Renting vs. Buying an Apartment: Key Considerations You Must Understand
Every now and then people need to make some big changes and start fresh. If we don’t do that, our lives become stale and we miss endless opportunities that could potentially change our future. Well, if you are looking for such an opportunity you will hardly find a better way than moving to some new location and into a new apartment.
But, such a massive change of pace shouldn’t be taken lightly and relocation always entails some very difficult financial decisions. Renting an apartment or investing in full ownership definitely stands on top of this list.
Well, let us take a look then at some of the most important considerations brought to the table by these housing options and try to help you make the choice that fits your specific needs so you can start your journey on the right foot.
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Long-Term Lifestyle Commitment
No matter whether you are renting or buying an apartment, you will have to deal with some sort of long-term financial commitment. Well, at least if you are not paying the entire price of your new home upfront. The main difference here is that the length of the rental lease is limited only by the time you decide to spend on some location, while mortgage installments present an iron-clad deal you will need to deal with anywhere between 15 and 30 years.
So, before making any definite decisions, be sure to double-check your personal and professional plans and assess whether taking stronger roots in a singular location makes a good call. Researching the local labor market, development programs, and community culture will prove to be more than helpful.
Maintenance Costs and Responsibilities
In this case, the decision you will need to make is very similar to the one business owners need to make in regard to renting or buying equipment. Essentially, renting some assets relieves you from a lot of costs and responsibilities regarding maintenance. If something breaks down, the owner needs to take care of it. But, you still need to put a lot of effort into lower-level maintenance duties, without having any say in the future property development or eventual upgrades that may affect your lifestyle. So, it really boils down to whether you prefer less commitment or more engagement.
The Options you Have on the Table
The present-day real estate market is highly competitive and the building sector is really struggling to keep up with the spiking demand. On the other hand, the rental sector is experiencing a genuine boom, even in the markets that were not considered ‘mainstream’ in the previous years. Take for instance Ohio. If you are planning to move to Columbus, there are much higher chances you will be able to find suitable apartments for rent than the properties opened for purchase. This is not the absolute rule, but if you prioritize your lifestyle habits and comfort, the rental market might be a better option.
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Accumulating Wealth through Equity
When you are paying off mortgage installments you are increasing your stake in the ownership of the property and in terms of your personal wealth. Over time, you can even decide to sell or rent your property and make the money you have invested back. But, even with things as they are, reliable sources like the New York Times claim that property prices will keep rising at a steady pace of 20% per year in future periods. The upfront investments you make can easily be offset only after a couple of years through sheer appreciation. Renting a property thus pays off others' investment.
A Matter of Upfront Costs
That being said, the upfront investments you need to make are considerable and usually sit around 20% of the total price of the property. Also, you need to take into account closing and other similar costs (inspections, permits, etc.) that add an additional 2% to 5% to the immediate expenses. And then there is the credit score which has a tremendous impact on the mortgage agreement. If you want to get decent installments, you need to score at least 620 or 640, for flexible term loans. Putting all these assets in place requires time and commitment which is not the case with rental properties.
Freedom of Choice vs. Financial Freedom
In the previous sections, we have mentioned that the owners are able to influence any aspect of their property development from selecting the BIM models down to upholstery. This can be incredibly empowering and gives owners a chance to tailor their future homes entirely around their lifestyle choices. On the other hand, renting a home saves you from things like property taxes, installments, depreciation, gentrification, and industry fluctuation. Combined with low upfront costs this makes for a very self-sufficient way of living. It all depends on whether you prefer stability or nimbleness.
Well, we hope these couple of considerations will help you realize some of the basic differences between renting and buying a home as well as some of their inherent pros and cons. And when all is said and done, both these options make a good call. How much you will get out of either of them will depend on your personal plans, financial outlook, and the area where you want to move. So, be sure to double-check everything we have said above and start the next chapter of your life on the right foot.
Author Bio: Marie Nieves has been a regular writer for High Style Life since 2015 and had some guest posts on other blogs in the meantime. Right now, she is taking a break from writing about lifestyle themes, and writing more about business (supported with a degree in business management). Marie is passionate about technology, HR, personal and professional development.
Cover image by Luke van Zyl on Unsplash
