The COVID-19 pandemic has forced people to spend more time at home, which in turn has prompted many people to move away from large urban areas or change their living situations by remodeling or redecorating. As we all get used to a new normal and start to think about working from home long-term, many of our priorities have shifted. The ‘wish list’ for our living situations now include a dedicated home office space or separate rooms to accommodate multiple people working from home.
If you are moving to a new city right now, finding the right place may seem like a daunting task. It’s important to create a budget and take inventory of all of your priorities. Whether it’s to be close to work, in a good school district or have more square footage, this will help guide your search.
Before you move, it’s also important to consider if you’re in a position to rent or buy. Both have their advantages and disadvantages that you should consider before making your decision.
Pros to buying
When looking to buy a house or condo, you can pick what neighborhood, amenities and features work best for you and/or your family. You are able to customize the look and feel to your personal style and set up your home the way you want. For example, you can do renovations or paint the walls – things you are not able to do when you are renting. A house gives you a sense of stability and security and can help you lay a solid foundation in a new city. From a financial perspective, investing in a property allows you to build equity over time and receive tax benefits.
If you are moving to a new city with your family, buying a house can potentially offer more space. Square footage can often be limited in rentals, and if you plan to work from home for the foreseeable future, it may limit your available space. For example, a studio for one person may have been desirable pre-pandemic, but now it can be a tight squeeze to live and work from the same space. Having more room to roam and a space to create a home office may be more desirable in our current environment.
Cons to buying
One of the big drawbacks to immediately buying a house when you move to a new city is that you have to decide on a house and neighborhood having not living in the city for very long. This could lead to you questioning the area you choose to reside in. It could also lead to making a hasty decision if time isn’t on your side and gives you less flexibility to pick up and move in the future. In addition, finding a house, closing and moving takes time and can be very stressful. You have to save enough money for a down payment and will need to budget for unexpected costs such as fixing appliances when they break – a stark contrast to renting, when you typically just need a one-month deposit and can call maintenance if something breaks or stops working.
Pros to renting
It takes time to learn a city and figure out which neighborhood and part of the city you’d like to live in. Renting gives you a chance to explore your new city, learn the different areas and see where you like to spend most of your time. It also allows for more flexibility and freedom to move around. An advantage of renting is that you know what you are getting into in terms of cost, meaning there is little to no fluctuation in monthly expenses. By comparison, when you own a home, things may suddenly need repair and you will have to foot the unexpected bill. It is also much easier to rent an apartment or house sight unseen. When you’re renting, there is less pressure on your decision and it oftentimes can be much easier to find a rental than a house to own.
Renting before you buy can also make you a more informed buyer. Buying a house is a significant investment and commitment so you want to make sure you feel confident in your decision. As the pandemic has shown us, a lot can happen in a few months.Renting gives you a chance to make sure you like your new city and that you are enjoying your time there as well as your job, if you took a new one to move.
Cons to renting
Most rentals are one-year leases, which means you may need to move again shortly. In addition, your rent could increase year-over-year which can stressful and tough on your budget. If you have pets, renting options can oftentimes be limited and if you have children, they may have to change schools if you move, which can be difficult halfway through the school year. Another drawback to renting is that you don’t build any equity over time.
“Home” has narrowed many of our worlds to four walls and the surrounding neighborhood, so selecting the right place is even more important in this environment. Before you move, ask yourself these questions to determine if buying or renting is best for you and your situation:
• Do you want mobility, or do you want to put down roots?
• How long do you plan to live in the same space? If it’s long-term, consider buying. If you only plan to be in that city a few years, it may be better to rent since it can be time-consuming to sell a house.
• What’s the cost of renting versus buying? There are rent vs. buying calculators like the SmartAsset tool, which allows you to put in the cost of rent and the cost of buying a house. It will indicate if financially, it’s better to rent or buy based on the number of years you plan to be in that place.
• Consider the risks and take a look at your finances. Are you moving to start a new job? It may be best to settle into your city and new job first. Be sure to use a mortgage calculator to figure out your monthly payments and see if you can afford it.
Moving to a new city is stressful and it can be challenging to determine if you should buy or rent. By taking a look at your budget and identifying your priorities, you will be able to figure out what option is best for you.
Steven Thornburg is territory director at UMB Bank.