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Buy Vs Rent Basics: Should You Buy or Rent A Home

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Rent vs Buy BasicsThe question of whether to rent or buy is no longer a clear cut economic one. Many people who can afford to buy their home are choosing to rent instead because they no longer have confidence in home ownership. If you can’t afford your rent you move on, but if you cannot pay your mortgage you lose everything.

Many renters have no plans to own their own homes, preferring to rent and invest their money in anything but real estate. While home prices are still dropping, foreclosures remain rising, and many are discouraged from purchasing their home. However, many analysts believe that house prices have bottomed and the time is right for buying. Those with the cash available for a good deposit are liable to benefit from purchasing homes while prices are low.

Benefits of Buying a Home

Buying a home has been risky in years past since many home owners have lost money in their investments as home prices have fallen. That being said, real estate is an excellent long-term investment, and if you are seeking a home, then by purchasing when prices are low you will be both investing and buying yourself a permanent place to live.

You can improve your home to suit yourself, while many rental properties cannot be changed in any way. However, by adding a new kitchen or bathroom, you will be adding to the value of your investment. You cannot do this with a rental, and every cent spent is basically wasted money that you will never get back.

With a mortgage, you can usually expect to get every penny back due to appreciation of the value of your property. You also get mortgage tax benefit, and owning your own home is good for your credit rating.

A major disadvantage is maintenance costs. If your roof starts leaking or your air conditioning stops working, you have to pay for the repair or replacement. However, with a rental, your landlord might go for the cheapest option while you can fit your own home with a more energy efficient system to save you money on power costs.

Buy Vs. Rent: Advantages of Renting Your Home

When you rent a home you having nothing to pay but the rent and consumables such as power. In fact, so many people are renting these days that landlords are offering incentives, such as flat screen TVs, free parking and reductions in the deposit. Many renters cannot afford high deposits, and this is a definite advantage to them.

Depending on the city you live in, it could be cheaper to rent than to buy. However, the buy vs. rent debate is not all about economics, and many people simply like the freedom to move around the country as they please, renting as they go. It usually costs a lot less initially to rent than to buy a home, and purchasing a home is long-term commitment that many are not prepared to make.

However, once your mortgage is paid your housing is free and you will likely own an investment that has appreciated! Or you can buy another property to live in and rent out your house. You have these options, while renting brings you no such investment benefits.

Calculators are often used to establish the benefits of buy vs. rent, but the results can be misleading. Maintenance costs are often not included, and appreciation is always approximate at best and a guess at worst. Quite frankly, if you are confused and unsure of the best way for you to pay for your housing, then we can can give you specific advice based on your specific needs and circumstances.

 

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Trace Richardson has written 645 articles on Sample Mortgage Inc.

I'm Trace Richardson and am the founder of LeadPress. I’m a licensed California Real Estate broker and a former equities trader previously holding the Series 7, 63, 55 and 24 securities licenses.

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