themselves.
What Affects Your Ability to Buy or Rent
Factors like income, credit score, and job stability affect your ability to buy or rent. Lenders look at these trends as they suggest you whether you have the finances and credit to commit and make consistent monthly payments.
Furthermore, a potential landlord will likely want proof of employment and income when applying for an apartment rental. Timely bill payment history is also essential in both cases. Keep any accounts current and in good standing, if you intend to pursue either route.
However, the starting point is knowing where you are at in your life, i.e., your goals and what you need to feel secure and financially set up, which will determine whether you should buy your own home or a rental property or do neither and continue to rent for the foreseeable future. If you’re a Gen Zer, you have time on your side.