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Writer's pictureLonnie White

RENTING VS. BUYING. EVERYTHING YOU NEED TO KNOW!




RENTING VS. BUYING. WHICH IS RIGHT FOR YOU?


When deciding to rent or buy, tons of questions begin to flow through your mind. This decision is much larger than most other daily selections you typically make. Choosing to rent versus purchase makes an impact on not only your financial health, but your entire lifestyle in general. So which decision is the right decision? In this article, we will discuss the benefits and drawbacks of both renting and buying so that you have a clear comparison of the two options.


 

RENTING


Renting a property offers a tenant flexibility, consistent monthly expenses, and limited liability in regard to repairs. Renting also enables a tenant to move at the end of the lease without questions or consequences. Some people make a claim that paying rent is simply a waste of money, but this is by no means true. In some instances, renting is a better decision than purchasing. The decision to rent or buy should be made depending upon your individual circumstances rather than someone else's expectations of you. If you're not ready to commit to living in a certain location, renting may be more favorable for you. If you don't have additional money parked in a savings or "rainy day account", renting may be a better option for you. If your credit health isn't where it needs to be to qualify for a mortgage, well renting may be your only option. It is definitely true that a mortgage will be less expensive than rent, but in the event something costly happens (roof repair, A/C repair, water leak, etc.), you will not be the one responsible for the out of pocket expense. The downside to renting though is the frequent increases in rent prices. Almost every renewal period the market rent tends to increase. This means it will continually become more expensive to live in the home/apartment you are currently living in. Although an increase in rent isn't 100% certain, it tends to be the norm in most cases. Listed below are both pros and cons of renting.


Pros:

  1. Consistent monthly expenses

  2. Not responsible for repairs

  3. Option to move when lease expires

  4. Option to renew when lease expires

  5. Access to amenities (In Apartment Communities)


Cons:

  1. Not establishing equity in a property

  2. Rent is more expensive than a mortgage

  3. Rental renewal increases

  4. Pet restrictions

  5. Inability to customize your living space (No Renovations)


BUYING


Owning a home is definitely something special. There is a great pride in knowing something is yours, and being able to claim it as such. Purchasing property provides many benefits and this is why home ownership is valued tremendously. However, home ownership does not come without responsibilities. When most people think about real estate, they tend to think about it as being an asset. Most people discuss lower payments, equity, tax benefits, and appreciation which is all very true. Mortgage payments tend to be lower than rental expenses. Properties in developing areas tend to grow in value which provides homeowners with equity, sometimes a lot of equity. The government has tax advantages available to homeowners which is super beneficial when filing taxes. The freedom to make changes and renovate your space is an enormous plus. Also, positive mortgage payment history is great when reflected on your credit report. Therefore, it's understandable why people love and advocate for homeownership. Owning a home comes with many good (great) benefits, but there are more than just positive factors associated with it. Although real estate is an asset, real estate is not a LIQUID asset. This means that if a homeowner is looking to sell their property, the transaction does not occur immediately. Depending upon market conditions, a property can sit on the market for months, sometimes years. Ultimately, this means that as a homeowner, you have less mobility in comparison to a renter when it comes to relocating. If you're forced to relocate and carry two mortgages, things can become overwhelming. In addition, along with homeownership comes property taxes, maintenance expenses, homeowners insurance, HOA fees, lender required fees, etc. Even though lower mortgages are a thing, a low mortgage payment does not necessarily mean a lower housing expense. There are many unforeseen circumstances which can be costly for homeowners. In the event of a leaking roof, broken A/C, faulty plumbing, or electrical issue, it is the homeowners responsibility to fix the problem. If property taxes increase, the monthly mortgage will also increase. These unexpected occurrences do happen, and it is best to be prepared for these unanticipated expenses. Other downsides to homeownership include upfront costs, interest payments, and the risk of property value stagnation or in some cases, depreciation. It is always wise to make sure you are prepared to take on homeownership prior to committing to a purchase.


Pros:

  1. Property appreciation

  2. Home equity

  3. Tax advantages

  4. Build your credit

  5. Ability to renovate


Cons:

  1. Property maintenance

  2. Property taxes

  3. Upfront costs

  4. Interest payments

  5. Property value stagnation/depreciation

  6. Less mobility

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