It is no secret, cost of living is going up. From groceries to rent to gas, it all costs a lot. Matter of fact, some sources state that rent increases by 3-5% in most cities in the US every year . The amount that households are spending on housing is pretty outrageous. The lower 1/3 of the population spend about 40% of their income on housing while most financial gurus including Dave Ramsey state that only 25%- 35% max should be spent on housing.
So what gives?
Renting is sometimes not the best way to go. If you want to get into a decent neighborhood and a place that isn’t run down and itty bitty, then you will most likely pay for it. This was the case with our last home search which turned into a home purchase . And in our (most current) move to Ohio we fell into the same predicament. Rent was going to be 1100 for an okay place. However, if we purchased a townhouse, we could easily save the $300 a month.
Rent vs Buy
Renting absolutely has its perks. Not having to pay for anything that breaks, moving out when you want, no maintenance except for minor inside details. Most of the time you will not even have to do lawn maintenance. Yes, the perks can be nice.
Downsides of renting
Just be prepared to pay for the perks. Rent is 25% or more than a mortgage payment in the same area. If you have pets (we have 3 cats and now a dog…yes I am the crazy cat lady ?) then just be prepared to pay a pet fee monthly and an extra deposit. And don’t let them know you have more than 2 pets. A lot of companies or landlords will not accept more than 2 pets. I almost think that one day they will restrict the number of kids. Landlords can always ask you to leave if you are not in a contract which could be a major pain. And definitely make sure that you keep the place to their standards, which is usually a bit excessive (in my opinion and experience).
Buying a home
Purchasing a home and being solely responsible for it is frightening. You may have the freedom to do with it what you choose, but you also have to pay for it. Exterior and interior maintenance costs time and money. A lot of people do not think about the cost of upkeep when they purchase a home and they end up getting into a lot of trouble over it. Big expenses such as a roof are obvious, but the small expenses (water heater, pool maintenance, mulch, painting) is where it gets to be really costly to maintain.
Buying a townhouse
A townhouse can be the perfect median between the two. It is still less privacy than a home, but it is also less maintenance. Not only will you be free of the weekend landscape hustle, but you will not have to pay for exterior maintenance. This also includes things like septic tank, roof, or exterior painting. Townhouses are also smaller which means less area inside to manage. Some may see this as a downside, but as I explore my longing for a more minimalistic lifestyle, I find it to be quite the motivating factor.
Since cost of living is the big theme with this post, it is definitely something worth being mentioned. The monthly cost of our townhouse is around $800 which includes the HOA, insurance, and taxes. Apartments in this area start around $1000 for a bit less space then we have now. So, if we are saving $200-300 per month on rent, we can feasibly afford to pay for any maintenance issues that arise. Perhaps the biggest monetary factor in the decision making process was that, while we were going to spend 10k a year on mortgage, we are almost 100% likely to get that money back when we sell in a couple years. And if we lost it during the sale? Well, we would have lost more while renting anyway.
At some point, you will just have to make a list of all the pros and cons and see which one suits you the best. Write every last detail down that you can think of. Don’t make any rash decisions. When managing your money, this is absolutely how to go about making smart choices. Every last purchase (big or tiny) really need to be considered thoroughly.
Are you thinking about buying right now? What are you looking to buy, a home or a condo?