Rent VS Buy, what’s the better fit?

Rent VS Buy, what’s the better fit?

When starting the journey of becoming a homeowner many of us question whether or not it's worth it to own instead of renting. Today we will explore some of the pros and cons of both renting a home and owning a home to help you make an educated decision on what's the better fit for you. 

Pros of Owning

  • You have control over what you do on your property

  • No waiting on maintenance to fix small things around the house, like a broken doorknob. 

  • Building Equity

  • Tax Deductions

  • HOA(Homeowners Association)

First, let's take a look at the pros of owning your own home. There is a myriad of reasons why owning could be the right choice for you. One of my personal favorite things about homeownership is it's yours. You get the choose how it looks from paint colors to the hardware throughout the home and more. If you buy into a neighborhood with an HOA you can enjoy the benefits(at a cost) of a well-maintained neighborhood, community events, and in some areas community spaces like parks or a pool. You also have the opportunity to build equity. What is equity? In simple terms, your home's equity is the difference between how much your home is worth and how much you owe on your mortgage. So if you originally purchased your home for  $200,000 and paid $1,400 each month for 5 years you have roughly paid $84,000 of your mortgage. If you decided to sell and found your home has increased in value to say $400,000 you would have an estimated $160,000 left on your mortgage allowing you to potentially walk away with $248,000.  

Cons of Owning

  • Costs for home maintenance and repairs can add up, impacting your savings. (insurance can help however not everything is covered) 

  • 30-year commitment

  • Property Taxes

  • HOA(Homeowners Association)

Unfortunately, it's not always sunshine and rainbows as a homeowner, since it is 100% your home it is also 100% your responsibility to maintain your home, unlike renting when it is the landlord's responsibility. While having homeowners insurance(that you pay for) and other insurance policies to assist you in an emergency situation you will most likely still have to pay out of pocket for a portion of the repairs or in some cases, you won't have coverage and will need to come up with the funds for repairs on your own, which can be very costly. It is also a huge commitment on your part when signing your loan. It’s no longer a 12-month lease that's fairly easy to walk away from, you are signing a 30-year commitment to purchase the home, which also means you are committing to paying property taxes every year. In Texas, those property taxes can be extremely high even with the ability to apply different deductions depending on how you file, it’s still important to plan out your budget and savings accordingly. You’ll notice that I’ve put the HOA under both pro and con, this is because in some circumstances you might not enjoy having an HOA when the rules they have don't work in your favor. Some HOAs might not allow street parking, boat parking, or even performing maintenance on a vehicle in your driveway. So before buying into an HOA neighborhood consider the rules and regulations they have in place as well as the fees associated with having an active HOA. 

Pros of Renting

  • Access to maintenance is typically included.

  • No property taxes

  • Less commitment when signing a 12-15 month lease

  • Deposit Returned

Let's move on to the pros of renting. When you lease a home or even an apartment most of the maintenance is covered by the landlord. This can save you money especially if it's a large appliance such as an oven or water heater that breaks. All you need to do as the tenant is to make a report to the maintenance team and they schedule to assess the problem and fix it. You also are not responsible for paying property taxes, as this is the sole responsibility of the property owner, not the tenant. In addition, it is much less of a commitment when signing a 12-month lease when compared to signing a 30-year mortgage. Lastly when your lease is over most if not all of your initial upfront cost(deposit) is returned which can help out big time with moving expenses and paying towards your next home, whether rented or purchased. 

Cons of Renting

  • Waiting on maintenance to fix small items around the house like a broken doorknob

  • Larger repairs are not on your schedule but instead are on the timeline set by the landlord. 

  • Not being able to make cosmetic changes, like paint, cabinet/counter updates, etc. 

  • You can’t build equity on a home you don't own

  • No guarantee of lease renewal

Moving onto the cons of renting we will revisit the included maintenance, while it’s nice not to have the financial responsibility that comes with maintaining your living space as a tenant you are at the mercy of someone else's schedule. If your water heater breaks after you submit your repair request the waiting game begins. It might be a day or two before a tech is able to come out to diagnose the problem and if a replacement is needed you could be waiting quite a long time for the repairs to be completed. There are rules and regulations in place for certain things to be repaired quickly, such as the AC unit breaking when its 100 degrees outside however because they rank what's important and what isn't, It also means you might end up living with a broken doorknob to the bedroom for an extended period of time because it is not considered an emergent repair, and tenets are typically not allowed to make repairs on their own and you don't want to be liable if you happen to cause damage in the process of attempting to fix something on your own. As a renter you also have no ability to build equity, you are paying someone else's mortgage and they will be the only ones to benefit from the equity you helped to fund each month. You also have no guarantee that your lease will be renewed at the end of its term. The renewal is completely at the owner's discretion. If they decide your unit needs to be remodeled they don't have to renew, instead, they will give you notice that your lease is up and you have to move out by a certain day. They also have the ability to raise your rent at the end of your lease term in order for you to renew and that amount might now fit in your budget forcing you to find a different place to live. 

There are so many things that go into owning a home or renting one, some we haven't even covered here. At the end of the day, it’s up to you to decide, as there is no real definitive answer on which is better when it comes to renting vs. buying. It depends on your own personal situation based on your budget, lifestyle, and personal goals. Educating yourself on all your options and weighing out the benefits and costs of each based on your finances and how you live is the only real way to know what the better option will be. I highly encourage you to reach out to a Realtor and lender if you are considering leaving the rental world behind for the world of homeownership. Learning from the professionals will help you get a full picture of what your finances look like, what the real estate market looks like and so many other factors that can help you decide what’s the better fit. 

Photos by Chris Robert on Unsplash, and Maureen Rooker


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