Does it Make Sense to Own a Home While Still Renting?
Buying your first house but not living in it — seems pretty crazy, right? To many people’s surprise, it’s a housing market trend that’s spiked in recent years, particularly among millennials. But why is this happening, and is this real estate trend a good idea?
Why buy a house you’re not going to live in?
Millennials prefer urban living. Unfortunately, their tastes in location can’t compete with city housing prices. Buying a house in a city is astronomically more expensive than buying outside of one.
However, cities offer job opportunities that smaller towns don’t. Instead of driving 45 minutes to an hour (or more) every day for a commute, many millennials opt for living closer to their job.
This leads to the current housing market trend: buying a house you’re not living in. Millennials will sometimes buy a house outside of the city that’s more affordable while still renting a place out in the city. Here’s why:
- Opportunity to rent out. Renting out a house could cover part (if not all or more) of the mortgage on a home. Eventually, this investment property could turn into a source of income.
- Place to settle later. Whether decades down the road or in the next few years when their employers finally allow people to work remotely, having a house to settle in is a wonderful source of comfort.
- Passion project. For those flippers who love turning a property for a profit, it might make sense to spend nights or weekends working on a house outside of the city.
When does it make sense to buy a house while still paying rent?
While this trend might sound lucrative, it’s still a bit risky. The last thing someone wants is to pay for a mortgage, homeowner expenses, and expensive rent every month. However, there are a few situations where this might work:
Your current rent isn’t bad…
If you don’t break out into a sweat paying rent every month, you might be in good shape to own a house on top of it. We’d like to think that if you’re sharing a place and paying $700 or less in monthly rent, you might be in a good spot to pay an $800 to $1,000 mortgage. But again, you’ll know your finances and what you can handle best.
…AND you could rent out the house you’re considering.
Find a property that you know could turn a profit (or at the very least, lower or eliminate your mortgage)? That’s a great sign. And don’t limit yourself to long-term tenant rentals, either. Vacation rentals or even flipping houses can help your financial portfolio grow.
The house could appreciate massively in the coming years.
Of course, buying in an area that will be popular but isn’t quite there yet takes some finesse. But if you’re nearly positive the house you’re considering could sell for significantly more than what it’s worth right now, it’s likely a good investment property. A diet of rice and beans and frugal living until you sell your house could very well pay off.
You see yourself living in this home (and can afford two rents until then).
Maybe you’re waiting for your novel to get published or your boss to let you work remotely. Maybe you and your partner are starting a family soon and one of you can (or wants to) stay home with your child. No matter the situation, it could work in your favor to buy a house, even if you still have to rent a place in the meantime. It might work better to have a place set up instead of entering the housing market when you’re “ready.”
While paying rent and a mortgage is not ideal, many people are making it work. What’s more, many are actually profiting off of this real estate trend. When you’re ready to jump into the housing market (or are even just ready to think seriously about things), jump in with RealtyHive. In addition to our listings, we offer cashback opportunities for homebuyers. Get started today!