To rent or to buy? That is the dilemma for many people, especially those moving to Chicago.
Friends and family alike are either renting or buying their own homes and you’re left with whatever option would suit you best. But always you need to ponder your needs and lifestyle. Of course, you also need to consider the housing market situation.
Chicago Home Prices
Real estate prices rise in a seller's market. In comparison to the previous year, robust buyer demand is boosting prices in the Chicago metro area.
The Chicago home market is expected to maintain its status as one of the hottest in the country during the next few years. And it will continue to do so given the current situation where most work is now done at home and people need a place to crash in for some time rather than constantly jumping from one room to another.
In the face of these obstacles, the real estate sector is adjusting to the present climate by conducting business using technology such as virtual showings and e-signing to assist buyers and sellers with their housing needs. Sellers, brokers, and homebuyers appear to be responding to the real estate industry's restrictions imposed by the coronavirus outbreak.
Home sales have been at an all-time high in recent years, as purchasers rushed to secure available properties at record low loan rates. The good news for Chicago purchasers is that mortgage rates are still low. The majority of purchasers are motivated by historically low mortgage rates and are eager to enter an increasingly competitive market in search of their dream home.
Renting vs Buying: Pros and Cons
Choosing between renting a home or buying is a decision that requires so much thinking and attention to detail. The thought of either renting or buying may sound easy, but with the consideration of several factors, that’s the time where the complexity jumps in.
For starters, you can consider the pros and cons of being a renter or a homeowner.
Renting
Renting is still very appealing in the midst of the strong housing market.
PROS:
- Rents in Chicago fell by 12% since 2020, according to the Chicago Tribune.
- There are plenty of good rental spaces all over Chicago due to the pandemic.
- With the pandemic causing mass unemployment, flexibility is more important than ever. If you expect a work change, you'll desire the freedom that renting affords.
- Assume you want to put down 3 - 20% on a home, but still you'll need to save more to get there. Then you can rent and save till you have enough money.
- It provides lower expenses. Purchasing a property can be costly at times. Rent if you don't want to pay for the things that go wrong.
- You can actually avoid paying taxes. Renting may be the greatest option if you don't want to be obligated to pay property taxes.
- It reduces market risk. You can reduce risk by negotiating a fixed rent for a second or third year in advance when renting.
CONS
- Rents are subject to increase. You won't know until it's time, therefore your annual budget will always be unclear. You'll be stuck with much larger rental payments if real estate values rise dramatically.
- It does not contribute to the development of equity. Your monthly payments are accumulating money for your landlord, not for you.
- You can't make changes to a property without the owner's permission.
- There aren't any tax advantages. When you relocate, you won't get a mortgage deduction, a property tax deduction, or a capital gains tax cut.
Buying
Buying a home is an investment and would not require you to owe someone a monthly payment because you actually own your home.
PROS:
- You have the freedom to do whatever you like in your home, from decor to renovations.
- If you have a fixed mortgage, you are basically safeguarded against inflation in the future.
- You can profit from tax advantages. If you sell your principal house and make a profit of $250,000, you can avoid paying capital gains tax.
- Buying a home has been a terrific strategy to create personal wealth for the previous 75 years. Each month, a portion of your mortgage payment is put into the principal balance of your loan.
- It fosters a sense of pride in actually owning your own home.
- Historically, real estate appreciates in value over time.
CONS:
- When you own a property, you are responsible for all of the unforeseen costs. And yes, that includes the seeming never-ending maintenance.
- Owning a home is never without danger. You might buy during a period of economic downturn, which will affect the value of your home.
- Renting gives you freedom; owning a home gives you roots. So, if you want to sell your house, you'll have to put it on the market and wait for the appropriate buyer to give the right price before cashing out your equity.
- Property taxes, which make up the majority of a municipality's revenue, can go into the thousands of dollars per year.
Homeownership is a difficult option that has both benefits and drawbacks. Do you enjoy the notion of choosing bigger furniture that suits your tastes without having to consider the space of your room? Perhaps owning a home is right for you. However, if you like a little more flexibility and convenience, renting may be right for you.
How to decide whether to rent or buy?
Purchasing a home is a wonderful achievement, but it also comes with a lot of responsibilities. When you decide it's time to stop renting and buy a house, it's critical to be aware of all the benefits and drawbacks. However, the question now lies with how to decide on whether to rent or buy?
