Rent Vs. Buy

Real Estate Agent with Riley & Associates Realtors


In today’s housing market many renters are hesitant to make the jump to home- ownership, and for good reasons! With the media’s doom and gloom reports and foreclosures piling up, homeownership is starting to look like a pretty grim option, right? Well, maybe not. While homeownership is not for everyone, it can be one of the best decisions you’ll ever make. So, should you buy? Below are some things to consider before making your decision:

Disadvantages of Renting
Paying someone else’s mortgage.
Paying rent is paying your landlord's mortgage and helping him/her build equity. You are paying for someone else’s asset. When you send your check to your landlord every month you can be sure you’ll never see your money back again.
Having no control of rent increases.
When you rent you have no control over monthly rental rates, which increase an average of 5% per year. If you can’t afford the hike in rent, you must move. In addition, if you are still renting after you retire, you will have little or no monthly income, and who knows how astronomically high rent might be!
Lack of Personal Freedom
In most rental situations the renter is very limited in his/her ability to alter the property to suit his/her desires. Most likely, the sage green walls and shag carpet you’ve been craving are out. Who really wants to spend money to improve a place that isn’t theirs, anyway? Have you been wanting a dog or cat? Chances are you either can’t have one, and even if you can, you’ll pay extra for it. Do you play an instrument? Hopefully it’s a quiet one or you won’t be able to practice.
The dreaded people upstairs/downstairs
If you’ve ever lived in an apartment building with noisy people above you, you know how terrible it can be to wake up to loud fights, kids screaming, a noisy TV, etc. Also, living above an overly sensitive neighbor can leave you feel as if you’re walking on eggshells 24/7.

Advantages of Renting
If your job has you moving all over the place, or you’re studying for a degree away from home, there’s nothing like the freedom of being able to get up and go. Although most rental agreements include a year’s lease, sometimes a landlord can find a replacement tenant.
Free Repairs
Although repairs may be completed slower than you’d like, they’re free! No need to worry about the furnace, the roof, the fridge; they’re all covered!
Less short term expenses
Many times a mortgage payment on a property is less expensive than what the rent would be; however, when you add in insurance, property taxes, and repairs, renting is usually cheaper.

Disadvantages to Owning
Economic Responsibility
There is a lot more to home ownership than simply paying your mortgage. You must pay property taxes, homeowners insurance and maintenance costs. If you need a new roof, furnace, or fridge there’s no landlord to call — you pay for it! This means you should have some money in reserve for situations like this.
Less Mobility
In a normal market, a house takes a couple years to generate enough equity to make it worthwhile to sell again. If you purchase a home and want to sell it six months or a year later, you may end up having to bring money to the table in order to sell. In order to avoid getting “trapped” in your home, plan on spending a few years there.

Advantages to Owning
Building Equity
Although some of your mortgage payment goes towards interest paid to the bank, whatever you pay in principal adds equity to your home. This is a great way to build wealth that can be used in a number of ways. If you let your equity sit in your home, you can benefit from cost free living when you are older and your mortgage is paid off. Or, you can refinance or open a home equity line of credit that can be used to build wealth and invest in another property, stocks, etc.
Now you can paint and decorate your home as you wish! If you want a pet, a drum kit, or a late night party, you can indulge yourself. You can do what you want with your home, within the limits of the law.
Sense of Community
Many times in rental areas the turn over rate is much higher than in areas with higher rates of homeownership. Knowing your neighbor can give you a greater sense of security about your environment.
Tax Write-Offs
Homeowners are able to deduct the interest and property taxes in their monthly mortgage payments from their income, which can save them hundreds or even thousands of dollars. This is something a renter cannot do.

These are just some of the main advantages and disadvantages of renting and owning. There are many online “rent vs. buy” calculators that can help you with more exact numbers. Additionally, nothing beats the advice of a local Realtor who is well-versed in local market trends and has connections with knowledgeable and helpful lenders.

Comments (1)

Don Draughn - Mortgage Professional
High Point, NC
Very good information.  This is very good for buyers to see.  Thanks.
Feb 04, 2008 01:03 AM