One of the major decisions you will need to make in your life is whether to buy a house or rent a place to live in.
This will affect not only your monthly income but also your overall lifestyle and the savings you accumulate through the years.
Every day, there are people who buy a house even if it is financially better for them to rent because they want to have their own place where they can put down roots.
On the other hand, some opt to rent all the time because of the minimal responsibility and flexibility it offers even if they would have garnered a bigger net worth over time if they had purchased a home.
Given these situations, what is the better choice then? Is it better to rent or to buy?
Let us weigh the differences between these two and know their pros and cons to help you with your decision.
What Is the Difference Between Renting vs. Buying a Home?
Renting versus buying a home is a big decision, and both options have their own set of pros and cons.
The answer to the debate on renting versus buying a house is not so cut and dry. There are several important questions that must be considered when trying to identify the better option of these two:
- How much can you afford?
- Are you looking for flexibility or stability?
- How long as you planning to stay in the house?
- What are your family, financial, and career goals?
- Can you take on the responsibility of home maintenance and repairs?
Once you have answered these basic questions, this will be a good starting point for you to decide on whether you should buy that dream house right away or settle for renting a place instead.
Reasons Why Renting Is Better than Buying a House
Here are some of the strong points of renting that make it a better choice than buying a house:
Little to No Maintenance on the Rented House
Things such as yellowing grass and chipping paint might not be serious concerns, but you still need to spend effort and time to deal with them.
If you are renting the place, you don’t need to sweat about these small things that make homeownership a daily responsibility. You might not even notice these concerns most of the time.
If you prefer to spend your weekends with your friends instead of bothering to climb up the ladder to clear the gutter of stuck leaves, renting could be your best option.
Renting offers flexibility that might not be easy or even possible if you own the house. If your job requires you to move to a different country or you decide to downsize, you can do both easily if you are renting.
If you buy the house, you will be tied down to that one location.
Hard to Sell a House
It is difficult to sell a house and look for a new place to live. There are some places where renting is better compared to buying a house. This is because selling a house in some areas can be tricky.
In cases like this, renting will let you move frequently without being bogged down by the burden of a house.
Call the Owner to Fix Problems
- Is the dishwasher broken?
- Did you notice warp in the window trim?
- Is the toilet not running?
If you are renting, these types of repairs and the costs associated with them will be the responsibility of the owner or the landlord, not yours.
Depending on the kind of lease you have, there might be a need for you to contribute to repairing problems that were the direct result of your own actions.
However, provided that you take extra care of the living space, this doesn’t have to be a problem.
It will also be much less painful to call the owner to fix the problems instead of calling and paying for a repair company out of your own pocket.
Reasons Why Renting Is Worse than Buying A House
There are several good reasons why renting is a worse decision than buying, and these include the following:
You Don’t Own Anything
Yes, it can be disappointing to realize that no matter how diligent you are in paying for your current home, it will not bring or give you anything in return in the long run.
You don’t own any part of that house no matter what you do. At the end of the day, you are just a renter that will need to leave everything behind when the time comes.
Your Rent Will Go Up Every Year
When the time comes that you need to renew your rent’s lease, you might be surprised to find out that the landlord has raised your rent. This trend can continue every year, something that wouldn’t happen if you buy instead.
Rent hikes are common, specifically in pricey rental markets. Tenants can sometimes expect an increase in rent with inflation that landlords often translate as 3% a year.
This is among the reasons why being a homeowner makes you feel more stable. When you own the place, you don’t have to worry about the need to move ever again.
No Tax Deductions
There are financial incentives that buying a house can give you. Becoming the owner of a home can give you tax credits and savings.
In the span of several years, the average monthly payment of a homeowner will be much lower than the monthly rent of a tenant.
The government also gives homeowners some tax incentives. Home loan interest is tax-deductible as a form of property taxes.
Some other perks of buying are the exclusion of the profits from the capital gains and energy-saving tax incentives or rebates from the government or companies if you choose to install green appliances.
Pay for Someone Else to Buy a House
The monthly rent that you pay can be used by the owner or the landlord to buy his or her own new house. You are helping someone else buy a house while you are left with no house you can call your own.
Reasons Why Buying a House Is Better
Buying a house is sometimes a better and wiser decision for several reasons:
You Own an Asset That Appreciates Over Time
Homebuyers could take advantage of the equity their house accumulates over time. It means that if the value of the house goes up, you will be able to cash in on its higher value once you decide to sell.
On top of that, with a fixed-rate mortgage, there is no need for you to ever worry about increasing rents.
As interest rates have gone low, it can now be almost as affordable to buy as it is to rent in most parts of the world.
If you are qualified for a house, you can build equity and watch your asset appreciate over time.
You Can Rent Out the House and Make Money
Unlike what most people think, owning their first house is not the end of things for most homeowners. Many choose to rent out their house once they buy a second one. Some even rent out any extra space to tenants.
By renting out the property, you will be able to make a good profit out of your extra space.
No Landlords to Kick You Out of the House
If your family lives in a rented home on a temporary basis, any form of infraction gives the landlord the right to kick you out of the house with a 30-day notice. You can even get kicked out if he decides to put the property up for sale.
But when you buy the house, you will become a permanent resident, and you and your family won’t be kicked out unless your mortgage defaults.
Great Tax Advantages With Being Better to Buy A House
Being a homeowner entitles you to some tax benefits. For starters, if you receive rental income as a homeowner, this income will not be taxed. You can also deduct your property tax payments and mortgage interest from your federal taxable income.
When you decide to sell your house, you can also deduct the capital gains from taxable income if you have used the property as your residence for two years out of the last five years.
Renovate Your House However You Want
Being the owner of the house also gives you freedom of improvement. No landlord will be there to tell you the things you can and cannot do as you decorate and improve the house.
Whether you give your bath a complete renovation or you decide to touch up some parts of your property, you will be able to do everything you want because you own the place. This makes buying worth the expense.
When You Sell, You Will Make Money
If the time comes that you decide to sell the house, you can make money, especially when the value of the property has appreciated through the years. You might even make more money than what you initially spent to buy the property in the first place.
Buy with a Down Payment and Lower How Much You Owe Each Month
While it can differ based on the state or city, there are times when the monthly payment for a mortgage is equal or lower than the monthly rental payment.
This is a good reason to buy with a down payment and lower the amount you owe in mortgage every month.
Reasons Why Renting a Home Is Better than Buying
Here are some other reasons why you might be better off if you just rent a home instead:
Constant Maintenance on the Home
One advantage of renting over buying is that there are no constant repair bills or maintenance costs involved.
When renting a property, the landlord takes on the responsibility for all the repairs, improvement, and maintenance needed. If the roof leaks all of a sudden, you can just call your landlord to get it fixed.
Hard to Relocate to Another Home
Renters have the freedom to live anywhere, unlike homeowners who are restricted to places their money can afford to purchase. Relocating to another house can be hard if you own the house you are living in.
More Expenses to Manage
Finally, renters don’t need to worry about managing more expenses, including property taxes that could get hefty. And while renters need to pay a security deposit equivalent to the cost of rent for one month, they don’t need to spend a down payment that is usually 20% of the price of the house.
Should I Rent or Buy a House Conclusion
Should I rent or buy a house? At the end of the day, the decision will all boil down to the amount you can afford as well as the level of responsibility you are willing to take on.
Make your decision based on what works for you and your finances. As long as you are happy with your decision, you know you made the right choice.
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