Should a 20-something RENT or BUY?

Question

Here's the situation: A 20-something guy or girl in the United States is moving out on their own for the first time. Should they RENT or BUY? They have enough money for a reasonable down payment, have a regular job, fair credit rating, and can afford an equal amount of rent or mortgage payment per month.

The usual advice is to BUY versus RENT so that equity is built. But in today's real estate market, home prices are very high. Maybe they should RENT now and BUY later?

What's your advice? RENT or BUY?

DaveJord · Accepted Answer

I own four properties 3 houses and I live in a condo. In this market I would not buy. As a 20 something I would consider a condo, because it is a lot easier to rent later if you move. Unless you are 100% certain you want to stay in that area for rest of your life.

I do rent my other three houses, but I took a lose on them for years like about $200 per house every month after rent... once calculate for the taxes and maintenance and if you use a property manger or not. But in order to may real money on a house you have to clear the mortgage and then rent it for at least 5 years without a mortgage payment. Then rent generated becomes your profit, but it will take a decade or more to get to that piont... this is not a buy and quick flip economy right now.

When you sell you lose about 20% of the profit to taxes, fees (title company/relators) and repairs. Then capital gains tax crushes your soul. Yup, when you own a house you are taxes about 6 times on the same dollar. 1. Taxes when you buy it, 2. Income Taxes if you rent it, 3. Property Tax annually for owning it, 4. Sell taxes when you sell it, 5. capital gains tax for making a profit. 6. Income tax for the year you sold it after they take capital gains.

So starting out I would rent, then wait for the market to dive again.

Phoenix98 · Accepted Answer

Buying a house is a better long term investment because once you pay it off it’s yours.

renting is better for the short term but long term not so much. Because your landlord can kick you out or raise your rent or just be a pain about maintenance. It’s kind of a gamble when it comes to renting.

You could also rent while saving up for a house as well.

it really depends on your financial and job situation.

AmandaYVR · Accepted Answer

Buy If:

Job is secure and have had it for years (at least two.)
Credit rating is excellent, very good, or good. A "fair" credit rating will not be given the best interest rates. Can the person afford the interest rates offered?
Definite plans to stay in this city or town. (Bonus points if same neighbourhood as job.)
If the total cost of housing is no more than 30% of income. Anything more is common, but it will be pushing it and leave little room for unexpected costs and emergencies.
If a home is in the budget, buy a home, not a condo etc. Multi-unit buildings tend to not hold their value as well as SFHs.

Early 20s, ok to stay with parents and build more savings. Late 20s, get on with life and get out from under parents' roof.
Rents are high because of covid. Many have sold their properties and some have left central locations to work somewhere quiet, cheaper, and more remote. Right now, renting is not a great deal. Buying is a possibility, but only if the other personal criteria also align sensibly.

sage2021 · Accepted Answer

@AviatorTom if you do decide to buy, make sure your property taxes AND your home owners insurance are included in the mortgage payment. That was the BEST advice my Mom taught me at a young age. So when I bought my first and only house I had them included in my mortgage payment. It made the payment a little higher, but not much. That way the cost of insurance and taxes is spread out in increments over the 12 months. And you won't constantly be stressing about saving up for them and paying a big chunk of money all at once. This is excellent advice Tom. 💡

MrOracle · Answer

You have to look at your financial situation as well as your living situation. If you think it's likely that you might leave the area within a few years, then renting might make more sense. If you don't to deal with maintenance or yardwork, then renting will allow you to avoid those things. If you live in a major city, then renting may be the only good option.

If you live in the suburbs or a rural area, and you don't mind taking care of the maintenance, and you plan to stay for at least several years, then buying a place makes more sense, as you will be gaining equity in the home/property, and so you will probably be able to sell the home for a profit at some point, plus you can deduct your interest payments on your taxes. You are also going to be responsible for taking care of the property, and you need to be prepared for big-ticket items (roof replacements, plumbing problems, yard work, etc.) that can come along as a home owner, and you'll need to keep up with the maintenance of small things, or they pile up quickly.

Dinklex3 · Answer

Depends completely on the individual and what it is that they want.
People talk shit about those who rent, but not everyone knows what they want or where they want to settle down at.
People tried to give me shit with leasing my car instead of owning it. Leasing was the best decision for me. Others are obsessed with "owning" things and think it makes them "better" somehow, but that's not always the case.
Sit down, think about the pros and cons. Figure out what's best FOR YOU. And try not to be bullied by others on what they value or think you should do.

Daniela1982 · Answer

You need to have 6 months worth of rent money built up to move out so you don't have to live paycheck to paycheck and have contingency funds in case of emergencies where you won't be able to pay rent. It's better to get kicked out of an apartment than to face foreclosure. As you say, the housing market may go bust like it did in 2008 as I am not sure these high prices can endure. You have to gamble whether interest rates are going to go back up, housing prices will come down, or housing prices will keep rising. Do you feel lucky?

OpenClose · Answer

I'd start off with renting and save your money for a down payment on a house. Depending on where you live. I moved every couple years and it gave me a good idea of what I was looking for in a house. Then at least you have a place to stay while looking.

My mom moved out and rented pretty much right when she turned 18. My dad lived with his parents until probably his mid 20's. He moved straight into a house after he married my mom.

