June 23, 2011, 6:00 am

When Buying a Home is the Best Option

by: MD    Category: Properties
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The other day I released my first manual on deciding if you should buy or rent a home post-college. Why the need for this? I feel that young professionals are often misguided when it comes to the idea of home ownership. There are too many myths that exist when it comes to both renting and owning. Owning is often viewed as the best investment you can make. On the other hand, renting is seen as “throwing money away.” I put up a bunch of guest posts this week on the decision to see if you should buy a home or rent one in your 20s. Today I wanted to take the side of home ownership.

Let’s look at when buying a home is a better option over choosing to rent a place out:

You plan on settling down.

If you’re ready to settle down with your career and with life, a home can give you the stability that you need. Renting provides a great sense of flexibility. If you want flexibility, then renting is probably in your best interest. When you’re ready to settle down, a home purchase can help you get grounded. If you’ve found work in the career/company of your choice, you also might be ready to settle down. There are many instances where you can find yourself planning to settle down. I recommend a first home purchase at this point.

You’re starting a family.

This is the most common instance where we find ourselves settling down. For those of you with a baby on the way or looking to start a family in the short term future, you may want to purchase a home in a community where you would want to raise your kids. Right before I was born, my parents purchased the home that I lived in for 22 years. Starting a family can be the perfect excuse to look into that spacey home in that calm community.

You know where you want to live.

The problem with many young professionals is that a primary residence is often viewed as an investment. The problem with this thinking is that real estate is not the greatest investment. Aside from all of the taxes and expenses that go along with home ownership, you still need to hope that your home appreciates in value. You must also factor in the rate of inflation. Buying a home for the sake of a “great investment” isn’t the best option. If you want to settle down and you know exactly where you want to live for the long term future, you’re ready to buy your first home.

Looking for responsibility.

As strange as it sounds, many of us young people find it a challenge to save money for no reason. Saving money without an end goal can get either really boring or you might just spend the money on random purchases that come up along the way. I don’t want to say that a home is a “forced savings tool,” but it’s a great reason for many of us to start saving up money.

A certain sense of pride comes along with owning your own place. You’ll find yourself taking pride in the presentation of your place and the responsibility that goes along with maintaining a home. Buying your own place can fill that gap that you feel as a 20-something living at home with no real responsibilities.

You plan on renting out space.

I’ve noticed that a few acquaintances have bought a home so that they can rent out a portion of the space while building their equity. The idea here is that you own the place, live in one of the units, and rent out the rest of the place. I see this as a great opportunity for a young couple looking to get their life started. You purchase a home and get a taste of life as a landlord in case you ever planning on buying a rental property.

Those are the instances that I could think of where you would be better off owning a home instead of renting one out. Did I miss any other times when you’re better off with owning? Please share with us.

(photo credit: owlhere)

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Comments

Sometimes buying can actually be cheaper than renting but you have to be sure to account for additional maintenance, taxes, insurance etc.

These are all very good reasons to buy. The most important, I think, is planning on being in one location for a while. The costs associated with real estate transactions can take some time to recoup.

Here in California we are seeing two things: home prices have fallen but stabilized in the past month or so, and rents are on the rise.

I mean 20% y-y rise!

Yet people still say they wonder if it is a good investment to buy a home right now.

What ind of investment is renting – because those are your two options!

I absolutely agree with your reasons to buy a home – in any market. But if any of these fit your situation – the longer you hestiate the more it will cost you.

Great post. I had never stop to think about it but I did buy a house when I felt the company I worked for was in a good financial position after some bad years.

I think another good advice is to buy what you need, not what you ultimately want. You might not want to aim for that mansion you dream of if you can only afford a 2 bedroom house. Otherwise, you might be loosing good opportunities.

I’ve seen many coworker by a house that was WAY too big for their needs. A big house comes with a lot of expenses and is more time consuming in terms of maintenance. Some ended up having to resell because they couldn’t handle the payments and maintenance costs. It’s very sad to see that happen.

I’m a firm believer in buying quickly your first house when you feel you want to settle but a first house that fits easily within your budget.

I prefer building up to my dream house while feeling safe financially. I’m a worrier, what can I say :)

Some people rent out their first home when they move on to another. Still others buy a duplex in order to rent out a space to offset some of the mortgage. There are a lot of reasons to buy a home, but only one way to buy it. You should approach this kind of purchase conservatively. 20% down payment and reasonable payment.

My best friend bought a 4 bedroom house in college, but rented out the three other rooms to people. It covered the mortgage and more. Now, he has moved on and rents the house out fully, and it covers everything and more still!

by: The Financial Blogger | June 23rd, 2011 (1:11 pm)

We bought our first house when we had William. having a kid in an apartment was just too much trouble ;-)

While I don’t consider my house as an investment, I find it way more comfortable than renting! On the other hand, if you stay in your house long enough, you can eventually live in it for “free”.

You hit the nail on the head. We don’t plan on buying a house until we are having our first child.

here is another angle to consider…..

when both interest rates and home values are steadily rising . . . one might want to lock in a lower purchase price and a low int rate

[...] 14. When Buying a Home is the Best Option @ TFB. [...]

I agree with a lot of what is said here. buying a house is forced savings. ***WITH TIME*** (read 10+ years) it will be a good investment. Buying a house must only be done thought if you are ready to commit for many years in the same place because everytime you move, it will often cost close to 10% of the value of your house and this will kill all gain you may have done in the short term.

[...] time for us to buy a home, and this is definitely a personal financial decision. It may be the right time for you to buy a home, but it may not be the right time for me and vice versa.  Some people buy [...]