Smart Ideas: Loans Revisited

Ways in Deciding Whether to Buy or Rent a Home

There are pros and cons between renting a home and owning one as experienced by many homeowners. An example of a big con in renting say an apartment is the closeness of your neighbour that you can actually hear their voices or footsteps.

Some will find buying a home a smart financial decision because it gives you stability and freedom to do whatever you like with your place. But eventually, owning a home may not be the best action, like if you are in the Pacific Northwest, because of the costs of maintaining the property like taxes, insurance, maintenance and so on that is often significantly greater than renting the house.

In the event that you are to make a financial decision whether to buy or rent your home, there are some ways to help you make an objective decision.

Your first guide is to check the price-to-rent ratio or P/R ratio, that will aid you in deciding whether to rent or buy your house. The number that you will get from this ratio will give you more or less an idea whether the homes in your interested area are fairly priced. The computation of this ratio is first you look for two similar units, where one is for sale and one is for rent, and divide the sale of the for sale unit to the yearly rent of the unit for rental, and the resulting number after your division is the P/R ratio. One expert says that if you get a ratio of higher than 20, it is better to rent than to buy the unit in that particular area. If there is no available ratio data in your interested area, it is good to consult a real estate agent in that place.

Another way in gauging the cost of housing in the particular area of your interest is to make a comparison of the income cost versus your family’s. From the figures you have found out, this will give you some sort of idea if the houses in that particular area is overpriced, and this will make you think twice whether to buy or rent.

There is also a rent versus calculator that can help you decide what to do and this information you can get from magazine source. Lastly, it should be your financial realization when you plan to own or rent a property for your home and not through the persuasion of others. Depending on where you want your family to settle or where your work will take you and your family, you can already start to compare the housing costs in that area against the possible income you will get if you settle there.

Another Source: my sources