When you’re a young professional woman, and you’re deciding whether to rent or buy your next home there’s a lot to keep in mind. There’s not one answer that’s right for everyone, but there are some things you should consider in terms of finances and lifestyle in the not only the short-term but also where you see yourself in the future.
The following are some of the things to think about as you make the decision.
One of the biggest things that you, of course, have to think about as you weigh renting versus buying is the cost of each. Around 85% of young adults aged 18 to 34 are renters according to a survey from Rent.com. However, Millennials spend around $93,000 on rent by the time they are 30. That’s a staggering amount of money,and rent prices only seem to keep going up.
Since 2010, apartment rental prices have risen by 28.5%, and the costs are one of the big reasons many young professionals instead opt to buy
You can’t just look at immediate upfront costs, however. You have to be more strategic. For example, if you’re going to rent an apartment where there are community living amenities, how will that save you money? What is the cost of maintenance on a home that you own? Do you have savings to deal with emergencies that could occur when you own your home?
Do you have enough money for a down payment and closing costs? Will there be homeowners association fees?
How Long Do You Plan to Stay?
If you’re a single, young professional buying a home might not always be the best option for you unless you plan to stay there for at least several years. If you think you could be moving in a shorter time-frame, perhaps because of your job, it’s usually better to rent.
If you buy somewhere you don’t plan to stay, you have to pay the down payment, and then you also have to consider the costs of selling the property. What will your ROI look like when compared to these costs? If you sell, you’ll be paying a realtor commission, transfer taxes, escrow fees, moving fees,and capital gains taxes.
However, if you think you’re where you’re going to stay for quite some time,and you look around see neighborhood prices on the rise, you might consider buying before you’re completely priced out.
Questions to Ask Yourself
In addition to what’s already been touched on, there are some questions to ask yourself as you decide whether you should rent or buy.
First, do you have any debt? If you have debt, including student loans or credit card debt, you might not be ready.
The next question is whether or not you have an emergency fund. The recommendation is having at least six months of expenses saved up before buying. You would need to be able to theoretically pay both your mortgage and your other bills for at least three months if something were to happen such as a layoff at your job.
Do you have enough cash-on-hand (in addition to your emergency fund) for at least a 10 to 20% down payment? If you pay at least 20% as a down payment, you won’t have to pay private mortgage insurance.
Finally, will your mortgage payment be more than 25% of your take-home pay each month? If so, you might reconsider buying currently.
If you’re currently single, whether that means not married or not in a relationship with a significant other at all, you may have to think about this as you decide whether to rent or buy.
For example, if you could begin a relationship or you’re in the early stages of something that could become more serious, you might not necessarily want to buy a home right way unless you do it entirely on your own.
If there is a breakup, owning a home together can make that extremely complicated and can lead to legal issues.
If you rent, you don’t have to worry about these things.
Also, if you’re currently single but you hope to get married in the not-too-distant future, how does this play a role in whether you rent or buy? Of course, you don’t have a crystal ball to see the future,but you have to think about how you expect your life to look five years down the road as well as currently. If you were to get married or have other big changes in your life such as a job change, you might want the flexibility of renting right now so that you could accommodate those changes more easily in the future.