Whether to rent vs buy depends entirely on individual circumstances. Understanding that I’m squarely on the fence, let me share how we recently approached that age-old question.
Rental property is a “side hustle” that I’ve been developing for a few years. Our initial condo was purchased with this intention in mind. After the birth of our daughter and condo rules restricting the number of occupants over 2 years old, relocating became a necessity. Scouring the rental market reinforced a key theme, renting in Chicago can be quite pricey. We need to move. Should we rent or should we buy?
Here are a few questions to ponder when weighing the options:
1. Do you have money for down payment and closing costs?
2. How long are you planning to stay put?
3. What are the neighborhood amenities?
4. How stable is your employment situation?
5. What plans do you have for the property when you leave?
6. Do you have savings or a plan to build one to address potential maintenance problems?
7. Are you willing to maintain the exterior (or pay assessments)?
8. How stable is the neighborhood?
9. What updates/improvements are needed before moving in?
After considering the above questions, we decided to pursue a short sale or foreclosure to minimize the upfront and monthly costs. Finding low priced property can be tricky. Basically, we wanted a deep discount on a great place in a great location that was move in ready. We also wanted a place that would eventually attract productive tenants.
The search took some time. We patiently looked at 20-30 units over 5 months. Many of the properties on the market were in questionable condition – to be polite. Listings routinely appeared in the $50,000 range, but the conditions often required significant renovation. If the unit was intact, there might be problems with the association. One building with a fantastic unit had a defunct association currently in litigation with the city over building code violations. Finally, we needed to ensure that condo associations had no restrictions against renting our unit in the future.
Units with little structural issues and no obvious association entanglements received offers quickly. A pre-approval letter (an initial nod from the bank) was required to submit serious offers. After missing out on several properties, the pressure to move quickly builds. I had to continually battle the urge to make rash decisions; to rush into something just to beat the crowd. I was disappointed when several attractive properties disappeared quickly. However, patience prevailed. We eventually found a short sale with minor updates needed and no association restrictions on renting.
Our decision to buy vs rent relied heavily on our long term goals for wealth building. Again, developing a portfolio of income producing rental properties fits our family’s financial goals. We expect to use the next 2-3 years researching the schools and neighborhoods and didn’t feel like renting for that time would be the best use of our resources. Of course we incur a higher cash outlay to secure a new residence, but the prospect of generating rental income or potentially recouping our investment in some future sale tipped our decision to buy. On a monthly basis, we save about $300 over the lowest priced rental unit in consideration. The decision wasn’t easy to make because WonderMan and I couldn’t agree initially. There is no perfect outcome. It’s important to objectively consider the options and make the best decision you can with the information you have. For us, buying seems better.