Money in Your 20s: To Rent or To Buy?

5 Questions to ask yourself before making that big buy decision

So, you’ve graduated from college and you’re now making that sweet steady paycheck you’ve worked so hard for the past four years. You’re bringing in a whole lot more money than what you had back when you worked that work-study barista job in the caf (ahem, you can now afford the party pack of pizza rolls) and you’re thinking about taking that next big step from “college student” life to “real world adult” life.  You’re ready to buy yourself a home because… that’s what adults do, right?

Well, at least that’s what most adults think they should do. And this might be the right decision for you, but not without asking yourself a few questions.

1. Are you sure buying a home is a GREAT investment?

I know what you’re thinking, “but my grandma bought her home for $30,000 and now she’s selling it for $650,000!!” You make a valid point. That is a nice investment. But keep in mind your grandma also probably lived in that home for 40 years. If you’re looking for an investment opportunity and you’re willing to be patient with the returns and upkeep, you may be in the right place.

2. Will anyone help pay your mortgage?

You can live for free or even make money off of your property if you plan strategically. I have friends who have bought homes and collect rent from roommates who rent out their spare bedrooms. The rent covers my friend’s mortgage and sometimes gives them a little extra income on the top. My rationale behind buying a home is to make sure that, no matter what, someone else is paying down at least the interest on the mortgage. If you can get make that work, you may be making a sound decision my friend.

3. How long do you plan to live there?

Even when you think, “this is it—I’ve finally made it as a yoga teacher in the country, ready to settle down in my adorable little bungalow on a hill with a hammock and a glass of iced tea”. (anyone…?) Suddenly, we get curious and find ourselves in a quarter-life crisis where bungalows are no longer fulfilling and we’re headed to the big city to fight (hypothetical) fires, drink far too much coffee and hardly sleep in our high-rise condo overlooking the taxis below.

See? Life changes in an instant, but home buying and selling does not always happen as fast as we may want or need it to. Remember your rich grandma from above? It takes some time to get that return out of your home–so if you don’t plan to live in the property for very long and you don’t have the means to rent it out for some extra passive rental income when you’re gone, then maybe the bungalow wasn’t worth it (as glorious as it sounds).

4. Do you have any other debts?

I will preach what my daddy always preached to me growing up. “Get rid of your debts because the last thing you want is to owe someone something that you don’t have.” I know, it sounds harsh, but it’s true. If you have other debts out there with your name on ‘em, keep your living expenses as low and predictable as possible, and focus on blasting away your remaining balances—you’ll be happy that you did.

5. What does your savings look like?

Don’t forget your closing costs, lawyer fees, appraisal fees, any upfront insurance or taxes you might need to pay, and the list goes on. These are the extras you’ll be paying on top of your down payment when you buy your home. Having a hefty reserve for unexpected repairs or replacements is also pertinent for responsible homeownership. No one ever said being a grown up is easy—which is exactly what my neighbors said to me after my bathtub started dripping on their heads within my first month of being a condo owner. **winks and flashes a cheesy boy scout “always be prepared” smile**