Here are the different factors for you to consider here:
a. Moving Timeframe
How long it will take you to move out and move into your new home (both renting and buying a home)? Which one takes more time and stress to move into? So think about your moving timeframe as it can help you better decide which option is more suitable. Because if buying a house would take months before you can freely live in it than renting, then perhaps renting is a much better option. Again, this depends on your situation and the reason why you need to move.
b. Work situation
If for example you were promoted to a higher position in your company but had to move, is buying a home still more convenient for you than renting a place in every place you can go? This is something that has influenced millennials and young adults, for starters. And with the booming of remote work, you should consider the way you work into the equation of finding your home in Chicago.
c. Are you single or with kids?
If you are a single individual who will not have to worry about family members, perhaps renting is for you. This would help you save by renting with roommates. On the other hand, buying a house would be more convenient if you have kids as it can be an investment on your part, especially that these children should go to school and it would be very troublesome if they constantly move from one school to another just because you do not have a permanent home.
d. Your Finances
It is important to oversee your finances first and budget them according to your expenses. Buying homes can be extra expensive than renting but it is a good investment for long-term use. Renting may be cheap, but given the amount of rental payment you have put out from your pockets can be troublesome especially when times get tight with money. Ensure first where your finances can lead you as it will help you reach a decision.
e. Have you owned homes before?
If you’re new to Chicago with no ownership of homes, you can start with renting. If you’re moving from a home sale, you are able to weigh things more conveniently this time given your experience in owning a home before. Apart from that, you already have some expectations with the expenses you might spend in both buying and renting a home.
Should You Rent or Buy?
So what should you do? Let me break down the different situations where renting or buying would be right for you.
Rent if
- If you are not sure where you want to live
It is alright to be unsure yet and still exploring the waters to see which community would make you feel more comfortable. So, to avoid trouble along the way, it would be better to rent first. Then when you had taken your time, you can decide whether renting or buying is the way towards your ideal home.
- If you are staying for less than 5 years
It is more practical to just rent a place if you are not planning to stay longer in a particular area. This will help you save more time and obligations in the maintenance and resources of your place. Buying a home in which you will only be living for less than a year is impractical and way more expensive. It would also involve either hiring a property manager or selling your home if you choose to move to another community.
- If you are still working on your credit
Renting would be more achievable on your end if you’re new in debt management or poor at it. This way, you can still save up for some time rather than risking getting yourself a house when your credit is still hanging by the thread. Again, if you are planning on buying a home, make sure that you are financially stable.
On the other hand, you should…
Buy if
- If you want to tap into an appreciating neighborhood
If you desire to be a part of the community and take advantage of the dynamic community, then get yourself a home. That way, you can provide your family a home with a community they can easily mingle and interact with. All the more, you should buy a home if you want to get into a neighborhood that is booming with economic potential and ripe for appreciation long-term.
- If you have great credit
A good credit score would help you get favorable mortgage rates. If you can fork a substantial sum for the downpayment, it would also help you get your desired home. If you are stable financially, then buying a home is no longer a problem on your end.
- Fixer-upper
If you are up for the challenge and are willing to acknowledge the responsibility of fixing a home,buying a home is for you, given that rental places would need the consent of the owner before you can do anything. You can also exercise your freedom to flex your creativity in making a house into your dream home.
- If you are staying longer than 5 years
Most importantly, if you are planning to live in the community for more than 5 years or perhaps a lifetime, you should definitely get yourself a home rather than renting. It is way more practical and a better investment on your end.
Conclusion
Chicago is the country's third-largest city (after New York City and Los Angeles), but it's easy to get around. The Loop, the central region, is densely packed with skyscrapers, while more residential districts spread out to the north, south, and west, with Lake Michigan to the east.
There are thousands of free events, activities, and places to visit around the city. If you live in Illinois, you can get free entry to museums like the Art Institute and the Shedd Aquarium on certain days. Every day, admission to the Lincoln Park Zoo, the National Museum of Mexican Art, the Garfield Park Conservatory, and the Cultural Center is free. And so much more!
If you learn how to embrace it, Chicago will definitely love you back!
Moving to a new home is a stressful and exciting process at the same time. And all the more, if you’re moving to the energetic economic powerhouse that is the City of Chicago! The Windy City offers many diverse neighborhoods, each with its distinct vibe that caters to people from all over the world. And one of the most asked questions to us realtors from our clients is “Should I rent before buying a house in Chicago?”
To be honest, there is no one-size-fits-all answer. It depends on your situation, especially if you have kids, pets, or both, and your finances.
