Should You Buy Or Rent A House?
Owning your own home may be a traditional part of the American Dream, but it’s not for everyone.
There are many reasons why it might be a better idea to rent than own a home, just like there are many reasons why it might be better to buy than rent your place of residence. It just depends on your stage in life, what you want out of a home, and what your financial situation is.
For example, you might not be financially ready to put a down payment on a home and assume all the costs of maintenance, taxes, insurance, utilities, and renovations that come with homeownership.
You might not want to live permanently in your current neighborhood or even in your current city. Maybe you just don’t want the responsibility of owning a home – or maybe you are ready to take the plunge.
Should you rent or buy a house? Here’s how to decide.
Rent If You Can’t Afford a Home
It goes without saying that if you can’t afford to buy a home, then the time to buy is not right. Plenty of people rent while they save up money to make a house down payment, and there’s nothing wrong with that.
Sure, financial gurus often say that renting is a waste of money, but that’s based on the fact that you aren’t building equity when you’re renting. Another way to look at it is that renting meets one of your basic needs – shelter – and so it’s worth the money you spend on it.
Buy If You Plan to Stay in the Area Long-Term
There are a lot of hidden costs that come with buying a house, including closing costs, which can add up to two to six percent of your home’s purchase price.
Because of these costs, you’ll actually lose money if you sell your house too soon. Plus, it’s not always easy to sell a house – sometimes houses can sit on the market for years, so you shouldn’t count on being able to sell quickly if you decide you don’t want to live in the area anymore.
It’s best to buy a house only if you plan to live in it for at least five to seven years. That way, you’ll at least be able to recoup your closing costs before selling, if you choose to sell after the seven years is up. If you’re ready to put down roots and stay in your neighborhood or city, buy a house.
Rent If You Don’t Want to Be Responsible for a House
There’s a reason why build to rent communities are getting more popular – many people want a nice place to live without the responsibilities of homeownership.
When you buy a place, you’re responsible for repairs and maintenance, updates and renovations, utilities, taxes, and insurance. It can be a lot to take on, especially if you’re a young person just starting out or an older person looking to downsize and simplify your life.
Buy If You Want to Build Equity
Homeownership is frequently touted as one of the best ways to build wealth in the form of home equity. In many markets, you can expect a home to gain value over the years so that when you want to sell, you can expect to make a profit.
Even if you don’t want to sell, you can take out a loan against your home equity to do repairs, renovate, send a kid to college, or even buy a second home. You can’t do that when you’re renting.
Rent If You Want Flexibility
For some people, the stability and sense of permanence that you get when you buy your own home is a feature, but for others, it’s a bug. If you want to try out other neighborhoods or if you’re entertaining the idea of moving to another city, renting is for you.
You can tear up stakes and move wherever you want when your lease ends. If you’re older and downsizing, renting can give you the breathing room to decide where exactly you want to live and what kind of lifestyle you want. If you’re young, it can give you the flexibility to make career changes or move around more.
Buy If You Want Complete Control Over Your Home
One of the major drawbacks of renting is that you can’t make any changes to your home. At most, you’ll be allowed to paint, and maybe drive some nails into the wall to hang pictures, but you’ll need to return the place to its former condition before you move out.
When you own your home, you can knock out walls, put up wallpaper, add or remove windows, or even gut the place down to the studs and completely redo it. If you want to make permanent changes to a property to make it your own, buying is for you.
It’s not always easy to decide whether you should rent or buy a home. Consider what goes into homeownership and whether you’re financially and emotionally ready before you take the plunge.