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Should you buy or rent a home?

By Trulia | Published: Oct 14, 2009 | 25 Comments

Deciding whether it's best to buy or rent a home isn't an easy decision. There are financial pros and cons to each. Plus, whether or not you want to become a homeowner may depend on your lifestyle, so it's very much a personal choice. Take a close look below at the pluses and minuses before making your move.

Pros to renting

  • You're not required to save up a hefty down payment.

  • Renting is normally a short-term commitment (you normally can sign a lease for as little as a few months to a year).

  • You are usually free of major maintenance costs and paying property taxes -- your landlord takes care of that. Also, it's normally up to the landlord to take care of major maintenance issues for the home. You're probably not responsible for tiring tasks like mowing the lawn or the shoveling the snow.

  • You aren't tied down to one place, and can relocate fairly easily.

  • In some cases, renting may be less costly than owning a home. While you may be able to afford the rent on a pricier home, you might not have the means to buy a similarly priced residence.

  • Since you are only obligated to a relatively short-term lease (a few months, or a year), committing to a particular rental isn't an arduous decision.

Cons to renting

  • You aren't building equity (the value an owner has in a piece of property minus the debt against it).

  • You can't take advantage of tax benefits (like tax deductions for mortgage interest and property taxes) only available to homeowners.

  • You may be subject to rent increases that you can do little about.

  • You might not be able to decorate a home as you like. (You may have to stick with the white walls and beige carpeting that your landlord put in.)

  • You may be subject to restrictions on pets (some landlords don't allow them). Also, your landlord could infringe on your lifestyle -- e.g., complaining about the level of noise from parties and the number of guests who park at your place.

  • You are dependent on the landlord to maintain the home and keep things in working order. (This could be a bad thing if he or she is lax about it.)

  • You could be evicted (say, if the landlord decides not to renew your lease, or to sell the home) and may need to seek another place to live.

Pros to buying

  • You can build equity over time.

  • The home is yours, so you have more control over how to decorate it and landscape it.

  • Greater stability -- as long as you can afford the property taxes and your mortgage payments, you don't have to worry about being evicted.

  • Getting to know the neighbors. Because you are likely to stay in a home you own longer than one you rent, you may become more involved in your community.

  • You can benefit from tax deductions on real estate taxes and mortgage interest.

Cons to buying

  • It's a big commitment. You may be in that home for quite some time, so deciding which home to purchase can be tough -- you want to make sure it's a good fit.

  • When it comes to maintaining a home, it's all about you. It's up to you to make the repairs when the toilet leaks or pay the handyman for the fixes.

  • Homeownership insurance premiums. You'll have to pay these to cover the cost of any potential damage to your property. Also, if your home is part of a homeowners' association (HOA), you'll have to pay HOA fees.

  • You may have to borrow heavily and pay interest (take out a mortgage) to afford the home. You could lose your house if you can't keep up with your mortgage payments.

  • You have less mobility because of the work and time required to find a buyer, sell your place and move your belongings. (Which you may have acquired more of, now that you own space to keep things in.)

  • If you can't keep up with your mortgage payments, you could face foreclosure and a loss of equity. (Not to mention the damage it'll do to your credit history.)

