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Cathy Tran:

Should you rent a home or should you buy one? At some point, you're likely to face this important question. Well, there's no right or wrong answer. It depends on your individual circumstances and preferences.

But it can help to ask yourself these six questions. Question one, how long are you planning to live there? Let's say you move to Boston for business school. You're excited about your new city and you think you may want to stay after you graduate.

Maybe that'll be two years and then you'll see. In this case, it might be best financially to rent, since buying and selling real estate can be expensive. More on this later. On the other hand, if you're likely to stay put for at least five years, the economics of ownership start to make sense.

Question two, what are the upfront costs? For a rental, you'll typically pay the first month's rent in advance and one month's rent as a security deposit. For a $5,000 monthly rental, that's $10,000 up front. You may also have other costs, like paying a broker.

This could be as much as 15% of the first year's rent. All in, estimate about three times your monthly rent for the upfront cost of renting. Buying, unless you pay all cash, will typically require a 20% down payment. If the house or apartment costs $500,000, you're looking at paying $100,000 up front.

Add to that the cost of a home inspection, appraisal, closing costs, recording taxes, and other expenses. This could be as much as 3% to 5% of the sales price. Question three, what will you have to pay on a regular basis?

If you rent, you'll be responsible for your monthly rental payment, renter's insurance, and probably the cost of utilities, like water, gas, electricity, and internet.

If you own, in addition to utilities and homeowner's insurance, you have to make the mortgage payment each month. As an example, your $400,000 loan amortized over 30 years at 6% will cost you about $2,400 a month.

Add property taxes, repairs, and possibly homeowner's association dues, and that rental may start looking a bit more reasonable. Question four, what is it worth to you?

One of the intangibles in thinking about owning or renting is that different things have different worth for different people. It's very important to some people to be able to decorate or plant a garden or make changes to their home.

Some derive satisfaction from just actually owning a place. That satisfaction or worth may eclipse the economics between renting and buying.

Or you might really enjoy not having to take care of repairs. That might be an added value to you. In a rental situation, if there were a leaky faucet, your landlord would be responsible for fixing it. If you own, you'd be on the hook for that repair.

In the end, you have to determine the value of these things and what they're worth to you. Question five, what about making changes?

As a renter, if you want to remove, say, the crown molding in the living room, you wouldn't be able to since it's not your property. The same would go for exterior alterations, like tearing down that ugly fence.

But if you own, you may have more freedom to personalize your space. So go ahead and rip out that crown molding. Remember, though, that certain projects could require a permit.

And some, like electrical and plumbing, should be done by a licensed professional. Changes like a new fence can spruce up the exterior but may also be limited by your homeowner's association or local regulations.

Question six, are there other economic things to consider? The decision to rent or buy is also an investment choice. And like any investment, there are trade-offs to consider.

If you wanted to sell, would you be able to easily? What would it cost? Six percent is a typical broker fee. There are also transfer taxes, legal costs, and other expenses to consider.

These can add up to 10% of the sales price, and sometimes more. So just to break even on the purchase price, you would need your property to appreciate by about 15%. And don't forget about inflation.

There are many other pieces to this puzzle, from the special tax treatment on the gains from the sale to certain tax deductions you may be able to take on a property that you own.

Alternatively, if you rent and have extra cash flow, you would be able to invest those funds in other things that could make you money.

The benefit homeowners enjoy that renters don't is the investment value of the home. Over long periods of time, the value of your home will likely rise and, as you pay down the mortgage, you will own more and more of that equity.

So let's recap. Renting gives you flexibility. Upfront costs are low. There's no down payment or financing cost, no property taxes, and no upkeep, but you also build no equity.

With that said, it can be a good option if you plan to move in the near future or aren't ready to commit to a particular location.

Owning a home is a commitment, a commitment to stay in the home and maintain it. It comes with significant upfront and ongoing costs, but you may have more freedom to customize a property.

You would also benefit from certain tax breaks and build equity over time. So, should you rent or should you buy?

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