Renting or Buying

If buying a home is your goal, property ownership is a good advantage. After buying a house, you own the property, which means you can customize it however you want and truly make it yours. (Be sure to check with city regulations and Homeowner Associations before you get too crazy with the custom builds!) If specific living space needs are high on your priority list, owning is likely the way to go.

Home ownership can be a long-term investment. You have the potential, in the long run, to sell it for more than what you bought it for. Remember though, this is potential and not guaranteed, and the payoff in the end may not outweigh the financial burden of a mortgage while you are paying it off.

On top of some of the obvious advantages, owning a home offers tax advantages as well. Homeowners can typically deduct mortgage interest and property taxes thus reducing their overall tax burden. This financial benefit can make owning a home more affordable in the long-run in certain situations.

Another reason why owning a home might be for you is stability. While living in your own house, no one can change any rules and your mortgage typically doesn’t change by any significant amount, especially on a fixed mortgage rate. The amount you pay monthly will remain constant, so it’s easier to plan out your finances for the long-term.

Unpredictable home maintenance and repair costs can affect savings quickly. For example, if major repairs are needed (i.e., the roof, any heating or AC issue, or most issues related to plumbing) you could be in for a steep repair bill.

Moving into a home can be costly and usually requires a significant initial sum of money to buy the house, known as a down payment—on top of real estate agent fees. Be sure to read any contracts involved in the buying process.

Buying a house is a potential long-term investment. Once you purchase a home, it won’t be a simple process if something like a new job requires a move. The entire buying and selling process can take months or even years.

Property taxes, another expense that is often not discussed, will cost you extra—over and above the expense of your mortgage. Property taxes are a tax paid on property owned by an individual or other legal entity. 1

Renting provides flexibility, especially for those still figuring out their long-term plans. Renters can move without the hassle of selling a property, making it a suitable choice for individuals with an ever-changing lifestyle or those who prefer not to be tied down to a specific location. Check with a rental property’s lease agreement before you sign anything. Some property owners require a minimum stay (6 months – 1 year).

Renting can offer a more affordable alternative in hot real estate areas where home prices may be high. Also, renters are not responsible for property taxes, homeowners insurance, or maintenance costs; these are typically the landlord’s responsibility. This can free up additional funds for other purposes, such as saving for the future or investing.

Another aspect to consider is the current state of the housing market in your current location. Real estate markets are constantly changing, and it is crucial to assess whether it is a buyer’s or a renter’s market. If housing prices are high and the market is competitive, renting may be the way to go until the market stabilizes or becomes more affordable for buyers.

Your landlord can increase the rent at agreed upon times in your lease. This makes costs unpredictable and complex to plan for the long term. Be sure to read your lease agreement and check to see if you’re in a rent controlled area.

Unlike owning a house, as discussed above, renting a property has no tax benefits. With renting, unlike a home, there is no possible higher return on value than what you paid for because you don’t own anything.

Apartments/rental properties also offer minimal freedom with your design choices, and any changes to your house or your apartment likely need a landlord’s approval. This may even include changes like pet ownership, as many apartments have a no-pet policy.