Comments

By Maikov Moffatt,  Wed Jan 6 2010, 18:52
With home prices low, the best move is to purchase a home! Why pay someone else, to rent their property and not have the benefits of ownership. Owning a home, has a financial freedom to life!
By Mitchell Hall,  Thu Feb 18 2010, 19:42
There are pros and cons to both. Many sellers have sold their homes and have decided to rent for a while before buying again.
By Bill.ladd,  Thu May 27 2010, 07:42
Whether you rent or whether you buy, you WILL pay for the home you occupy.
Prices are lower, 30 yr fixed rates in our area dropped yesterday to 4.5%, most tenants are paying more to rent than to buy a comprable home here. With the benefit of mortgage interest deduction, appreciation, and principle reduction, I cannot imagine why more buyers are not in the market.
By Thomas Waslowski,  Thu Jul 8 2010, 12:03
If your prepared to own a home then go for it. Proceed with caution though. Renting is ok if need be but isn't it better to build your own equity that build others'?
By 1st Zero-Emissions Realtor,  Fri Aug 6 2010, 06:32
If you are temporarily staying in a certain location (let's say for less than 3-2 yrs) then renting may be your simplest choice, unless you are in the middle of a booming market where you can actually make money on the home within those short 2 or 3 years.
Otherwise, Home Ownership is still meant to be what it always has been "The American Dream" - to own your own home! If you are considerably stable and have your roots planted in a location, you might as well put your rent money towards a home that you can call your own.
By Terry Bell,  Sat Aug 28 2010, 17:22
If you can even qualify to buy a house then you are in an elite group these days! So take advantage of it! Your realtor should be able to tell you whether you will have "positive cash flow" if you later need to relocate and want to rent out your property. Talk to you accountant about whether you can use the tax advantages for either buying to be owner-occupied or to rent out and build equity! Financial matters are best analyzed by your "team"! Seek out a realtor, tax accountant and loan broker to get a consensus of opinion of the benefits of home ownership for you as either homeowner or landlord!
By Fran Rokicki,  Sun Sep 26 2010, 04:35
My advice to buyers would be, if you have good credit, buy a home, now! The rates are the lowest that they have been in over 30 years. Averaging around 4%, you will probably pay, less per month to own a home, than if you were renting the same square footage. Not only will you be paying less per month, you now will have a tax write off. Invest in your future, in America. Buy a home, today!
By Sandra J Steele,  Sun Oct 3 2010, 10:30
interest rates are the lowest in almost 50 years. Build equity, acquire a tax write-off. Have pride of ownership (The American Dream) Don't just rip up rent receipts. Do yourself a favor and buy NOW
By Delaine Campbell,  Wed Jan 5 2011, 11:02
We just covered this topic on 1580 AM Radio, The Fan, The Real Estate Radio Network with Ryan Sloper. I've added a rent vs. buy calculator to my web site. ownership is not for everyone, but for most people it is. And with the VHDA loans more young people can get into housing, they just don't THINK they can. I hope that your articles here help nudge young people to MOVE on this market and to go ahead and get something. Before they know it 5 years will pass and they're still renting when they should have bought. They can always start with what they can afford, build their wealth and investment portfolio, and keep as rentals. It's never to late to buy or to start investing in real estate.
By Malcolmkettering,  Sat Jan 29 2011, 11:04
@Maikov Moffat:
Your post cracks me up. Let me parse:
"With home prices low..." - by all measures of housing costs as a % of income, homes are still overpriced all over the US and the prices are still dropping, so it seems silly to buy now.
"...and not have the benefits of ownership." - nice way to gloss over all the huge responsibilities of ownership.
"...has financial freedom to life" - well as a homeowner with equity, I would totally disagree. I feel trapped by owning a home now, I calculated I have spent $300,000 on my house since purchase including mortgage, prop tax, repairs, etc. while if I had stayed in my rental duplex, I would have spent $150,000 in the same amount of time. And my home is small and affordable and maintenance has been minimal.
To summarize, your post and many others here are very one-sided and are just programmed responses from people who make money off of transactions, whether or not they benefit their clients in the long run.
By Blue,  Fri Mar 4 2011, 18:19
Malcolmkettering, if you were to sell your house right now, would you get more than $150,000 for it?
By Terri Bridges,  Thu Mar 17 2011, 14:41
Many homeowners are turning their properties over to property managment firms. It allows for a line of revenue to come in to cover the mortgage or "almost" cover the mortgage. It also allows the home owner to free themselves from feeling shackled to a home. They may opt to take advantage of purchasing a new property well below market. The key is to take advantage of the current market and property managment is a viable means of doing so.
By Karen Parsons-Fiddler,  Tue May 3 2011, 09:01
This is such a personal decision...and this really gives the potential buyer things to think about. I think that talking to a Realtor® and lender are good sources of information...even if the actual purchase is a distant one.
By Shawn Rosa,  Tue Dec 13 2011, 11:06
always buy! even when renting is cheaper in relation to buying, there is no chance for a capital gain
By Shawn Rosa,  Tue Dec 13 2011, 11:07
...unless you wont be in the area very long...if you have to move often, then the closing costs associated with buying a home are not worth it.
By Gayla Roggie,  Tue Jan 31 2012, 11:53
In our area- Upstate NY, it is generally cheaper to buy than rent. Even if you might pay a lttle bit more per month, with all your costs, at least you are investing in something that will give you some equity and a return when you go to sell later. As always make sure you factor in all costs and dont live above what you are able to afford.
By Adrian Provost,  Mon Feb 27 2012, 17:02
Buy, Buy, Buy... unless you're temporarily housed for whatever reason.
By Ronald Rosario,  Fri May 25 2012, 12:49
Great article
By Matie,  Mon Jun 4 2012, 08:04
And what about building a house? Is it cheaper or...
By Michael Steverson,  Tue Oct 9 2012, 14:47
Real Estate professionals always talk about the available properties and the low interest rates. Yep, all of that is true but I have found with the majority "potential" buyers I have worked with is that it doesn't matter how many properties are available or how low the interest rates are. People continue to rent because they can't qualify for a mortgage loan.
By Mark McGuire,  Tue Dec 11 2012, 16:34
It makes no sense to rent when interest rates are so incredibly low. The only catch is that it is more difficult now than ever before to get a bank to lend you money. Your first step shouldn't be looking for homes, it should be consulting your local bank or mortgage lender and seeking a "pre-approval" to see what you might be able to purchase.
By masondag07,  Wed Jan 23 2013, 05:52
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By Rick Taylor,  Fri Jun 7 2013, 10:41
There is no better time than now to buy real estate in the entire country than now with low interest rest, the climate with the federal reserve, Most brokers have a template to plug in the numbers whether to buy or rent and purchase always comes out the winner.
By Pam English,  Thu Jul 18 2013, 13:44
With the rates still low, NOW is a GREAT time to buy! Take advantage of current market conditions and realize the dream of home ownership! What are you waiting for?
By Paul Mccormick,  Tue Aug 6 2013, 10:42
And the best tool available FREE for 1st time homebuyers is IB Calculator from InBedrock.com. It will help you better understand ALL real costs of homeownership: 1) Purchase closing costs, 2) Financing costs, 3) Operating costs like real estate taxes + homeowners insurance + utilities/maintenance costs, and finally Sale closing costs. Perform Buy v Rent and Breakeven Analysis, and understand how + why you build equity over time in your home. Get Started Today! No advanced math or EXCEL skills needed.

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