Buying a home is considered a key part of the American Dream, but it isn’t right for everyone. The recent financial crisis and market instability have reinforced the need to carefully consider personal finances and circumstances when weighing whether to rent or buy a home. And in the often transient and always pricey D.C. region, renting often makes sense for both budget and lifestyle reasons.
Whether to rent or buy a home is one of the toughest decisions people make. It requires taking a hard look at your savings, job security, future plans, and the local affordability, as well as consideration of factors that are difficult to predict, such as the future of the overall housing market and mortgage rates. We offer advice and guidance to help you make the best decision for your situation, based on our real estate experience and knowledge of the D.C. metro area market.
For some people, home ownership is the right decision. But renting can be a more prudent choice for people in a variety of situations, including those who don’t know how long they’ll live in the area, work for a struggling company or in a volatile industry, are paying off college loans, or have minimal savings for a down payment. Others simply don’t want to deal with the risks and hassles homeownership brings.
Risks of Homeownership
Home ownership is riskier than renting because of uncertainty about both home values and ownership costs. Renters know upfront what most of their monthly housing costs will be, while unforeseen expenses are always a possibility for owners.
- Breaking even on the costs of purchasing a home, such as closing costs and loan points, takes a long time in the D.C. metro, often five to six years or more, depending on the specific location. A need to relocate sooner, perhaps due to job or family needs, could mean losing some or all of that money.
- Unexpected maintenance and repairs costs from issues like storm damage, an inoperable furnace or plumbing problems can easily drive annual care and upkeep costs above the typically recommended annual maintenance budget of 1 percent of the home’s value.
- There’s no guarantee that home prices will rise and you’ll build equity. While we conservatively estimate about 2 percent appreciation per year, the actual amount can vary widely based on the type of property, location and how it is maintained. And no matter how well you care for your home, market-driven price declines are always a risk, even in the District of Columbia.
- Buying your home for its investment potential is risky and far from a sure bet, and experts do not recommend this as rationale for purchasing your residence.
Hidden Costs of Home Ownership
- Purchase costs: Buying a home requires not only a down payment and thousands of dollars in closing costs that must be paid at the time of purchase. Many lenders require a down payment of at least 20 percent of the purchase price.
- Yearly costs:Recurring monthly or yearly expenses include, mortgage payments, condo fees (or other community living fees), renovation costs, maintenance costs, property taxes and homeowner’s insurance.
- Lost opportunity costs:Money spent on a down payment could have yielded returns from other investments. Or, if that money is used to pay down debts, it can lower both monthly expenses and debt load, putting you in a better financial position.
Benefits of Renting
- Affordability: Buying a home in D.C.’s desirable neighborhoods is pricy, with small condos often selling for $500,000 or more and many properties topping $1 million – often more than many professionals can comfortably afford. There may be roomier, less expensive options in outer suburbs, but what you gain in savings you lose in time and money spent on transportation to work, restaurants and other urban amenities.
- Close proximity to amenities: More often than not, renters are able to afford homes in desirable areas where buying is out of reach. Through renting, you can live in walking distance to gyms, restaurants, bars, and grocery stores, ultimately saving significant time and money.
- Cash Availability: Renting can free up many options for investing that often yield better returns than investing in a home would. A home’s value would have to increase at a significantly higher rate than inflation to make it a better bet, and home prices, especially in DC metropolitan area, remain overvalued compared to rents.
- Simplicity: Renting is easier than ownership. Rather than investing considerable time and money on upkeep and maintenance, a reputable company will handle everything for you. We worry so you don’t have to, and it reduces the stress, anxiety, and tedium associated with home ownership. Renting allows residents to spend their precious time and energy on more rewarding and enjoyable pursuits.
- Mobility: Being a renter gives you the luxury of flexibility. If you’re offered a fantastic promotion in Paris, renting makes it far easier to take advantage of the opportunity. Or, if you get a raise, you can upgrade to a newer, better apartment as soon as your lease is up. The freedom to move when you need or want to is incredibly valuable.
- Community: Rentals, especially large apartment buildings, often bring many opportunities to to meet new people, including potential friends and networking opportunities. Great building common areas encourage socializing, including relaxing lobby lounges, rooftop decks, gyms, or even the mailroom.
Gordon James Realty has hundreds of rental properties to choose from and we’re happy to answer questions and help you in the process of finding a great place to live. The Washington DC and Arlington, Virginia rental markets tend to be more competitive during the summer months when young professionals and university students typically move, so we recommend starting the process early. Rental prices tend to drop in winter months, but there are also fewer options at that time.
We’re experts at helping tenants find a home that matches their needs, wants and budget, and we’re confident we can help you find your perfect rental property in the DC Metro Area. Give us a call today for more information about our available properties!