Renting or owning my home?

Question

I have been renting a home now for about 4 yrs. The money just seems to go into the monthly rent and its gone. Would I be better off purchasing and owning my own home. I live off of Social Security income, but have some money saved up and could make a down payment on a home that I could afford the monthly mortgage. Renting seems like a dead end for me. I live in Fontana, CA. The homes in north Fontana are too expensive. I was thinking about buying a home in the Apple Valley area, as they are a lot cheaper. But its the desert area so I dont know.

Answer 1

I recommend reading What's the catch in investing in real estate for rent? and making a list of expenses.

You have a known expense, the rent, and the assumption that it will rise a bit each year. If not each year, eventually the landlord will bump it, and on average, the rent should track inflation.

The buy side is the complete unknown, especially to us here. The mortgage and taxes are just the beginning. My ongoing issue in the buy/rent debate is that it's easy to buy "too big" or at least far bigger that what you are renting.

One extreme - a couple moves from their one bedroom apartment into their purchased 3BR home with far more space than they ever use. No need to paint the full picture of numbers, the house is a money pit, and they live for the house.

Other end - Couple already renting a nice sized home, and they buy a similar one. They rent out the two spare bedrooms for 5 years until they have kids and want their privacy back. They bought smart, for less than market price, and from day one, the mortgage was lower than the rent they paid. By year 5, having sent the extra income to pay down the mortgage, they've paid down half the loan. As the kids come along, they refi to a new 30 yr fixed at 3.5%, and the payment is tiny compared to the rest of their budget.

Simply put, the ratio of house price to rent for that same house is not a constant. When the ratio is high, it's time to rent. When it swings very low, it's worth considering a purchase. But the decision is never clear until every detail is known. The time may be perfect, and the day after you close, you lose your job, or in a good scenario, get a raise and are relocated. Just because you bought low yesterday, doesn't mean the market will pay you a good price today, it takes time for out-of-whack pricing to come back to normal.

A simple question? Maybe. But we first need a lot of details to help you understand what you are considering.