To Rent or To Buy: Some Reasons for Each

Deciding between being a tenant or homeowner is an important choice for any family or individual. Numerous factors such as timing, location, occupation and finances can play a role in determining if the time is right to buy, or if it would be better to rent. Let’s take a look at some of the advantages and disadvantages of both buying and renting real estate.

Reason to buy: A home is an investment!

While house hunters should not rely on the potential selling price of their new property consistently going up, home values are likely to appreciate in today’s market. This means that in all likelihood, if a buyer owns a home for a period of time then they will make profit whenever they wind up selling. In the meantime, each time a homeowner makes their monthly mortgage payment, their net worth increases by the amount that their debt to their lender was reduced by. When monthly rent payments are made, on the other hand, the payer’s net worth remains unchanged.

Reason to rent: Reduced risk

While it is most likely that home values will appreciate over time, it is hardly a guarantee. For example, during the fourth quarter of 2008, the height of the great recession, home prices in the U.S. plummeted by 12.4%. This meant that millions of homeowners found themselves needing to pay back debts accrued when they bought their homes that were no longer representative of the present value of their property. Not only does renting reduce the risk of being stuck with an unwanted depreciating asset, it eliminates it all together.

Reason to rent: Mobility

Since renting agreements are often made and modified on a yearly basis, tenants do not need to be nearly as committed to their living spaces as homeowners. For individuals who do not want to make a commitment to living in a specific area for an extended period of time, renting is a highly convenient option. Moving can be an expensive process, but switching from rental properties eliminates many fees and payments that are often unavoidable to homeowners who are making a change.

Reason to buy: Stability

Home ownership can provide a sense of financial and social stability that renting cannot. If a home purchase is financed by a fixed-rate mortgage loan then the loanee knows exactly how much they will owe on a monthly basis for the duration of the mortgage. If the loanee’s income increases over time, then their payments will take up less of their overall budget. This is different from renting because rent payments can increase whenever a lease expires.

Reason to rent: Maintenance and repairs

Dishwasher stopped working? Toilet won’t flush? Water seeping through the ceiling? These types of problems could keep homeowners up at night, but for renters, fixing them can be just a phone call away. Landlords cover the expenses of maintenance and repairs, not tenants.

Reason to buy: Control

Owning a home means your house, your rules. If you want to have pets, you won’t have to worry about a landlord getting in your way. You can run the laundry without having to dig through your couch for spare change. You can store as much of your belongings wherever you want and you never have to worry about someone telling you that you’re violating their rules. Homeowners avoid many of the logistical hurdles that renters have to jump through in order to live their lives the way that they want to.

A comprehensive list of reasons to rent or own could go on for ages. At the end of the day, such a consequential decision boils down to personal circumstances, preferences and priorities. One person could view something like the ability to be mobile as of critical importance, while another could dread the idea of ever moving again. It is important to consult with a financial advisor before making such a life-altering decision.

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