This article is part of the "Buying a House - Not As Difficult As You Think" series. I will analyze the crucial points for you to consider before reaching a decision: Should you buy or rent a house in the US?
- Is buying a house in the US as expensive as you think?
- What are the different types of housing in the US?
- What factors affect housing prices in the US?
- What do you need to prepare to own your first home?
Firstly, in this article, I will help you distinguish between two housing options: renting and buying.
Renting
For most of you who have just come to the US or have been living and working here for a while, renting is the first thing to consider. Rent prices in expensive areas such as California will fall around 2,500-2,800 USD/month, or in New York, around 4,000 USD/month.
In other areas with lower prices that are favored by many Vietnamese people, such as Texas or Florida, the cost of living is around $800-1,400 per month.
The advantage of renting is that you know exactly how much you need to pay each month to the landlord without having to worry about any unexpected costs. The rent-to-income ratio is recommended to be around 30% per month, but this number is increasing.
The next advantage is that you can choose the rental location, move to another place, or continue to stay when the rental contract expires. However, renting also has pressure because the landlord can continue to rent to you or not, for personal reasons.
Buying a house
The primary difference when buying a house is that you must invest a substantial amount of money upfront compared to renting. In essence, you will obtain a loan from the bank, which you will repay over 30 years, along with interest, before achieving full ownership of the house.
You will be responsible for the annual rising costs such as property tax and home insurance. In addition, you also need to consider the annual maintenance costs, repairs, or renovations. This cost falls into the range of 1% of the value of the house you buy.
However, owning a house always instills a sense of security and certainty. This is especially true considering the psychology of Vietnamese people, for whom a house is a representation of our lifestyle, personality, interests, and financial capacity.
After many years of investing in real estate through the purchase of rental properties and renting them out, I have heard that many Vietnamese people in the US also aspire to own their first home, yet most of them believe that purchasing a house in the US is both challenging and expensive. While everyone desires a house, only some know how to optimize cash flow or fully grasp the conditions for buying a house.
I want to share with you that, in addition to buying your first home and seeing it as your only asset in life, you can do more than that. With a decent income and a solid understanding of mortgage loans, cash flow calculations, and property management, you can expand your investment portfolio by engaging in additional purchases, sales, and rental activities.
This is the path I have taken to build a $6 million asset portfolio while maintaining my 9-to-5 job over the past 12 years. If you have a decent down-payment amount, along with a relatively good income, and you are willing to learn, conduct research, and persevere through loan rejections, you will be surprised to discover that the path to acquiring your first house and numerous other properties is not as difficult and uncertain as you think.
Based on the information provided above, you have essentially differentiated between renting and buying a house. In the upcoming articles, I will provide you with more intriguing insights into housing options in the US, the factors influencing house prices, and effective strategies for leveraging real estate ownership.