There are many situations that can make a person in a tough spot of deciding whether they should rent or buy their next apartment. If your lease is up and you want to move, or you have started a career in a different city, you’re wondering what is going to save you the most money. While renting might make sense at the beginning, taking into consideration how long you will be in an area and other factors can cause buying to make more sense. Many quality communities provide apartments for rent like apartments for rent in Birmingham AL. Here are some ways you can decide if renting or buying is the better decision for you.
You will want to know what the role of the location is in the real estate market. Consider the price of a down payment, purchasing costs, utility and maintenance fees, what amenities surround the location, etc. By taking all of those items into consideration, you can figure out how that location is going to make renting or buying make more sense.
Buying an apartment is expensive. A buyer has to have at least 20 percent of the cost of the apartment for a down payment, something that might be out of your budget right now. You also have to pay upfront fees, utilities, and annual fees that the seller is not covering.
Renting is less expensive when it comes to upfront costs. Typically there is a down payment of one month’s rent and a security deposit, which you can get back if no damage is done to the rental. However, once a lease is up the rent can fluctuate and you might end up paying more for where you are living than you would like.
Return on Investment
Since apartment prices are rising, this is good for selling your apartment later on if you were to buy. Potentially, the hope with buying an apartment is that when you do sell it you can make money off of the apartment. With a good looking real estate market, this is a good possibility but there are no guarantees.
With renting you know you are not going to get back any of the monthly payments you put in the rental. That money is gone and not coming back, making a return on investment nothing.
Length of Time
The length of time is the biggest decision maker when it comes to buying or renting. If you plan to live in the area for fewer than five years, renting might be the best way to go. Rent is expected to rise every year, which makes renting difficult if you plan on renting for a long period of time.
Buying an apartment and selling it within a few years means you can lose a chunk of the money that you put into the apartment. This is going to ruin your return on investment and you might end up coming up even when you sell your apartment, giving you no money back from the original investment.