Wondering if renting or buying is better for your unique situation? You are not alone! This is a question our agents are asked often. If you are buying a home as an investment property, there are many other considerations. The help of an expert can be invaluable. Let’s dive into the pros & cons of renting vs buying.
To start, several pros of renting are below:
- A lower monthly payment without real estate taxes or a down payment. Paying a landlord your monthly rent is typically less than the going cost of a mortgage plus the insurance, taxes and ongoing maintenance.
- You are not responsible for maintenance. When the air conditioning goes out or there is a leak, the landlord is responsible for the cost and headache of making repairs. You have the peace of mind of not having to budget for or deal with fixing appliances or doing necessary maintenance at the rental property.
- You have the freedom to move any time. When renting, you are not tied to one rental or location long-term. Thanks to the flexibility of lease terms, you have various options ranging from the typical 12-month lease agreement to a month-to-month rental.
On the flipside, cons of renting are:
- Your rent payment is a monthly expense rather than an investment. When renting, you walk away with no equity or ownership after making rent payments.
- Rents have the potential to keep rising. The cost of renting is volatile from lease term to lease term. Upon lease renewal or signing a different lease, there is always a chance that rents could change.
- There are no tax benefits. There are no tax implications when renting a home or an apartment. However, there is a slight tax advantage to homeownership since you can write off your mortgage’s interest payments.
- There is less stability. If you are renting a home, the owner could choose to sell it at any time and require you to pack up and be out by a certain date. So while you have signed a lease for a certain amount of time, there is no guarantee if and when the owner wants to sell.
- There are more rules and restrictions. Since a rental is not your property, you must adhere to the owner’s rules. These could vary from no pets allowed, being charged a pet fee or parking facility fee, no remodeling and more.
Pros of buying can be:
- Your mortgage payments build equity. With each monthly payment, you gain home equity, also known as ownership in your home. Over time, the home or condo becomes your property and a source of personal wealth.
- Enjoy the tax benefits. There are tax benefits to home ownership since real estate taxes are fully deductible.
- Owning a home provides stability. You may have a family and do not want to risk having to vacate a rental on short notice, or you might want to put down roots to benefit the next generation behind you. Owning a home gives you the stability to settle in and truly call a place home.
- Freedom to make changes to the home. An owner of property has fewer restrictions and can renovate, add-on and make changes (as long as they do not violate laws or HOA rules). You can also have pets and abide by your own rules.
A few cons of buying would be:
- Large upfront capital investment. When purchasing a home, buyers typically leverage their purchase with a fixed-term mortgage. Lenders require buyers to put-down a percentage of the purchase price (10%) to secure the mortgage. This typically translates to buyers needing to write a large check prior to purchasing the home.
- You are responsible for making payments and handling repairs. There is no landlord to call when your air conditioner breaks; you have the responsibility to vet repair companies, get quotes, line everything up and pay for it to be fixed.
- You are tied to one location. Unlike renting, you are putting down roots that aren’t easily changed. Listing the home, showing it and going through the home sale process typically takes a month or longer. You cannot simply pick up and move like you can when renting.
- Costs add up. Not only are you responsible for lining up the repairman, you are also responsible for everything from your roof to the appliances and so much more. A floodlight replacement here, a leak there and a broken microwave later, you will see that these costs really add up over time.