So many people struggle with the decision of whether it’s the right time to buy a home or keep on renting. You hear people telling you you’re throwing money away by renting, or taking a huge risk by buying with all the foreclosures out there. So how do you make sense of all of the information to determine whether it’s the right time for YOU to buy or rent? Let’s assess a few items:
1. Are you ready to be a homeowner? When something breaks, you’ll have to call someone to come fix it and pay for it. No landlord. How about maintaining the property – annual termite treatments, changing your HVAC filter every 1-3 months, annual HVAC service, etc.? If you said yes, continue on to #2.
2. How long do you see yourself staying in the property? If it’s at least 2 years, you’re may be eligible for capital gains exemptions (Disclosure: I am NOT a CPA nor do I play one on TV. Please consult one for more accurate tax advice. End required legal disclaimer.) That being said, if you stay less than 2 years, you’ll most likely lose money just on commissions and transfer taxes alone. You can always consider the possibility of renting it out if you have to move unexpectedly.
3. Is it cheaper to rent or buy!? The heart of the matter. As an example, take a look at typical rents around Arlington for a newer 1 bedroom condo:
Crystal City: $1,700
Shirlington Area: $1,370
Fairlington Area: $1,350
Now look at average sale prices for a 1 bedroom in the same areas:
Crystal City: $328,310
Shirlington Area: $275,000
Fairlington Area: $285,000
Let’s Compare the Clarendon Example Using the NYTimes.com Rent v. Buy Calculator
Assuming an average annual appreciation rate of 4%, the national average, and the minimum FHA down payment of 3.5%, you can see it’s better to buy if you plan on staying there for at least 3 years.
I encourage you to play with the calculator using the numbers above to see if you’re surprised at where your potential break-even point is. Obviously average sale prices and average rents are just price points to be used for comparison, but there are cheaper places to rent/buy and more expensive places to rent/buy, it all depends on what is right for you!
Also, I used 1 bedroom condos as examples. If you’re interested in more details about larger condo units, townhomes, or houses, i’m happy to provide that information for you. Just ask!
Need help figuring it out? Let’s talk.