Buying a home has great benefits, but so does renting. In this article, we break down the financial pros and cons, and talk about common lifestyle differences to help you determine which is better; buying or renting.
Homeownership has long been considered an integral part of the American dream. However, deciding whether to buy or rent is not always an easy task. It largely depends on your lifestyle and financial ability. But both renting and home-buying demand a consistent source of income, and may also involve some effort to uphold. Which one is right for you?
We will cover the following topics:
Of course, there are obvious differences between renting and owning property. There are benefits to each, and downsides to each. You may not have all of the responsibilities of homeownership when you rent a house, but you might find that you’ll have more free time since you are not tied with homeowner duties. On the flip side, owning a home allows for more freedom and customization, it also offers potential financial benefits, if done right.
Renting isn’t always a better option than owning a home, and owning a home isn’t always as simple as it appears. Let’s discuss some of the fundamental differences between renting and buying.
While homeownership is costly, it comes with several benefits, here are the most common advantages of owning your own home.
Homeownership can qualify you for some tax benefits like the homestead exemption and federal tax deductions, which allow you to itemize your federal income taxes and deduct property taxes and mortgage interest, lowering your overall tax burden. When you own your home, you can deduct your property taxes and mortgage interest. However, the tax benefits are directed to your landlord when you rent.
Buying a home, unlike renting, is an investment. That means you create equity as you pay off your loan; owning a little more of the house until it’s paid off in full. You also profit from the increase in value of your home over time. Home upgrades can enhance the overall value of your property, making it easier to refinance when you need more money and worth more in profit if you ever decide to sell.
One of the most appealing aspects of owning a home is doing whatever you want with it, including using it for passive income. You can transform your home investment into a source of income by renting out rooms, floors, or even the entire house to renters if you’re comfortable with the idea. This creates additional cash which is great. Just make sure to pay attention to your local rental property requirements.
Because homeowners invest time and money in their property, they are more likely to stay longer than the average renter, establish roots in the neighborhood, start families, and participate in their communities than a temporary apartment renter. Owning a home will offer you a sense of belonging and motivate you to participate in community activities such as associations, clubs, volunteer organizations, businesses, and more.
Owning your own home opens up a world of creative and decorative possibilities, from painting and hanging art on your walls to DIY renovation projects. Your house is a blank canvas for you to paint on – it’s time to get creative with your home! In addition to this, you can finally get your “man cave” and garage the way you’ve always wanted, or a pool in your backyard.
Ok, so we’ve seen some pretty great aspects to owning a house, what could the drawbacks be?
Suppose you have a problem with plumbing, electricity, broken appliances, or other issues in your rental unit; you can contact your property manager responsible for handling and paying for maintenance and repairs. But as a homeowner, you are solely responsible for all expenses that come with repair and maintenance.
If you rent a house, you do not have to worry about high upfront costs, such as a down payment, earnest money, home assessment, and more, unlike if you buy a house. Although renting typically has a security deposit, a down payment on a house is much higher, and not everyone can afford right up front.
The value of a home can rise over time. Or drop. While you have the opportunity to create equity and profit, you also face the danger of losing money on your investment if the value of your property drops, depreciating your assets according to the local or national market. Are you still paying off your mortgage? Check here to see if you can pay it off faster.
When you buy a home, you’re signing up for a long-term commitment to care for and pay for it. The purchase of a home is a substantial financial commitment. You’ll have to keep putting in money over time, from mortgage payments to maintenance, repairs, and upgrades. But it can be possible to cut your mortgage payments down significantly, but can you really pay off your mortgage in 5-7 years? Sam doesn’t just think so, he’s seen hundreds of people become debt free!
You might want to think twice before buying a house if you aren’t ready to put down a long-term commitment. A move in the future will also require you to go through a complicated selling process. You’ll put time, money, and maintenance into your new home.
