To Rent or To Buy? The Advantages & Disadvantages
Updated: Oct 23, 2022
Should I continue renting an apartment or should I buy a home? Housing needs change throughout our lives, and every option to choose from has its own unique set of advantages & disadvantages. Whether you’re relocating to a new city, or your family is growing (pets included!), ask yourself what you need to feel at home & what option is right for you. Below are some questions to ask yourself when considering renting vs. buying, including the advantages & disadvantages of each.
To Rent or To Buy?
Truth is, we all have our own financial situations, lifestyles, & long-term goals that would impact our housing needs. Making the decision on whether to buy or rent doesn’t have to be complicated though! It all starts with asking yourself about your situation & where you see yourself in 5 years and so on. To help you start planning your next move, ask yourself these 5 questions to determine if renting or buying a home is the best option for you.
Does renting or buying work with your timeline?
Are you financially able to buy?
Which fits your lifestyle better?
What are your long-term goals for homeownership?
Have you considered the responsibilities of each?
Advantages & Disadvantages of Renting
Advantages of Renting a Home
Home Maintenance: Things break & parts wear out….As a renter, you aren’t on the hook for those costly repair & maintenance bills (unless there’s negligence). This is ultimately one less expense you have to worry about while living in the home or apartment.
Flexibility: Once your lease expires, you can move across town or across the country (even to a new country), all without having to worry about listing your home. If you foresee a major life event happening such as a new job, you may want to consider renting over buying.
Investment Opportunities: Without paying for maintenance & repairs, you may have some additional funds available to invest in other things. Take that vacation or save even more for a future down payment!
Disadvantages of Renting a Home
Temporary: While renting is great if you are planning a major life event, it may not be the best option if you are looking to establish roots in the community. Renting is meant to be short-term, providing housing needs until you can reach the long-term goal of homeownership.
Uncertainty & Unable to Modify: Since you don’t have ownership of the home, you probably won’t be able to make any changes (even painting the walls). The owner has the ability to sell after your lease expires is also a concern to keep in mind for the long term.
No Equity: As a renter, your monthly bills aren’t contributing to your equity, but it does build equity for the owner. Equity is the percentage of the home’s value you’ve paid for rather than what your lender still owns, so you aren’t improving your finances if you aren’t the owner.
Advantages & Disadvantages of Buying
Advantages of Buying a Home
Building Equity: The longer you are the owner of the home, the more equity you will have in the home. This can lead to making more money when you sell the home, or you can even borrow money against your equity for big expenses. Those who buy a house rather than rent may even qualify for tax breaks, especially first-time homeowners.
Customizable: Buying a home means you have full control of modifying, upgrading, & customizing your home. From repainting the walls to replacing the cabinets, this gives the homeowner the ability to turn a house into a home they can truly call their own!
Stability: As a homeowner, you have the ability to decide if or when you move instead of any landlord having a say in the matter. There may be a time where a job opportunity takes you across the country, or maybe the market is perfect for selling your current home for a bigger & better place. No matter the situation, you have control & the stability of owning the home.
Disadvantages of Buying a Home
Home Value: In a perfect world, your home’s value would go up over time as you build equity. Sometimes, however, events out of your control such as a downturn in the economy can reduce this value. Typically, the longer you own your home, the more you can improve your return on investment as the costs will be balanced out over time.
Extra Expenses: As a homeowner, it is your responsibility for paying for the maintenance & repairs, whether you DIY the projects or hire an expert. As you are going through the purchase process, it is important to keep in mind those hidden costs like the closing costs, inspections, insurances, etc.
Investment Limitations: Homeownership requires capital, from the monthly bills to the ongoing improvements & maintenance. Especially in the early stages of owning the home, you may not have a lot of extra money that you can invest. That said, owning the home alone can be a great long-term investment, let alone making improvements to increase the home’s value.
Key Takeaways: Renting vs. Buying a Home
Planning to move to a new city or expecting a career change? Major life events, hobbies, & interests all will play an important part in determining whether you should rent or buy a home, both now & in the future. What better time to do some soul searching & aspiration planning!
Whether you decide to rent or buy a home now will have an impact on your current financial situation as well as your long-term ownership goals. Talk with a Financial Advisor to review your needs & best options.
Responsibilities of renting a home are different than those of owning a home, so are the bills. Keep in mind the hidden costs of home buying like maintenance & repairs but remember that homeownership is one of the best paths to financial freedom. Your local real estate agent will work with you to lay out your needs, navigate the paperwork, finances, etc., & help you determine if renting or buying a home is the best option for you at the time.
For more info on the market, visit Realtor.com’s 2021 report on Renting vs. Buying HERE.
Renting vs. Buying Sources:
Realtor.com: Rent vs. Buy January 2021
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