Renting vs. Buying

It used to be that young couples would get married, buy a home and live there for the next 40 or 50 years. But times have changed. Home prices have skyrocketed in the past decade, making home ownership very difficult for some young people just starting out. It has also made some older homeowners more inclined to sell their now pricey homes and jump back into the world of rentals again, freeing up equity that they can use during their retirement years. Renting has become a much more affordable option for many – but just as there are downfalls to buying, there are disadvantages to renting too. So what should you do? What makes sense for you and your family?

The only way to answer that question with certainty is to know your personal finances  inside and out, and to do your research. A pros and cons list can be useful in this situation.

Buying a home – pros

  1. If we’ve learned anything over the past several years, it’s that homes can often be good investments.
  2. Possible rental income. If you choose, you can rent out a portion of your home to help cover monthly mortgage payments and other expenses. Your home can be a source of income.
  3. Your home, your choices. You can paint, wallpaper, decorate and landscape any way you like when the home belongs to you.
  4. Tax exemptions. As a homeowner, you may be eligible for certain tax benefits that renters are not.

Buying a home – cons

  1. It’s not wise to put all your eggs in the equity basket. You can’t guarantee that you’ll get more out of your house than you put into it, so banking on it to fund your retirement isn’t necessarily wise. You can increase the equity in your home by doing renovations and improvements, but it’s impossible to know how much of a difference that will make when it comes time to sell.
  2. Aside from the cost of a down payment, homes can be expensive to run and maintain. Consider moving costs, lawyer’s fees, mortgage payments, property taxes, house insurance, repairs and renovations, utilities, landscaping, snow removal, furniture and décor – and you’re looking at a lot of expenses, both upfront and ongoing, for the life of that home.
  3. When you buy a home, you’re committed to staying there for a good long while unless you want to go through the hassle and expense of moving again.

Renting pros

  1. In addition to maintenance and repairs that are usually taken care of by a landlord, it’s much easier and less expensive to pack up and move to a new place if and when the spirit moves you, or when circumstances require a change. Even if you have to break a lease to move, you can sometimes offset the cost by subletting your apartment for the remainder of the term if your landlord approves.
  2. It’s usually easier to be approved for rental than it is to get approval for a mortgage. Obviously you need to have a fairly decent credit history, but mortgage lenders usually have much higher standards.
  3. You may be able rent a house or apartment you’d never be able to afford to buy, allowing you to be in desirable neighborhoods that would otherwise be out of reach.

Renting cons

  1. While, as discussed, home equity isn’t something you should necessarily bank on, it can be an important investment that’s useful in your retirement years when you sell. Renting eliminates this potential. Everything you pay into your lease is gone.
  2. You may be at the mercy of your landlord as far as housing costs go. If you don’t live in a municipality with strict rent control, there’s no way of knowing how much your lease payments may increase from year to year, which makes it difficult to budget for other needs and wants.
  3. You never really know how long you’ll be able to stay in a rental property. There are usually protections in place to ensure that you can’t be evicted suddenly without cause, but it’s unlikely that you can guarantee that you will be able to stay in your place indefinitely. Landlords sometimes sell or opt to move back into homes or apartments they have been renting out.

Your decision to buy or rent is a personal one that hinges on so many different factors. Take your time making that decision, weighing out all the pros and cons based on your own unique situation, including your long-term goals, current life situation and finances. The worst thing you can do is rush into a situation because you’re feeling pressure. There will never be a “perfect” solution, but there will be one that suits you more than the other. It just takes time and thought to sort it out.