What are the pros and cons of buying vs. renting a home?
We have just started 2020 and I have received a lot of questions from potential clients on what’s ahead in the new year. Although it is not always easy to predict the trends in real estate and what will happen in the housing market, but many people still wonder if they should buy a home this year. I thought it would be good to write about what the pros and cons are of buying vs. renting a home.
First of all there is no definitive yes or no answer to what is best given the fact that real estate is always changing and real estate is of course very much regional.
These days, home inventory is still low and prices are still up and both mortgages and prices are expected to continue to go rise in 2019.
There are many experts who determine the cost aspect and how you calculate the economical viability of renting vs buying, if you are interested into that, please look at rent vs. buy calculators and compare annual rent and purchase pricing. But going into calculating prices is a different blog for a different time.
I would like to keep it simple and want you to consider the following on the pros and cons of buying vs. renting a home.
The Pros of Renting a Property
- You have freedom to move
- You have lack of responsibility
- You have fewer expenses that might be paid by a landlord
- You have the ability to put your money into other investments
Let’s start with the big advantage of renting an apartment or a home. When you rent, you pay a landlord a certain dollar amount each month. This dollar amount is typically less than the going cost of a mortgage, assuming you factor in the insurance and taxes. Maintenance, is an important factor because you can contact the landlord if something breaks down. This gives tremendous peace of mind.
There’s also a huge psychological freedom to renting; due to the fact you are not bound to a 30 year mortgage. You may have 12-month lease agreement but there’s even a good chance you may have just a month-to-month contract.
In short, you won’t feel trapped, and you can freely move on if you want/need to for any reason, such as job relocation, downsizing, upsizing, etc.
The Cons of Renting a Property
- You will walk away with no property to your name
- You may be stuck in a lease
- You could be forced to move if owner decides to sell
- There may me a lot of restrictions
On the other side of the coin of course is that renting seems to be synonymous with temporary. If you plan to establish a household, renting an apartment or a home might not be the best solution for your family. You might also be limited to what you can and cannot do with the rental property. Pets aren’t always allowed and you might not be able paint the unit the way you want it. You also realize that rental payments have the potential to continue for a long time. Rent will most likely continue to rise year over year and you still do not build equity that is yours that you could pass along to your children.
Pros of Buying a Home
- You will have a place you call your own
- You get to make your own rules
- You can significantly build wealth
- Owning might still be cheaper then renting
As we have discussed some pros and cons of renting; what are the pros and cons of purchasing a home?
Well, the obvious advantage is that you actually gain home equity, or ownership in your home.
In other words, over time the home or condo actually becomes your property, as opposed to renting, where you never own anything.
Additionally, owning might be a cheaper alternative than renting these days in many markets across the United States thanks to the low interest rates.
If you do a simple online search and you’ll find many locations where it’s “better to buy than rent.”
In many cases, your mortgage payment, even when factoring in taxes and insurance, may be less than what a landlord charges for rent.
You also, as an owner of property, have fewer restrictions, and can add or modify your property and make it your own. With modifications and additions to your home, you very well can increase the value of the property year over year.
Cons of Buying a Home
- There are a number of hidden costs
- You will have more responsibility and liability
- Owning might be more expensive than renting
- You don’t have the opportunity to move easily
There are several disadvantages you may want to be aware of when it comes to owning a property. Firstly, you need to have a sizable amount of money, for a down payment or the entire purchase amount to buy outright.
With rent, typically you just need the first and last month’s payment. When you buy, you may need at least 3.5% of the purchase price in most cases (FHA loans), which can be a significant amount if you plan to purchase a home in Atlanta.
There’s also a chance that your mortgage payment will exceed the rent in your area. You also have to take into account that you have to pay real estate taxes and insurance. These cost do not stop once the mortgage is paid off. Sometimes you also have to pay additional HOA dues, depending on the community or neighborhood.
You also realize by now that once you own your property, you are also responsible for maintenance and upkeep. Owning a home may be wonderful but it also can add quite a bit of stress if you are not the DIY type.
As you can see, there are numerous pros and cons to buying vs. renting, and vice versa.
When you rent, you pretty much know what you’re getting into. You won’t be making any money, but you’re not necessarily losing any money either. It certainly gives peace of mind.
With a home, you’re not knowing what the future of the economy holds but in the long term it is very likely you build equity and get a good return on your investment.
If you more questions on what is best for your family in 2019, I am very happy to work with you, look at the figures and determine the best course of action. I am an expert real estate agent and have helped many of my clients decide on either to rent a home or make an invested and purchase a home in Fayette, Coweta, Fulton or even in Cobb County.
I am standing by to assist you with all your real estate needs. Please don’t hesitate to call me at 404-697-9817