Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about homeownership; specifically, whether you’re better off buying or renting.
Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.
You also can learn how to send in a question of your own below.
For more information, check out “This Number Will Tell You Whether It’s Better to Buy or Rent” and “How Renting a Home Can Make You Richer Than Owning.” You can also go to the search at the top of this page, put in the words “real estate” and find plenty of information on just about everything relating to this topic.
And if you need anything from a better credit card to a mortgage, be sure and visit our Solutions Center.
Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.
Today’s question comes to us from Super Mom:
I’m 60 and single. Should I buy or rent a house?
I’ve owned houses since I was 21 years old, so that’s more than 40 years. I’ve rented before, but I don’t think I’ve rented more than a year or two in my entire adult life. So, when it comes to buying, I’m a believer.
But that doesn’t mean everybody should own a home.
I like owning homes because I like customizing my home. I created a little home studio here that I’m talking to you from right now, and I like to know that I can modify my home to suit my needs, fix it up and basically do anything I want to it.
I’ve also made money with real estate over the years.
But that doesn’t mean that everybody should always own a home. So, let’s talk about some of the things you should consider as you decide whether to rent or own.
How long will you live there?
Real estate has really high transaction costs. Agents typically charge 6 percent to sell a house. So, if you paid $300,000 for a house, unless you sell it yourself, you’re going to pay $18,000 to some real estate agent to unload it. In short, you’ll need that much appreciation just to break even.
This is one reason why you need to stay put for at least five years before you think about buying a home.
Are you in the right place?
Obviously, you want to buy a home in a location where home prices are going up in value.
There are a lot of variables that go into good housing markets. But one of the main things that makes real estate go up in value is when a city is growing. What makes a city get bigger? Job creation. So, if the place you’re buying in is a place that’s creating a ton of jobs, it’s a good sign.
You can find the job picture by going to the local Chamber of Commerce, or simply doing some online research. Just go to your favorite search engine and ask, “How many jobs were created last year in (fill-in-the-blank) city?”
In short, if you’re in a growing, vibrant area, the odds of real estate appreciation are much greater than if you’re in a place where population is declining. In fact, if you’re in a place where people are leaving, I would advise you not to buy a house at all.
Can you afford it?
Owning a home costs a lot more than renting one.
As an owner, I have to buy insurance on my home. I also may be heating and cooling more space than I actually need. I have to do maintenance, and it can be a lot. I pour money into my house most years. And it takes a lot of time.
I personally enjoy fixing up my home, but if you don’t, ownership may not be right for you.
These are all things you need to consider, Super Mom, along with many more. We’ve written a ton on this subject: Click here for links to lots of articles.
If you decide you want to be a homeowner, like me, awesome. But if you don’t, nothing wrong with that.
Think about some of the factors I’ve mentioned here, do a little reading and you’ll make the right decision for yourself.
Hopefully that answers your question, Super Mom. And I hope you’ll all join me right here next time!
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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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