Can’t Decide To Rent Or Buy? Consider These Options
An alternative to buying/renting might be renting to own. Instead of initially purchasing a property, a potential buyer and seller agree on a contract, in which monthly rental payments are made based on the home’s value. These rental payments are often priced at above market rates, which allow for rent credits. Rent credits is the difference between the above market rental rate and the fair market rental rate which is counted towards the potential sale. After about 2-5 years (depending to their contractual agreement), the renter can choose to buy the home at the original price minus the equity he/she has paid into the property, or move somewhere else.
If none of the above options sound like something of interest to you, maybe initially buying a property and then leasing it out is a better option for you. This option is similar to the first option we’ve described. The only difference is that you may move somewhere else and place tenants in the property to cover your expenses. Usually, if the homeowner has a low monthly payment, they can markup the price to make some cashflow. For example, if a homeowner have $750 of monthly expenses (mortgage, insurance, taxes, etc) and he/she charges the tenant(s) $1150 a month to rent the house, then the homeowner can make a monthly cash flow of $400.
Before any serious research, consider the location. This small, but incredibly important detail will influence the price substantially in all cases. Then, consider how long you plan to stay at this location. If this location will be a place for you and your family, choose to reside for at least 5 years. Don’t hesitate to look into home-buying options (there may even be a sweet tax deduction just for buying a house). Do not simply make a decision based on a “possible” tax break, or just to say you own a home. You want to be absolutely positive that you are getting the best possible value out of your investment. Make sure that you do your due diligence!
If you enjoyed this post, get email updates and exclusive content from us by subscribing below to our email list (it’s free).