I am often asked by people who are early in their careers why they should buy a home if they don’t plan on being in an area for more than a few years. Saving for a down payment can take years, so why save for that long to buy a home that you’ll either outgrow soon or move away from as you progress in your career? These are reasonable concerns, and your income and current savings will determine if you can afford it. If you can, purchasing a home can be a great investment, especially in a highly transient area like Northern Virginia. Large numbers of people come here for temporary positions on a consistent basis and many prefer to rent homes rather than apartments. If you can afford the upfront expenses of purchasing a home (down payment, closing costs, first year of maintenance), then living in the home for a few years and renting it out once you move could be a great way to begin earning passive income and building equity. There are several mortgage options that allow for very little or even no money down (see my blog article “No Money Down Mortgage Options, 11 Aug 17). I purchased my first home, a townhouse, in my mid-twenties. It was perfect for that stage of my life and after I moved, I began renting it. The cash flow each month is great and I am building equity in a home on which I can continue to collect rent or sell when I choose. It was a tough financial decision to make early in my career, but I am grateful now that I made it. I have several friends from the military that purchased homes at each duty station and rent once they move. By planning their finances for this every few years, they continue to build their real estate investment portfolios. Some of the key factors to consider are choosing properties that are likely to rent and keeping monthly expenses (principal, interest, taxes, insurance and condo/HOA fees if applicable) lower than what you anticipate to charge for rent. Whether you are in the military and move often, or just starting in your career, this is a great investment opportunity to consider.

 

I’ve been following Josh at Millenial Money Advice because even though his advice is geared towards millennials in the earlier stages of their careers and investing, his information is applicable to a broader audience. In this article, he goes in depth about the factors to consider when deciding whether to rent or own. Since I am an advocate for including real estate in your investment strategy, I think this is great information to consider when deciding if purchasing a home with the intent of renting it later is right for you.

 

Renting vs Owning a Home

 

Once you have worked for a few years and saved up some money, you may ask yourself if you’re better off renting or owning a home. I know I have been asking myself this question a lot lately. The answer is, “it depends.”

When determining whether or not to buy a home it’s tempting to just compare your monthly rent to what your monthly mortgage might be, but this is not an accurate comparison. When comparing the cost of renting to owning there are a variety of factors to take into consideration. I will do my best to help guide you through all of these factors. Here is where I would start:

 

What is the total cost to rent?

 

Step one would be to determine exactly what you will be paying to rent. This includes monthly rent and renters insurance, which most landlords require.

 

What is your monthly mortgage payment?

 

Determining the total cost to buy a home is not as straight forward, as there are a lot more factors to take into consideration.

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