Buying Versus Renting a Home

Many would agree when I say that home ownership is the greatest American dream. Nothing beats driving home from work at night and pulling into your driveway to be greeted by your wife, dog, and a house that you can truly call your own. Well, actually it's the bank's house until you pay that mortgage note off, but it's a nice thought! In fact, if you don't truly understand the costs involved in owning a home or how much you can really afford, it can quickly turn into a financial nightmare. But at the same time, who wants to throw money away by renting when really all you're doing is paying someone else's mortgage? And when it comes time to sell, they count their money while you're still stuck paying rent. So how do you decide? Take a look at the following pros and cons of owning and renting. I hope this article provides you with more insight and helps you decide what's best for your situation.

Before we get into the pros and cons I'd like to point out that you need to give great consideration to the type of housing you need. If you have a large family, with two large dogs, and you need plenty of space then your typically apartment, condo, or townhome rental might not be a great idea. However, if you're a college student or low income family that only needs a living room, kitchen, and two bedrooms then obviously renting becomes an option. It completely depends on what you need, not necessarily what you want.

Pros for Renting.
As a real estate agent that makes a living by selling homes, it's hard for me to write about the advantages to renting, but I think there are certain exceptions where renting is actually a great choice. For instance, the flexibility that renting allows you can be of great benefit. Most of the time, rental contracts require you sign for a period of time, whether it's six months or a year. If you choose to break your lease before then, then you can pay a penalty that allows you to get out of your contract and move forward. If you have a job that requires you to move around a lot, then the amount of time it takes to sell a home can be a huge disadvantage. Rental contracts are very flexible.

Another advantage is for the young adult. Most young adults getting new careers started do not have the substantial income they need to buy a home and maintain it. When renting, you are not responsible for any repairs which can be both costly and time consuming.

Again, if you are a low income family or single person then a big advantage is that it doesn't require a lot of cash to get moved in. Most apartments or condos require a security deposit that equals 2-3 months of rent, which is a big difference from the normal 5-10% down payment one has to make when starting a mortgage.

Cons for Renting.
There are obvious reasons why renting is a disadvantage. The number one reason not to rent is lack of control over the property. Landlords can raise a tenant's rent at anytime. The landlord could do a poor job of maintaining the property, leaving you with an unpleasant living situation. This could range from leaky faucets to mold issues. Most apartments have restrictions or covenants. This is a big one. The apartment could deny you the right to have pets over a certain weight, you can't play your music at a certain volume level, or you're not allowed to redecorate the apartment with paint, wallpaper, or anything else that alters the appearance. You're at the mercy of others above you or beside you, and if the walls are thin enough you can hear toilets flush or footsteps at all hours of the night. I've been there, done that, and I can tell you with confidence that it's not fun.

One disadvantage that I'd like to point out is the emotional pride that comes with owning a home. Everything in this world has a territory. Everyone has their own little space in this world, and when you are living in a place that isn't your own then you don't have any emotional ties to the property. There is a certain freedom that comes with owning and renting completely takes out that element. It's almost as if you're a prisoner.

The main disadvantage is the money factor. Who doesn't like money? I do. First of all, though you are helping pay the property owner's taxes with your rent, you are not receiving tax benefits by doing so. You can't claim any deductions on your tax return from your rent. The owner of the property is gaining equity. You are not. You've heard about the home investor craze with flipping houses and raising prices. This means that if prices over the past 2 years have appreciated 20%, if they choose to sell then they are enjoying the rewards that you helped pay. That's no fun.

Pros for Owning.
I could talk about this all day but it's basically just the flip side of renting. Owning a home is an act of emotions or feelings. Not everything can be reduced to paper and numbers. No one tells you how to decorate it, how many dogs you have, how loud your dogs can bark, as well as the freedom to landscape your yard. Let's face it. We all like control. By owning we have complete control of our homes.

Obviously the biggest benefit is financial. Like I mentioned before, you will receive tax deductions from the mortgage, taxes, and interest you paid this year on your home. Another thing is equity. Equity. Equity. Equity. If you have a home that you paid $250,000 for originally, and over five years property values appreciated and it would now appraise for a market value of $325,000, then should you choose to sell you're going to pocket $75,000 for simply owning the home and making payments. If you were renting you would not have that opportunity.

Cons for Owning.
This section is going to be short and sweet. The only downfalls to owning are lack of flexibility and obvious financial costs involved. As I mentioned before, if you move a lot based on a job or family reasons, then owning a home can put you in a jam. If the average home in your area stays on the market for approximately four months, then you can't easily transfer from Point A to Point B.

I hope you found this article informative on the advantages and disadvantages of renting or buying a home. Everything situation is different, and I highly recommend considering what you need versus what you want.