For many first-time homebuyers, deciding if you should rent or buy your first home is one of the most difficult to navigate. There are so many factors to consider and just as many different opinions.
Especially if you are young and working your way up the professional ladder, renting might seem like the way to go. More straightforward in, less commitment, less to worry about.
Why buy?
But when you crunch the numbers, especially in a market like DC, where homes tend to rise in value, sometimes dramatically, buying early could set you up for one of the best investments of your life.
And if you get in now, with incredibly favorable interest rates and newly reenergized mortgage availability, you might find that your early real estate investment in DC pays dividends far beyond your expectations.
Because of demand, DC is known for its high home prices. But rents are generally at least as much as a mortgage payment in the area. That already suggests that buying is the right move.
But with the addition of low mortgage rates for borrowers with excellent credit, plus the return on investment in DC area real estate, which is much higher than most investment products you can find today, buying DC looks like the right move.
Once you figure in all of those benefits, according to Trulia’s chief economist Ralph McLaughlin, it is 37.6 percent cheaper to buy than to rent in Washington. McLaughlin bases this on a low-interest rate, a 20 percent down payment, and seven years spent in the home.
For renting to become a better deal, the average home price would have almost double, and the average mortgage rate would have to nearly triple. That means, barring any extraordinary circumstances, it’s always a great time to buy.
Renting has pros and cons, as does owning a home. Thinking through these can help clarify which option is right for you.
Renting Pros and Cons
You can move once your lease is up without having to sell or give notice. If something goes wrong or a repair is needed, it is usually the landlord’s responsibility to fix it.
Your rent will most likely increase at the end of your lease, so you may either end up paying a lot more for a place you love over time or move each year.
All of that rent money is going into the landlord’s bank account. Your single most significant expense does not contribute to the stability of your financial future.
Want a pet? Your landlord can say no or can put limits on what type of pet you can own.
Buying Pros and Cons
Want a pet? Choose whichever one you want. Love the color purple? Paint your living room with your favorite shade of lavender. Your house is your business, and you can run it (and decorate it) any way you want.
Rising home costs in DC mean that you build equity as the market goes up. DC is one of only a few markets with the kind of consistently rising home values that will ensure this kind of return.
A fixed-rate home mortgage means that your mortgage payment will stay the same over time while your income, presumably, rises, making your home more and more affordable each year.
To move for that new job you may have to put your home on the market. However, many employers have relocation programs that can help or can buy your home outright to help you make your move.
Or you may choose to take advantage of DC’s great market to become a landlord yourself, allowing you to keep that home and have the mortgage paid by a renter. Hire a property manager and let them deal with upkeep and rent collection while you build equity.
So Should You Rent or Buy a House?
While in most markets, Rent vs. Buy is a difficult problem to solve, DC’s high market returns and consistently rising demand ensure that if you choose to buy, you won’t be sorry.
Let one of our Realtors help you find the home that makes sense for your budget and your lifestyle. Create an account at our website and talk with one of our agents to get targeted listings from your favorite neighborhood sent directly to you.
And check out our website’s many resources to help you learn more about the DC market.