Choosing Whether to Rent or Buy

While those that are planning on being in an area for less than 3 years typically are ideal renter candidates & aren't the best candidates for buying because of the fees involved in selling being a much higher starting point than buying (though there are exceptions). For those planning on living in an area for more than 3 years, especially for much longer periods of time, in Hampton Roads buying should be considered. "Two US Census Bureau researchers have determined that the biggest determinants of household wealth are owning a home and having a retirement account." The net worth gap between renters and homeowners is staggering, with estimates often between 40 times greater and 80 times greater total net worth of homeowners vs renters.

Often the choice about whether to rent or buy is cultural. If your parents owned, you're more likely to own, and if they rented, you're more likely to rent. There are also many misperceptions about owning and renting from both sides. It's important to weigh the options and choose which is best for you based on accurate information. Be sure to use the calculator that I list on my Helpful Online Calculators page, & be sure to input the right appreciation rate from Zillow as I explain on that page. If renting is currently your best option, see my page for it here.

When to Buy

Plans to live in home for at least 3 years & willingness to accept the risk of responsibility to achieve higher net worth & lower housing payment
 
Credit at least 550 in some cases & 640 in others. However, there is 1 program with mortgages where credit score is not considered & there are free credit boosting options for prospective home buyers.
 
2 years of income in the same field  even if you change jobs with some exceptions (such as recent college grads coming out with contracts in their field where they don't need 2 years experience)
 
Experiences with bad landlords or property managers (reviews for property managers are generally relatively low compared to many other businesses including real estate firms for sales) in the past & desire to not repeat those experiences
 
Desire to have the freedom to make substantial changes to home or otherwise invest in long term ways, such as the landscaping, paint, fixtures, or otherwise
 
Presence of better options of programs to reduce home cost when buying than renting in most cases, including but not limited to programs that transfer rental assistance to buying help such as this one; get your personalized report on possible programs to help you buy here, as buyers are most often unaware of all their options
High appreciation projection for the coming year (see Zillow)
Projected increase in mortgage rates in the future like this article in January 2021.
Monthly cost is less than renting for a comparable home in many cases, so factor that into breaking even or making a profit
 

When to Rent

Plans to live in home for less than 3 years in a typical market (i.e. not 2020/2021 when you could live in a home for 2 years & potentially still make a profit on a typical home purchase without renovations due to higher than typical appreciation rates)
 
Credit lower than 550 in some cases, 640 in others depending on the loan, goals, and ability to quickly increase credit score & desire not to use home buying program where credit score is not considered. Keep in mind that for lower scores, a double security deposit is often helpful in securing a rental property. Low credit also can mean higher debts, so living in a worse home temporarily for rent while paying off high-interest debts more quickly before purchasing a better home can in some cases be beneficial as long as appreciation doesn't outpace, interest rates don't go up for the house, etc.
 
Moving from 1 industry to at least one other in the past 2 years with some exceptions as described under "When to Buy"
 
Desire for increased flexibility in transitioning from one home to another with no desire to have an option to make profits during transitions
 
Rapid rate of appreciation in a market that does not appear to be historically supported, indicating a bubble (I do not believe that we have a bubble currently in Hampton Roads, but that is the case in some other markets)
 
Job that forces one to rapidly move from place to place with no assistance for buying or selling from the job, or job uncertainty
 
Free rent available with family or others and desire to not rent out rooms to pay for the entirety of a mortgage or enough of a mortgage to cover everything but annual equity gains depending on the situation

Desire to pursue live-aboarding on a boat and wanting to try it out first before purchasing land (see liveaboard column for local docking options here).

Going through a divorce that isn't finalized yet.

Going through a bankruptcy that isn't finalized yet.


High depreciation projection for the coming year (see Zillow).

Projected decrease in mortgage rates in the future when looking at projections like this article in January 2021 (though this example points to the opposite in Jan 2021).
 

Many Exceptions

There are a multitude of exceptions to the general rules above. Even if you fall within some of the situations above, it's still a good idea to ask me about if you might qualify as an exception. A cash buyer, of course, can save $ much more quickly, as can those acquiring closing cost assistance, good deals, & using other high-value programs to reduce home cost, some of which reduce cost by as much as 50%.

My exception example: I was living rent-free with my family prior to purchasing a home where I rented out rooms to cover the mortgage for 1 month to test out and prove the ability to do so prior to getting married. If I had rented a comparable home, the rent payment would have likely been >40% more than the mortgage payment, & >50% once my PMI was knocked off. In addition, because I got such a good deal, my net worth immediately dramatically increased as repairs were made to the house from the conventional renovation mortgage loan I acquired with relatively low-interest rates & low PMI in light of my credit score being above 760. The student loans I had were less than the equity gains within 1 year because it was such a good deal. Also, the majority of the 5% I needed for the down payment was covered by down payment assistance, the majority of the closing costs were covered by the seller, and my PMI was removed in less than 2 years after I requested that it be removed and cited that I had roughly 30% equity based on the appraisal vs. the mortgage amount. My home was the most lucrative investment I've ever made, even though I have invested into stock in my life that increased by around 1000% but was a lower net volume gain than I achieved with my home purchase. Rather than selling my home and turning a large profit after 2 years, I rented it out for a positive cash flow investment property. While paying off my mortgage & having positive rental cashflow, the property grew in value by over 20% due to appreciation. I've also been able to raise the rent from the initial amount I charged due to increased rental prices (like homes appreciate in value, rents increase over time as well).