Where will you live after college? We weigh the pros and cons of buying versus renting.
If you’ve just graduated from college, or will soon, a big question you have to answer is, “Where will I live?”
Although hardly anyone graduates from college and immediately buys a home, renting isn’t all it’s cracked up to be. The conflict can be especially difficult for GenY, which has a tendency to dislike commitment or feeling stuck in one place.
But Millennials are graduating with the largest amount of student debt and fewest job prospects of any generation, so the pressure to be financially responsible is enormous.
When month-to-month renting is your best friend
If you’re starting out in a career you aren’t sure about, a short-term lease rental is your friend. You can find monthly, three-month and six-month leases, although they aren’t common. Sometimes property managers who don’t normally offer short-term leases will be open to negotiation if they have an excess supply of apartments.
Short-term leases enable you to travel from place to place if you happen to have a freelance or mobile job. If you decide to take that South American backpacking trip, you’ll be glad your lease in Chicago is only six months.
We’ve seen an increase in demand for rental properties. But even more, people are asking for shorter lease terms. Turnover is way higher than it used to be, and while rentals are in high demand, people aren’t staying in them very long. — sales representative for Ashlea Gardens rental community
When long-term leases make sense
Maybe you’re early in your career, but you know you’ll be in the area for a while. You could be like many college graduates who take a job to pay off student loan debt knowing it isn’t the right career path for you. Taking that customer service job will pay the bills and be a good addition to your resume. This allows you to safely sign a year-long lease, knowing you won’t be switching jobs within a year.
Even if you’re starting a great career and have no plans of leaving, renting for a few years can help you save up for a down payment on a home. It allows you to get to know the area better and take your time finding a great deal on a house.
When buying is the best decision you’ve ever made
Maybe you’re one of the lucky few who graduated from college with a great job and benefits. The advantage of buying now is that housing market looks pretty good for 2014. Rental prices have increased as more people turned to renting when the housing market crashed.
Many Millennials who had previously been living at home and look to move out find that buying is a more financially attractive option. You’ve already been paying rent to your parents for a few years, so you might as well cut your losses and make an investment in a house.
If you’re worried about whether you’ll stay in your current job, think about where you live. If you live in a metro area with a lot of job options, buying a home doesn’t tie you to your current job like it would in a small town with fewer opportunities.
Every situation is different, and every market has its own set of challenges. On average, after five years or so, buying turns out to be cheaper than renting. (Click here to tweet this stat.) The New York Times has a great tool that calculates the difference between buying and renting from a purely financial standpoint.
Looking to the upcoming year, real estate experts predict that mortgage interest rates will rise, but since refinances are down, banks will loosen their standards for loans and getting a loan should be easier.
Experts see the end of the housing shortage, which means you’ll have more options to choose from. If your budget previously had you limited to homes that were less than ideal, you might have a few more half-decent options in 2014.
What should you do?
Take a hard look at your finances, situation and life goals. Do you want the stable job and the house with the picket fence? Or does living out of a backpack covering international news in Asia sound like what you want to do for the foreseeable future?
Buying a home means commitment, security and establishing yourself for a set period of time, whereas renting has no strings attached and allows you flexibility.
What kind of advice would you offer a recent grad who’s trying to decide between buying and renting housing?
Caitlin Dodds is a PR specialist, recent grad and Millennial who loves to write about anything and everything in her spare time. If you’re craving more of her ideas, you can find her blogging about social media and small business marketing.