Should You Rent or Buy?
The former idea that buying a house in Denver as the best option for a living situation is an outdated idea. There are many factors to understand before making this important decision. Some of these factors include the area you plan to live in, your financial situation, and current market value.
Determining how long you will need to stay in your home is a great place to start. If you are planning a short term stay such as a year or two, then buying a home is not as attractive. As with purchasing a home, selling can take months to a year to find a buyer, and additional time to settle a deal. This situation may be a viable opportunity for someone that is looking to rent the home out or resell it at a later time for profit. If you are planning to settle down in the residence for a while, then taking a look at your financial situation is the next step.
Steps toward determining your current financial are:
- Calculate the amount of money you have in savings.
- When buying a home is an option, take into account expenses such as move-in costs, repairs, and home preparations.
- Calculate percentage of cash you can put down on your home over the total sale value.
- Determine the amount of debt you currently have, and your credit score.
- After you have of these numbers laid out, figure out your current financial health. Are things tight after you pay your expenses? Can you justify paying for all the extra costs of your new home?
If your financial health is good, and you would like to buy a home, then determining the market value is a great next move. You can hire real estate agents, or even do your own market analysis. Take a look at selling prices of homes like the one you want in your area. A great sign is when home prices are going up. This means people are attracted to the area you want to live in and it is a desirable place to be. If homes are declining in value it can mean that the quality of the neighborhood is declining. Take in to account the state of the nation’s overall economy as well.
A ratio that can aide in determining the value of renting or buying a home is the ratio of the price of the home you are looking at divided by the annual rent of similar properties in the area. If this ratio is less than 20, it may be smart idea to buy the home your desired location. Some cities have a more competitive rental sector than home ownership and it may be of benefit to you to buy a home instead. Being honest with yourself will save you from financial stress later. If you want help looking at your financial health then hiring a professional can save you in the long run.