Deciding Whether to Buy or Rent
Deciding whether to buy or rent?
There are many benefits to buying and owning a property, whether a home, condo or apartment. There are many benefits to renting property as well, though. Which is right for you depends on who you are.
This article will explain the differences between buying and renting and lay out what you should consider when deciding whether to buy or rent.
Buying vs Renting
Buying a home is paying the money necessary to own the property. If a property is $200,000 and you pay the owner $200,000, then the property is yours.
Often, buying is not quite this easy. Rather, it requires taking out a mortgage, which essentially involves borrowing the money to buy a property then paying back the lender over time. If you don’t pay it back, then you can lose your home through foreclosure.
Renting, on the other hand, is paying money to use a property for a particular amount of time. Usually rent is determined on a monthly basis, so a renter might pay an owner $500 a month to rent an apartment. Unlike buying, no matter how much money a renter pays, he will never own the property.
The Benefits of Buying
Buying a property is an extremely important, expensive and often difficult process. However, it comes with a few very big benefits:
- Investment opportunities – If you own a property, then you are the person who’s in position to benefit if the value of the property goes up. For example, if you buy a home for $200,000 and you sell it for $300,000, then you gain $100,000 (though you’ll be taxed on it).
- Lower taxes – The Federal government gives many tax benefits to home owners. We are not tax experts here at MovingGuru.com, so check with the IRS or an accountant to discuss some of these benefits.
- Ownership – There’s a lot to be said for owning something. Once your home is paid off, it’s yours, and you can live for free for the rest of your life.
The Benefits of Renting
Renting does not offer a way to make money, nor does it give you an inside track to becoming a home owner. However, it does still offer a lot of benefits:
- Low risk – Renting does not require taking out a mortgage, which is essentially like taking out a massive loan. It also does not require you to gamble on whether the price of the property will rise or fall. That is, while you can’t make any big gains, you also can’t suffer any big losses.
- Flexibility – Though a lease can be restrictive, it’s minimally so when compared to home ownership. If you want to move from a rental for a job, a new experience or a significant other, you are essentially free to do so after your lease ends. You certainly don’t have to worry about selling a home.
- Cheaper – Renting won’t make you any money, but it’s also far cheaper than buying a home. Now, this does have some limitations. Some rents can be very expensive, while some financed homes (mortgages) can require fairly low monthly payments. However, generally speaking, renting will be your cheaper option in the short term.
- Simplicity – If you own a home, you own all of its problems. Renters, however, can depend on their landlords to take care of most maintenance issues. Also, some renters can get their landlords to cover certain bills, like water and electricity, and some rentals even come furnished.
Making Your Decision
There are many personal reasons for choosing buying over renting and renting over buying. However, any decision should involve considering the following:
- How much money do you have saved?
- How much money can you spare for rent or mortgage payments each month?
- Where do you see yourself in a year? In five years? In ten years?
- How is your job security?
- Are you ready to research the real estate market to increase your chances of choosing a home that will appreciate in value over time?