But like, I'm trying the consider other places and economies. In California, you are probably stuck renting for a long time

NathanDavis · Answer

my advice would be... try to consider as much as possible... are you wealthy? are you in disadvantage, are you planning to move or stay where you live, do you have a career, a business, random jobs?

are you buying property to live there? to possibly re-sell it later? or can you rent it?

and where are you buying by the way, and how, is it convenient or not?

the one thing you should consider the most is what are your plans towards moving forward

personally, I started to rent first, till I had the possibility to buy, and I did buy with the intention to rent that house and I only did that because I had the opportunity to borrow a place from friends and also family

Kayla45 · Answer

Honestly if you have enough money to buy then that would be the best option for you, however it's very rare for a 20 year old to have enough from the get-go to go and buy. Unless of course, they take out a loan.

Financially it's smarter to buy than rent in MOST cases, however that DOES not mean it's always a suitable financially stable choice.

If you feel like you make enough money to do it then go for it, just don't take out a huge loan that you won't be able to pay back, it's totally fine renting for a couple years to build up your financial foundation. Just be smart with your investments, don't waste it unless you are positive you are making the right choice.

Adam1978 · Answer

In general it's buy, but with todays market you shouldn't buy unless you are sure you want to live in that spot for a very long time and you think it is worth the price. Price is bound to go down when population goes down and that is something people that are young today will live to see. Especially if you don't live in a hotspot.

Hürrem · Answer

20 years old? I would say buy a house then let it rent while you stay in your parents house (Assuming your parents allow you to stay for free or at least lower price than usual rent) for few years until you can buy another house for yourself. So when you move out, you have 2 houses. A house for rent and your own house.😉

Brainsbeforebeauty · Answer

It's what they can comfortably afford... While rent/mortgage itself could be the same price, owning a home comes with more costs than just a monthly mortgage payment, like PMI (private mortgage insurance) if they put less than 20% downpayment, property taxes, water bill, (that's sometimes included when renting) not to mention home repairs and property upkeep that you don't have when renting..

HighlyVolatile · Answer

Rent cheap and save was my philosophy in my 20s. Also when moving out for the first time, I think there can be questions if that's where we want to permanently live. For example, the first place I moved to was great for working but maybe a horrible place to raise a family. So I rented affordably enough that I could save once I figured out where I actually wanted to live and settle down.

Subarugirl · Answer

My husband and I bought our first house about a year ago. If you can afford it that is the way to go. When you rent that money is gone, when you are paying a mortgage that money goes towards the equity of the house. It's like a forced savings account.

The issues is that most people in there 20's can't afford to buy a house, especially in expensive metro areas like, Seattle, Portland, New York and LA.

OddBeMe · Answer

Buying is always better. But it comes with lots of costs and is harder than just renting an apartment. Which is the draw. But monthly, both are about the same price. So it makes more sense to own. Even if you plan to move in a few years. You’re very likely to make a 10-20% profit when selling.

But again, there’s lots of costs and red tape when buying. For a reason.

TrueConfection · Answer

Buy. The housing prices won't be going down anytime soon and rent will be going up. The interest rates are also good right now. Better to take pride in their hard earned money going toward something they own.

purplepoppy · Answer

It's going to vary from location to location. If your money's only going to get you a shit flat in a crime ridden area your better off renting in a better neighbourhood. But based on your description they can probably buy something decent.

SnakeBoop · Answer

Most folks who rent will not end up in their own home. It's a vicious and hard habit to break. So if they can afford to, buying is always better.

exitseven · Answer

I would still buy if I could. There are tax advantages and even if the value dips a little it will recover. If you rent, all you have in the end is a bunch of rent receipts.

DeeDeeDeVour · Answer

I bought my 1st property in my mid-20s.  Before that, I was renting an apartment in that same property I bought.

DizzyDesii · Answer

Im only renting and thats an apartment. I won't buy until sometime between now and 35 and that will be a 3 bed 2 bath house i built

EnglishEuropean · Answer

Always buy if you can afford to but you must be able to pay your mortgage. You are buying an asset. If you can't buy you should rent, staying with your parents probably isn't good for your mental health.

Razp_Sorbet · Answer

If you have enough money then you should buy. It's always a better option

Aiko_E_Lara · Answer

If you're really satisfied with that place, it's so much better to buy it. It's an investment. Ofcourse you need to have enough. Every year, rent gets more expensive and inflation sucks.

shaysh87 · Answer

i don't know why you think most average folks in their 20s would have enough money to buy a house or a condo. I don't know what world you come from.

douride2 · Answer

II rented for a year when I first moved out on my own.

Static_In_The_Attic · Answer

If a 20-something can afford to rent I say the 20-something should buy a house because paying your own mortgage is better than paying someone else’s mortgage.

RobT312 · Answer

I still think buying works well if you can swing it. Property is a safe investment as it tends to appreciate. I took the starter condo route, allowing me to profit to have money to buy a house

annabananna · Answer

If you live somewhere where the cost of homes are increasing I’d say buy for sure.

Jessica745855 · Answer

BUY a condo or something. OWNING something is better as opposed to throwing out your money into an apartment-

Juxtapose · Answer

Frankly they should stay with their parents until they have enough money to buy the house outright because that's pretty much what it takes these days.

josephinelcajon · Answer

If in the next three months, I say buy! If waiting until summer interest rates will be too high.

jahaims · Answer

Rent and invest the money you would have put on the down payment.

Anonymous · Answer

Depends on your plans, and how long you'll be staying there or moving away.

Drumlin2001 · Answer

If you can buy, usually better option.

TacosRAwesome · Answer

If you afford to buy, then buy.

pizzalovershouse · Answer

Depends on your income a great income than buy

ImaNomad · Answer

Save until you can buy.

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