People often ask me if they should rent or buy a property and there are some advantages and disadvantages to both. It can be a daunting task to determine which is the best way to move forward but hopefully this article will give you some clarity.
ADVANTAGES TO RENTING INSTEAD OF BUYING
someone manages the property for you
if something breaks it’s not your responsibility to fix or pay for it. This reduces your liability and unexpected costs that can pop up.
moving from out of state
Since buying is an investment, it does take getting a feel for the different areas to be able to make an informed decision as to where you want to buy. This is especially good for someone who gets hired out of state and must move quickly but doesn’t have a chance to research the area they are moving to.
ADVANTAGES TO BUYING INSTEAD OF RENTING
you can make it your own
Many landlords restrict what you can change or modify in the property, so if you don’t like something you’re stuck with it. But even if they did allow you to make changes who would want to spend money to improve a property they don’t own.
Renters are restricted by their landlord on what they can modify on the home, when you own your home you can invest to customize or renovate your home! You can turn it into something which is truly yours that reflects your taste and preference. By doing this you are also adding value to your home which benefits it’s long term value.
tax credit
In home buying you can take advantage of reducing your taxable income by both the amount you pay in property taxes as well as your mortgage interest on the loan. So another disadvantage in renting is that you make your payment but are not able to reduce your income tax by any amount of rent that you paid.
automatic savings account!
What I mean by this is equity (which is the difference in what you owe and what the home is worth) is built up in a home as the market rises and as you pay down the mortgage. