Renting vs Buying: Why should you buy a home?

When it comes to renting vs buying we want to encourage you to opt for owning real estate as soon as possible and as sensibly as possible. Yes, this is Aalto - the Direct Real Estate Marketplace - and not a rental site, but all bias aside, it's our focus as advisors to help you reach your goals. Owning your own home is one of the best ways to build equity and people that have more experience purchasing and owning real estate have a much better understanding of how to build their equity and plan for their future.

If you think owning isn’t possible now, we highly encourage you to establish a relationship with a financial advisor to put together a plan for managing your finances and goals for your various life cycle stages. Take the steps to get pre-qualified for a mortgage and you might just find that your mortgage payments are more affordable than renting (especially when considering rent in and around the Bay Area). If you aren’t in a position to qualify for a loan yet, you will have an understanding of what it will take to do so.

Renting vs Buying

Renting makes sense during certain life cycle stages and especially in those post-college years when you set out to develop a career and build personal equity. Renting pops-up at other times when something short-term and flexible creates a practical solution. But here’s the problem with renting - you’re not building equity for yourself. You are paying to build that equity for someone else and you are putting money towards rent that could go towards a down payment. Ultimately, renting equates to a convenience equation until you are in a position when it is practical and affordable to purchase your own home.  

We hear it all the time from people who wish they had started planning sooner and are often making forced decisions due to their current life cycle stage.

Key relationships with trusted advisors will set you up for success with one of the most serious and sizable assets in your portfolio. Having a well prepared plan in advance of your home buying journey will position you well to make sound, well-timed, lucrative investments that can begin building equity in your portfolio.  

In regards to owning real estate, the return on your investment should not just be seen through a financial lens, but we recommend you look at your overall quality of life! When considering buying we recommend that you consider location, historical value of homes in the area and what the current market dynamics are, your lifestyle and think about the life you want to live, and the condition of the property and potential costs you will have after you buy. If you keep coming back to these key components you are  more likely to make a sound decision. If you take a calculated approach, and you take care of your asset then it’s a solid place to build equity.

Other significant benefits to owning your own home revolve around financial gains such as tax breaks, deductions, and fixed interest rates on loans. With interest rates on mortgages currently at historic lows you could lock in a great 30-year rate with monthly payments going towards your equity and not paying rent towards someone else’s wealth creation.  

One thing, and we can’t stress this enough, is to make sure to buy a home that is manageable. You want to keep in mind additional costs like insurance, property tax, maintenance, and repairs. Where you don’t want to find yourself (and where we never want to see our clients) is in a situation where you are maxed out with your mortgage. Think sensibly.

Think about whether this is a 5-year home or a 10-year home. Your planning may adjust accordingly, especially depending on the market dynamics in which you are buying.

Just as you formulated a plan to purchase your first home, you want to develop a practice of updating and reevaluating your home ownership plans on a regular basis - is it time to refinance? Should we save for a renovation? Is it time to sell? Having a team of trusted advisors and fostering good relationships with industry professionals will help you now and at every stage of your real estate experience. 

If you have any questions please share them with us at hello@aalto.com. We’d love to hear from you, and we’re here to help!