When to Buy, When to Rent.

The line between buying and renting can often be a fine one for people just starting out and wondering which is right for them. The benefits of buying and the attractive prospect of having equity in a home often weigh against the less restrictive nature of renting and the deferred responsibility of home repairs through renting. Making the decision can depend on a variety of factors, but perhaps biggest among them are the general real estate appreciation seen in the area and the time you plan to be in the property.

Real estate market appreciation can be a difficult figure to tie down in regards to a particular area. A considerable amount of data and time is needed to properly do homework on the expected appreciation on a certain home. We have all heard stories about booming areas that have flattened out and seemingly depreciating areas turning around economic fortune.

Real estate appreciation plays a key part in the difference between buying and renting. A quick and dirty rule of thumb states that the cost of buying and then subsequently selling your home is about 10 percent of the purchase price of your home. That 10 percent encompasses things like closing fees, realtor commission and other associated costs. That 10 percent markup is something that needs to be made up for in real estate appreciation of value of the home. If your area does not appreciate by that amount, you probably will not make up the difference.

That rule plays into the second strong factor in deciding whether to buy or rent: the length of time you plan to stay in a particular town or home. If you need to see that 10 percent appreciation to just break even on the transaction costs of buying and selling your home, staying in the home for only a short while does not give the real estate much time to appreciate. The longer you stay in a home, the greater its odds of appreciating in value, ensuring that you not only cover that 10 percent, but then have built up equity in the home as well.

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