Renting vs. Buying a Home + Pros and Cons for Each

Buying a home has long been part of the American dream, but homeownership isn’t for everyone. Sometimes, renting makes more sense and offers greater freedom.

Have you been wondering about renting vs. buying? Choosing whether to invest in a home or pay rent is a big decision that depends on your finances, lifestyle, and personal goals.

One isn’t inherently better than the other. Both require an income to afford housing payments unless you have enough money on hand for an all-cash purchase, but even then, you need to consider your overall financial picture. Renting and buying come with various degrees of maintenance responsibility and commitment.

Whether renting or buying is right for you depends on your current situation and an honest look at where you think you’ll be years later.

So, use our guide to renting vs. buying and consider the pros and cons for each. Then, remember that we can’t make a perfect choice, but we should be wise enough to carefully weigh all our options.

Renting a Home 

Renting a home offers flexibility. There’ll typically be someone else to tend to maintenance issues. You’ll probably have predictable monthly expenses, so you can likely count on extra cash in your budget. However, many rentals require you to adhere to a list of community and individual unit rules (e.g., your landlord might not be flexible if you want to paint your bedroom bright pink).

When you rent, you’re not necessarily throwing money away (you have to pay to live somewhere, even if you buy), but you’re not building wealth either. Here are some pros and cons for renting a home.

Pros 

Many people find immense benefits to renting. The following are reasons why you might want to rent your next house.

• Flexibility. You can probably move quickly if you need to (as long as you’re not in a lease or are willing to pay to break your lease)

• Predictable housing payment. Your housing costs (including utilities) may be consistent each month since you won’t have to factor in repairs and other expenses.

• Low maintenance. You’ll likely have a landlord or property manager who will handle major maintenance tasks (but be prepared to change your own lightbulbs or fix minor problems).

• No property taxes. The owner of your rental is responsible for paying taxes on the property.

• Less strict financial standards. Getting approved for a rental unit is often much easier than qualifying for a home mortgage.

Cons 

Renting can seem like the best option if you don’t want to deal with surprise expenses or repairs, but there are some drawbacks.

• Rent increases. Landlords can raise your rent after your lease expires, especially in areas with high housing demand.

• Possibility of a property sale. The owner of your rental may decide to sell the property, especially during times of rising home values, leaving you looking for a new place to live.

• No tax benefits. You won’t get to claim homeowner deductions on your taxes.

• Limited personalization. When you rent, you usually can’t do what you want with the home (no building your dream kitchen or entertainer’s backyard, in most cases).

Owning a Home 

When you own your home, you get to make decisions about what to do with almost all aspects of your property (condos, townhouses, and other properties with homeowners associations may significantly limite your freedom). But you’re the one responsible when something goes wrong too. Purchasing your next house can provide pride of ownership—a place to truly call your own. However, picking up and leaving may be diifficult if you change your mind, have a job transfer, or experience an emergency that uproots you.

Pros 

Is owning a home right for you? There are benefits to purchasing, including the following.

• Sense of stability and community. Owning can offer more assurance that you’ll enjoy the fruits of a neighborhood for an extended period.

• Builds equity. Most real estate increases in value over time.

• It’s yours to improve. Decorate, renovate, and add on as your heart desires.

• Tax benefits. Homeowners can claim a mortgage interest deduction on their taxes.

Cons 

Wondering what might not be in your best interest when it comes to owning a home? Here are some reasons you might want to give homeownership a second thought.

• Responsible for maintenance. As a homeowner, you’ll have to tend to all repairs (or hire someone) and bear the cost of all maintenance.

• Requires a sizeable financial commitment. You’ll have long-term expenses like property taxes and homeowners insurance, along with a hefty initial investment (including a down payment and loan closing costs).

• Property value may decrease. While most real estate increases in value, you might lose your equity in the property.

• Difficult to change your mind. It’s not easy to pick up and move if you change your mind about where you want to live or if life’s circumstances call you elsewhere.

Still not sure if you should rent or buy? Ask yourself the following questions to help make the decision easier.

• How long do I plan to live in the area?

• What are my finances like?

• What is the state of the housing market?

• How does my job factor into this choice?

• What are the costs of renting vs. owning this particular property?

Are you looking to sell or buy a new home? Let Better Homes & Gardens Real Estate® walk you through the process.

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