Deciding on Renting or Buying Your Home? The Pros and Cons

Choosing whether to buy or rent a home is a critical decision. This topic has been discussed for centuries; real estate is a business that has been around as long as people needed shelter among communities. It not only affects your overall lifestyle but this decision also makes a impact on you financially. It is often said that buying a home is probably going to be the largest purchasing decision in a person’s life. While I don’t completely agree with that, there is truth in it. Real estate is likely the largest ticket item on average across the variety of things that you can buy. As we all need a home to live in, whether to buy or rent real estates is definitely a decision to weigh carefully.

Real estate investment and ownership can be regarded as a form of investment that will allow you to build equity along with a reliable source for ensuring tax deductions. On the other hand, renting also comes with its advantages. When you rent, you maintain flexibility in where you decide to live; you also have little to no responsibility in maintaining the property. However, different people have their own preferences with respect to renting or buying a home. Let’s explore the pros and cons so that you can make your own decision.

Renting a Home

Renting implies that you can move out easily without penalty whenever your lease ends. There is no need to think about long term maintenance or consequences of the home. However, it also implies that you may have to move instantly if the landlord decides to sell the property, converts your apartment into a condo, or does not renew your lease in any other way.

The biggest myth related to renting is that you end up “throwing money” every single month. However, this is not true. It is true that you are not building up equity in a home with rent payments on a monthly basis. However, when you consider home ownership, there are a large proportion of expenses not going towards the process of equity building.

As you rent, you know exactly how much you are going to spend on your housing every month. There is no need to be afraid of unexpected costs coming from frozen pipes, or an infestation of pest; those would be responsibilities of the landlord. Your expenses, the rent and maybe some utility, would be predictable every month. Some people enjoy that piece of mind and consistency; leaving them to perhaps invest and build equity elsewhere with the money saved by renting.

Pros of Renting:

• Monthly costs are fixed & predictable
• Easier to pick up & move whenever you feel like
• Savings can be utilized for other life-centric goals like paying off a debt or investing
• You are not associated with costs linked to owning a house

Cons of Renting:

• Rent might increase in the future
• Rent money does not go towards building any equity
• Limited control on the overall aesthetics

Buying a Home

Buying home ownership implies that you will have full control and responsibility over the home; you are building equity into an asset; there is no landlord to pay or defer decisions to. In addition, with buying a home, you can discover many intangible benefits. Some intangible benefits you obtain may include a sense of community, stability, and overall pride of home ownership. On the otherhand, those benefits mean very little to individuals who prefers a more nomadic or transient lifestyle.

If you prefer the freedom of living in different places, all the time, buying a home to live in may feel restricting. Real estate is the original illiquid asset. You cannot quickly convert a home into cash whenever you want; regardless of whether you are trying to avoid plummeting home prices, or you need some extra cash. Even when the market is up, there are major transaction costs upon selling for trying to capture real estate profits. The overall cost of home ownership tends to be higher than the overall costs of renting a home. This holds true even when the mortgage payments monthly tends to be the same or even lower than the monthly rent. Those costs can be attributed to home maintenance, unexpected repairs, and other issues.

Pros of Buying:

• Tax benefits to owning
• Value of home can go up with the passage of time
• A highly permanent living arrangement
• You can personalize the space the way you want it
• Payments go towards equity building

Cons of Buying:

• Responsibility of handling all the maintenance work
• You can lose your home if financial situation changes
• Home can lose value due to fluctuations in the economic conditions
• Additional costs of owning a house –including maintenance, home insurance, property taxes, and so more
• You get stuck in a single place for several years

Bottom Line

There are a variety of factors to think about when considering whether to buy or rent the home in which you are living in. Weighing all of the pros and cons, I am still a big proponent of buying and paying for my own home over time. For one thing, i enjoy the intangible sense of ownership and association with a particular community. On the other hand, I also enjoy the flexibility and freedom of being able to live in various places.

The solution the seemingly paradoxical situation is that once you buy a home, there are so many ways to rent it. Whether you rent your home for short-term rentals through a platform like Airbnb, or decide to go the traditional route of finding stable tenants, buying a house no longer means you are stuck. There is plenty of optionality for you to choose from when deciding to be involved with real estate. This is something that I’m particularly interested in and will continue to write about.

There is a long list of reasons in addition to what has been mentioned that puts buying a house a better financial choice than renting. It does require a bit more work; but that work will pay off in the benefits that you will gain from the variety of things you can do with a house you own versus renting one from a landlord. I’ll surely try to dive into some of those reasons more deeply in my next few blogs articles.