Renting vs Buying: Pros and Cons

Renting vs Buying: Pros and Cons
by Kevyn Pitts - February 26, 2022, , ,

You may have heard that buying a home is always better than renting one but that isn’t necessarily true! It all depends on where you are in life and what your goals are for the future. if having more flexibility with your living arrangements sounds like something worth sacrificing ownership over, then maybe renting would work better for you instead

Flexibility

The greatest advantage to renting is flexibility. You can move at any time, within the limits of your lease agreement. It costs you nothing but the costs of physically moving your belongings.

When you own a home, it takes years to build enough equity to cover both rounds of closing costs, from when you first buy and later go to sell. If you buy a home and then decide to move 18 months later, you'll probably lose thousands of dollars, as you haven't had enough time to build equity to cover all the closing costs.

The greatest advantage for homeowners lies in the ability to build equity over the long term. In fact, the greatest predictor of net worth is homeownership, with renters having an average net worth of only $6,300 while homeowners boast an average of $255,000, based on the Fed's latest Survey of Consumer Finances.

Bryan Davis, Founder & Real Estate Geek, Spark Rental.

Future Plans

Making the decision to rent or buy a home should be based on several factors which include how long you plan on staying in the home, the area you want to live in, and the overall costs of owning a home vs renting. Although I feel this is more of a personal decision.

People who choose to rent can expect lower overall costs and convenience, yet they won't have the equity to gain from owning a home. Owning a home comes with more of a commitment, but it also offers the chance of building equity.

JasonGelios, Realtor, Its All About The Real Estate.

Financial Perspective

From a financial perspective, it makes more sense to rent versus buy if you don't plan on living in the property for more than 5 years (generally speaking the time frame depends on many factors specific to each individual's unique situation). It also makes a lot more sense to rent instead of buying if you are still working on building up your emergency savings fund because home repairs are inevitable and some can be very expensive so if you don't have a built-up emergency fund then you can put yourself in a difficult situation.

If you are planning on being a lifetime tenant then I would recommend negotiating a favorable rental rate before moving in and then being a great tenant while living there. Being a great tenant is important because landlords value great tenants and will often not increase rental rates as much as they should to retain a great tenant. Therefore if you intend to rent for a long period of time, negotiate a favorable lease rate upfront, and are able to keep rental increases over time to a minimum you may be able to live very affordably.

Bill Samuel, Realtor, Blue Ladder Development.

Liability Check

Many home purchasers do not realize that a home is actually a liability that requires payment of taxes, insurance, association dues, and maintenance. Homebuyers like to think of their home as an asset but value can quickly disappear if the housing market endures a recession. The illusion of a home as being an asset and not a liability is perpetuated by the mainstream media and the real estate industry that propagates the myth that homeownership is the American dream. 

Renting on the other hand offers a person greater flexibility to move at the end of their lease period without needing to go through the hassle of selling the property. Renting offers a person predictable monthly expenses for the lease period and the outsourcing of maintenance to the landlord. This means less stress, aggravation, time, and money to make any repairs.

David Reischer, Attorney & CEO, Legal Advice.

Long Term Investment

A good long-term investment – this is the top benefit of owning a home. Homeownership brings a sense of stability, pride of ownership, and freedom. When you own a house, you have complete freedom to decorate it however you want to. You are also building up your equity while paying off your loan.

On the other hand, the disadvantage is that owning a house can be expensive. You have to pay for your maintenance and take the time to renovate it at your own expense. Plus, property taxes can go up, costing you lots of money.

As someone who rented almost her entire life, I can confirm that renting gives you more flexibility. You have no responsibility to maintain the place, plus, you can move out anytime you want.

On the other hand, the disadvantage is that you can get evicted anytime. You can’t make any changes too without your landlord’s approval. Plus, they can increase your rent anytime.

Expert, Mocca Bajao, Thrive.

Easy Finances

If you care about your finances, mortgages provide more long-term financial stability than renting. The mortgage interest deduction is the only tax break on residential housing available to homeowners - and while some people wrongly think of this as a subsidy, it actually provides some protection for taxpayers against higher taxes.

Even if that were not true, the income tax savings from mortgage interest (and property taxes) would more than offset any lost benefit from federal income tax deductions on rents instead of mortgage interest and property taxes.

The biggest advantage over renting is that homeowners build up equity in their houses; even though paying off a 30-year loan can be tough, you build equity -- which offers more collateral for borrowing against your home for other purposes like education, medical bills, starting a new business, and other needs.

When you rent, you are paying someone else's mortgage; in most cases, your landlord's. Homeownership also offers more stability than renting; if you have a family or other situations that require stability, owning your own home is a good way to ensure that.

Michail Korovin, Founder, Pearls of Caviar

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