Renting vs Buying a Home
There can be no better feeling in the world than owning your own home! One thing is for sure, we all need a roof over our head. In most people’s case they either end up paying rent for this roof or a mortgage payment. At a first glance it seems to make more sense to put the money into your own pocket and pay off a mortgage so you can eventually own your own home free and clear, but is buying really a good investment? This article discusses why it’s usually better to buy your own home rather than rent.
Real Estate is generally a long term investment. It is true that from time to time in the right market someone may be able to make a quick buck by flipping real estate. But for the average person who is buying a home to live in, you generally are not making money off of your home in the short term.
When you buy a home you need to take into consideration the costs involved in buying and selling a home, from appraisal and home inspection fees, property transfer tax and real estate commissions, all of this must be taken into consideration. Generally, a home makes financial sense if you are going to live in it for at least 24 months.
When people lose money in the real estate market it is usually because they did not own it long enough, they sold too quickly. Usually you cannot depend on making any real profit in real estate in the first 2 years of the purchase. In fact, the market may fall after you buy your home. Historically speaking, the longer you own your property the more it will have increased in value.
Take a look at the graph below that shows the average house in Kamloops since 1993. As the graph shows, the average house price at this time was $138,500 and in 2013 the average home price in Kamloops was almost $384,000. This is a great return on investment if you bought a house more than 10 years ago.
If you have been renting over the same time frame you have probably noticed a considerable change in terms of what you are paying for rent. With rental rates increasing constantly, there is no guarantee you will be able to afford them as the years go by.
Real estate has proven to be one of the most stable long-term investments there is. It is also your guarantee of retirement security, for most people by the time they retire they will have their house paid off and will no longer be making mortgage payment. If you rent your whole life you will never reach a point where you no longer have to make payments.
Overall, it is far better to own your own home than it is to rent. You will have a great feeling in the pride of ownership, and in most cases you can rest well at night knowing you have made a smart long term investment with your money.