Real estate rookie

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When I graduate, I plan to work for my father’s company back in my hometown–a small suburb in Ohio, near Cincinnati. I don’t mind the idea of working closely with my Dad and following him into the family business. What I do mind, though, is the idea of going back to my old childhood bedroom and living with my mom and dad!

I’d like to get my own place, but the area I’m from isn’t really one that has a ton of apartments for rent. My dad says that renting doesn’t make economic sense in the same way that buying does, and he also says I’m too young to buy a house, anyway. Is he right about either of these things? Is there any way for me to live on my own and have it make financial sense?

Your father’s position on home ownership is the conventional wisdom on the subject, and it’s often true. The idea is this: when you pay rent on an apartment, you get a place to live and nothing more. But when you make mortgage payments, you are getting a place to live while also erasing debt on a property you own; eventually, you may finish paying the mortgage, which means you’ll fully own a valuable asset and will no longer have to worry about rent or mortgage payments! 560,000 home buyers saw this logic in 2016, and a similar number will no doubt see it this year.

Of course, in practice, it gets a lot more complicated very quickly. Mortgages come in all shapes and sizes, and down-payments can range from huge to small–or even nonexistent, as is the case with USDA loans. Owning a home involves other expenses to take into account, such as property taxes, homeowner’s insurance, and maintenance and repair costs. Owning a home turns your living situation into an investment, but investments can go down. If money you might otherwise invest in stocks or bonds is locked up in a property that’s plummeting in value, your mortgage payments might start to feel like nearly as much of a waste as your rent checks–and you won’t have the flexibility of being able to just move out when your lease is up!

In a healthy real estate market, though, your dad’s argument is a good one. Real estate experts we spoke to felt good about the market for homes in places like Mason and other Southwestern Ohio towns. The majority of people in the U.S. (64.3%) own their homes–but that’s the lowest figure since 1967. That may be a reflection of the changing calculus of home ownership and personal finance, but it may also just be a reflection of the economy–homeownership peaked in 2004, prior to the mortgage crisis, and mortgages haven’t been as easy to get since.

All in all, the choice between renting and buying is a tough one that you should make with the help of your parents, financial advisors, and perhaps some real estate experts (make sure they’re working for you, though, when you ask them–it’s easy to forget the real estate agents work on commission).

But it’s also worth mentioning that renting an apartment next year and buying a home need not be mutually exclusive. While your suburb may be short on affordable apartments, it’s possible that you’ll find something in a converted home or shared space if you look on Craigslist or on other local sites and message boards. Nothing will be as cheap as living with your parents, but life is about balancing short- and long-term goals, and only you know what independence is worth to you.

Every traveler has a home of his own, and he learns to appreciate it the more from his wandering. ― Charles Dickens

Written by Suzanne Hite, former publications editor serving the technology services sector.