Modern apartments are appealing to many people for obvious reasons. They offer a lot of flexibility and ease of transition. If you’re already renting a single family home, or apartment unit, you’ll know most of these, but here are some benefits and drawbacks to consider if you’re considering renting:
Apartments provide an easier move-in and move-out procedure, which offers your lifestyle some freedom. There is no lengthy sales process if you need or want to move away at any point. It’s as simple as waiting until your lease expires and then departing.
If you’ve ever rented, one of the greatest things about not owning the property you’re living in is not having to manage repairs. The downside is if you don’t have an attentive landlord, you may have to live with a broken faucet for your entire lease. But typically, you won’t have to worry about scheduling repairs or budgeting for costs if a plumbing burst or an appliance breaks down. Your property manager handles all maintenance and repairs, so all you have to do is make a phone call when you need help.
While purchasing a home necessitates higher credit scores and more thorough background checks, renting an apartment is less strict. You’re likely to be authorized for the lease you desire if your credit score is good and you don’t have any bankruptcies on your record.
Most apartment complexes and units include utilities in the monthly fee, saving you money and time, while homeowners can pay hundreds of dollars per month for utilities. Utilizing the included utilities will make your life easier, trust me.
Apartment complexes are more likely to be found in great locations near the best shopping, attractions, nightlife, and other entertainment. Yes, those apartment units can be pricier, but you can get an apartment in places that buying is not possible, for example, the apartments above the shopping centers.
Like mentioned before, apartment rentals do not include the upfront costs associated with buying a home. Yes there are costs up front, but typically the only thing you need to pay is the security deposit and the first month’s rent.
Aside from the numerous advantages of renting an apartment or single-family home, there are disadvantages, too:
Because your apartment isn’t your property, you won’t be able to claim any tax exemptions as a tenant.
Homeowners bear a greater share of the costs of purchasing and maintaining their homes, but they can also benefit from accumulating equity. In contrast, renting an apartment may be more convenient but it does not provide you with the opportunity to invest in your home’s value over time. Some people consider this like “dumping money down the drain”.
Your rent is fixed for the duration of your lease, but can vary if you renew or sign a new lease. You’ll have little say over how much you pay each month in the future. If you pay your rent on time, are a good tenant, and keep good terms with your leasing agent, you could possibly avoid hefty increases, but it isn’t up to you.
When you pay your rent, your landlord earns the equity the property gains. If you own your home, the benefits of your investment go directly toward your net worth. Rent will continue to increase, as your landlord is entitled to increase the rent as he wishes.
When you pay your mortgage, you build equity that builds on your financial wealth. As with any investment, success depends on a variety of things like location, economy, maintenance, and environmental issues that can all impact the house’s overall value. If you’re new to property management or real estate investing, make sure you get connected to groups, individuals, or nearby events.
If you haven’t heard, real estate investing is a second language to Daniel and Sam, they have plenty of experience, and have used their knowledge and experience to train, coach, and educate many people to become successful in many areas of real estate and raising capital. Check out their book on how they went from 0 to 75 units in just one year!
So which is it? Is renting or buying property better? After looking at buying and renting from different angles, here are our final thoughts to help you decide if you’re ready to own a home of your own.
First and foremost, this decision really depends on you. If you want to stay in once area for several years, and more freedom to do as you please with your property, buying a house is most likely the best choice. Along with the physical benefits of tax deductions and equity, homeownership provides intangible benefits such as a sense of stability and the joys of ownership. But, if you like the freedom of moving around more often, and don’t want to be bogged down by legalities and homeowner responsibilities, renting is going to be your “happy place”. It really boils down to your financial situation , lifestyle, and personal aspirations, this will help you decide whether you rent or buy a property.
Both offer you a place to live, which is the main function of a home, but both require that you have a steady source of income to make the payments. All that said, ultimately, you’re the best one to make the decision because you know what you want.
What is your style, owning or renting?
Lydia is one of our content writers. She has experience in sales, social media, and in marketing communications. Her interests range from photography to writing, and entrepreneurship to the great outdoors.
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