When considering a move, it’s important to evaluate whether renting or buying makes sense for you at the moment. There are pros and cons to both, so how do you know what the right decision is for you and when? We compared the two options to help lead you in the right direction.
Benefits of Renting
Ability to “Test Drive” A Neighborhood—Maybe you want to try out an up-and-coming neighborhood, or just somewhere you’ve always wanted to live before you decide to make a long-term investment there. Give it a year to see how you like the area, it’s conveniences and your commute before making a purchase.
Maintenance Costs and Repair Bills—There are certain expenses that renters are not responsible for because they fall on your landlord, such as water, sewer, garbage pickup, leaks and more. And if your super lives on site, they will take care of any small repairs that may come up, like unclogging a drain, replacing an outlet or patching or painting a wall.
Real Estate Taxes—As a renter you don’t pay real estate or property taxes because you don’t own your residence and therefore it’s not an asset. Taxes can be tens of thousands of dollars a year, so avoiding this expense is a huge benefit of renting.
Life Change—If you anticipate a life change like getting married, having a family, or becoming an empty nester within the next 5 years, renting may be better suited for you right now. Until that life change happens and you know what your living needs will be, renting will give you some time to figure it out.
No Down Payment—If you’re still working towards saving enough money for a down payment, renting is the way to go. Or, if you’d rather have that money in the bank for a rainy day you won’t have to put down an exceptionally large sum of money when you sign a lease. Usually first month’s rent and a security deposit are all that’s required.
Benefits of Buying
Equity–Instead of paying rent each month, put that money towards an asset that you actually own and gets you equity, such as a home or apartment. Real estate is a great long-term investment.
Tax Deductions–As a homeowner you are eligible for related tax deductions. Itemized deductions may include things like interest that you pay on your mortgage (the amount will depend on when you took out your mortgage), state and local property and income and sales taxes up to $10,000.
Customize Your Space–If you’re addicted to HGTV or Pinterest you’ve probably fantasized about a home remodel or redecorating your master bedroom. As an owner, you won’t face the restrictions that you do in a rental. You have the freedom to showcase your style in every room of your home however you choose.
Return on Investment–Purchasing a property is a big investment, but in the long-term you will likely make a good return on your investment. The key is holding onto it for a long period of time.
No Rent Increases–Unlike rent, a fixed mortgage can’t go up, even if inflation does.
Additional Factors to Consider
Still unsure of what to do? These questions may help get to your answer.
Down Payment–Do I have enough liquid money for a down payment? To avoid paying PMI (mortgage insurance) you’ll need at least 20% of the purchase price.
Affordability–Can I afford the monthly mortgage payment, common charges, maintenance fees, property tax in addition to the down payment? Be sure to run the numbers before you buy to ensure you’ll be able to cover your monthly expenses and still live comfortably and save money for the future.
Life Change–What is my 5-year plan? Do I anticipate any life changes that would require a change in space? Whether you’ll need an extra bedroom, a smaller home, or a change in location in the foreseeable future, renting might be the better choice for right now.
Return on Investment–How long do I need to stay in this home to see a return on my investment? Owning typically makes more financial sense than renting after 5–7 years, and the longer you stay the better your return will probably be.
Contact one of our qualified agents to discuss if renting or buying currently makes more sense for you.