Is it really better to buy a home instead of renting In Palo Alto?
Updated: Feb 25, 2022
Are your parents right?
I speak to a lot of incredibly intelligent local women and men working in the tech industry in Silicon Valley, who are paying exorbitant monthly rent to live in Palo alto, most of whom could buy a home pretty quickly if they wanted to. One aspect of being young and capable, is having freedom and not wanting to let go of that freedom! I know this myself as I thought the same way before I bought my first home.
The thing is, rent is purely an expense and the likelihood is that you are supporting another person's mortgage. Sure, the owner probably needs to dip into their own savings to cover the monthly costs on top of what you pay in rent, however when the future rolls around in 5-10 years time, they will own that home and you will not.
You will have contributed a large percentage of income to help a stranger pay off their mortgage. During this time, the property will also increase in value. Your rent will increase over time and the property owner will build more and more wealth as their mortgage repayments decrease, real estate prices increase and equity builds in the property.
I guess the answer to this questions is yes.
Do I need a 20% down payment?
If you want to avoid PMI, you're going to need to save a 20% down payment to buy a home. In saying this, there are new programs evolving and changing on a daily basis. It's important to speak with a trusted lender to find out what options might be available to you.
The answer to this one is no.
Are there any benefits of renting instead of buying?
I would say the biggest benefit of renting vs. buying is flexibility. If you are still trying to work out where you want to base your career or whether you want to travel overseas for a gap year, it might not be the best time for you to buy a home.
In saying this, you can always rent out your property if you do decide to move interstate or overseas for a while. Just think about all of the property investors who never lived in most of the homes they've bought.
You will need to have some extra income available to cover repairs, insurance and some outgoings, even while you have tenants in your property, but in the end you will be building wealth.
The answer to this question is yes depending on your personal circumstances.
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