This biweekly sponsored column is written by the experts at Gordon James Realty, a local property management firm that specializes in residential real estate, commercial real estate and homeowner associations. Please submit any questions in the comments section or via email.
When relocating, one of the first questions you should ask yourself is if you are going to rent or buy. The answer is not always so straightforward.
With a median home value of $530,000, the D.C. real estate market is more expensive than many. That’s why it’s critical to determine what works best for your situation.
If you’re just passing through, renting may be a better option. But if you’re willing to manage property from a distance, buying and living in a home for a short period may be best because you can rent it out later.
Still undecided? Check out this expert advice on when to rent and when to buy.
When Renting a Home Makes More Sense:
You Plan on Relocating
Unlike other areas of the country, D.C. has a very transient population. While it’s true many people stick around for the long term, many are just passing through. Temporary government appointments, military personnel and short-term government contracts all contribute. If you know you’re not going to be around for the long-term, renting is an easier option with less commitment.
Your Income Is Unpredictable
Self-employed professionals and contractors don’t always know what their income will be in the long-term. While contractors can expect a predictable paycheck while on contract, once the term ends you’ll be stuck with a mortgage payment no matter what. If cashflow is an issue, owning a home will make it harder for you to downsize when times get hard.
Retirement is Close
Even if you have a pretty hefty retirement fund, D.C.’s high cost of living can wipe that out quick. If you can buy for cash and still have plenty to live on, then owning may be for you. Otherwise, renting is a better option. The fixed costs (though rents do rise) will make it easy to budget. Renting also provides you with the flexibility to downsize or move into your RV and travel.
Mortgage Rates Are High
The past few years have seen some of the lowest rates for a long time, but lately rates have begun to rise slightly. Because of the high sticker price of Washington homes, try to buy when rates are at a low and rent in the meantime.
Why Buying a Home Is Your Best Bet:
You Want to Start a Family
Some of the top public schools in the country are in the D.C. area, so it makes sense to want to raise a family here. If you’re looking to settle down, the suburbs are an affordable and more spacious alternative to living in the city.
You Plan on Staying Put for 10 Years or More
Even if you’re not starting a family or already have one, buying makes sense if you plan on spending at least a decade in the area. Rents rise every year, but mortgage payments don’t.
Mortgage Rates Are Low
Rock-bottom mortgage rates are a perfect reason to buy a home. Rates have been holding low for quite some time, so it’s best to look as soon as possible.
Rent is Extremely High
High rent is a fact of life in the Nation’s Capital. Since rent tends to increase by a percentage every year, take advantage of fixed mortgages where your payments never change over time.
There’s no one perfect answer for the rent vs. buy question. It all depends on your situation. Take your time to explore your goals and your financial picture before making the decision. If you’re still unsure, a calculator may help you determine what’s right for you.