Renting vs Buying
It seems like there will never be a clear winner when it comes to the age old question – is it safer to buy or should an individual rent? The reason why there will never be an universal answer is simply for the fact that we all have different ambitions in life. On a previous entry I highlighted variables that are rarely discussed when this conversation comes up.
The following should now be considered, especially by millennials when making the decision to buy or rent:
- Job stability is far more important than average wages; the average millennial changes employers every 3 to 7 years.
- Current and long-term availability of job opportunities. Can new homeowners rely on their current employer(s) to keep them employed while paying off their mortgage; if not, are there ample opportunities to switch employers if one is laid off.
- Opportunity cost staying locally vs. relocating to thriving job markets or even emigrating.
- Do people even care about retirement anymore? Is there any reason to sacrifice your 30s and 40s to pay off your mortgage. Younger generations are starting to become more skeptical of waiting until their golden years to complete their bucket list. Without fully retiring at 65, individuals continuing to work in their golden years have additional financing options to enter the real estate market at a later age (i.e. focus on building their professional career – work experience abroad, renting rooms out when becoming an empty nester, etc.).
- Are people willing to work more than one job just to be a homeowner? Is business ownership or running a side business a good idea? Or is it too risky for the average person?
As cautious a new homeowner should be, renters have risks that they need to consider as well. To simplify this ongoing, never-ending debate, I have provided fun illustrations to showcase an unbiased look at the cost benefit analysis of renting vs. buying.
Regardless your choice, having a savings plan is crucial in both scenarios. A renter would need to start investing as soon as possible to ensure they have long term savings to complement their fixed income later on in life. The buyer will need to have access to an emergency account if they are ever laid off and need additional support to make their mortgage payments.
Everyone should consider their options before they make the big leap.