Buy or Rent? How to Determine What Makes Sense for You

Staff

4 Min Quiz

How does the cost to rent stack up against the cost to buy in your city? If you divide the average sticker price by the average rental rate and get a number in or above the 18 to 20 range, which route should you take a closer look at?

A high rent ratio can mean renting is your best bet, at least for the time being. That's because a higher number sometimes signifies a housing bubble collapse is looming on the horizon that could leave you underwater when it bursts.

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If you're thinking of moving in the next couple of years or considering a lifestyle change like marriage or parenthood, which is potentially the smartest route?

It can take several years for a home to appreciate enough to be worth the investment, while people who rent can invest the money they would've dropped on a down payment in stocks instead and possibly make a killing. However, it's important to note that both of these scenarios come with a big "if." Since either option is a complete gamble, if you feel the need to maintain some flexibility in your life, renting could be the route to go.

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If you decide you're ready to stay put for a bit, what's probably the best way to go?

If the rent ratio is sound, then it might be time to settle down. That way, instead of potentially seeing your rent go up, you'll possibly be seeing the value go up in what's almost certainly your largest investment.

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If you own pets, which option is preferable?

It's true that renters typically pay a deposit if they have pets, but that's also meant to cover all the damage those pets will potentially cause. So while someone who owns their own home doesn't have to shell out a couple hundred dollars just to get their dogs or cats in the door, they'll be the ones footing the bill when the dog ruins the hardwood floors or the cat tears up the carpet. This one is pretty much a draw.

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Are you dying to paint the walls and install those granite countertops you've been eyeing online?

Buying a home means you enjoy much greater flexibility when it comes to activities like sprucing and upgrading, whereas people who rent often don't have the option to customize and can sometimes lose their security deposits for even small alterations to their apartments.

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If you're not hot at managing your money, which alternative might you want to opt for?

Owning a home is a serious financial commitment. Costly repairs can pop up unexpectedly, upkeep can drain your wallet and then there are expenses like property taxes and homeowners insurance. Bottom line, if you can't keep a budget and save up some spare funds, you might be better off with the lightened responsibility that comes with renting.

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You've found the perfect neighborhood; unfortunately your jaw dropped when the real estate agent told you how much your dream home was on the market for. What should you do?

It's a tough call. On the one hand, if you chose an apartment in the same neighborhood, chances are good you could manage the rent. But on the other hand, this is a question of where you want to live. That's a big deal, although it's easy to lose sight of it. You're going to have to go with your gut on this one.

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Are you a DIY fanatic? If so, what housing path might that lead you down?

If nothing thrills you more than the idea of creating a garden, covering your cupboards in mosaic stones or installing a built-in bookshelf, you'll definitely want to consider buying. Remember, some landlords get upset about small nail holes in the walls -- what would they say when they discovered your decorative flair?

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Do you like dealing directly with individuals on a one-on-one basis? If so, what should you do?

If you enjoy dealing directly with people and skipping the corporate hassle, renting from an individual could be the best option to consider. But if you're leaning toward buying a home, there are real estate agents, brokers, appraisers, inspectors and lenders to deal with, and hey, they're people, too!

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What about the possibility of rent increases? Should that help tip the scales toward home buying?

It's true that your rent can go up, but your property taxes can, too. It's a tough call all around, so just get out there, do some research and decide what's going to work best for you and your situation!

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Image: refer to hsw

About This Quiz

Many experts agree that while buying a home is often the ideal decision, there are definitely situations where a person would be smarter to rent. Find out which is right for you by taking this quiz.

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