Most people will have considered renting vs buying pros and cons at some stage in their lives, but it’s never an easy decision to make. The decision to buy or rent is often an emotional one, though anyone involved in real estate will tell you that any decision to buy real estate (or not to as the case may be) should always be made with the head, not the heart. So when you are considering the renting vs buying pros and cons it bears keeping that in mind. The emotional desire that many of us have to own our own home must be put second to the financial imperative to make a sound decision on what for many people will be the largest expenditure on purchasing an asset in their lives.
The recent drops in hose prices in some countries around the world, as well as the contrasting skyrocketing in others highlights the need to look locally, in your local area and not just in your country or state, for indicators of growth or slowdown. This is a very important part of making your decision to rent or buy a home for yourself.
The reason being is that you do not want to over-capitalize – make a purchase, only to find that a large scale drop in real estate prices occurs a short time later and you suddenly are in a position where your mortgage is more than your home is worth. This is the nightmare of every purchaser of real estate, but if it is the family home we are talking about, it is just so much more serious.
The pros of renting your home
First off, renting is going to be cheaper for you week to week and month to month in most cases. This is because taxes, insurance, maintenance and improvements to the property all cost money over time and also because mortgage repayments often cost a fair amount more than the average rental for the same property. This leaves a greater percentage of your income for other things such as living expenses and ideally a program of investments (such as stocks and other assets), which will see money flow back to you over time as they appreciate in value. If you were sinking all that money into mortgage repayments that would not be possible.
Renting as opposed to buying also provides you with greater flexibility in the location you choose to live. Relocating need not involve the hassle of trying to sell the home you live in before you can budge. As a renter you are also immune from any drops in the housing market and rises in borrowing prices as we have seen recently in the U.S. This especially applies to real estate investors who have chosen to borrow through private mortgage lenders. You are also able to live in nice areas you would likely not be able to afford to buy yourself as a renter.
The pros of buying your home
It is a common argument that homeowners are building wealth by living in and paying off an asset. Whether or not this is actually the case is debatable, but the true definition of an asset is best saved for another time. By far the greatest advantage to buying your own home is stability. You are not driven by anyone else’s whims and you never have to move if you want to stay.
If you choose to buy vs rent your home you are also able to take advantage of increases in market value of real estate. This increase in value may also disappear if the market moves the opposite direction, and some choose to sell the property once a significant gain in value is achieved to realize their wealth that they have on paper. When you own your own home you are immune to increases in rents, which in some cases can be brutally expensive.
Renting vs Buying pros and cons – the conclusion
There is no one size fits all single answer that applies to everyone here. After looking at renting versus buying your own home you may well consider that it is better for you to rent, whereas the next person may decide it is time to buy – it all depends on what you want. Your goals in life often determine the most appropriate course of action for you. You may decide that you will purchase a property but rent it out and continue to rent the home you live in – that is a very popular choice these days and has many advantages in terms of tax and other expenditures. Buying vs renting is a quite a difficult consideration and an argument that has many angles.
Remember that this is your decision, and that no-one is better qualified to choose whether to rent or buy than you are – all you need is a little information and you are as well informed as the financial adviser down the street. Ask questions, weigh up your options, and live your life the way you want to – there’s no-one better qualify to decide the question of whether to rent vs buy than you.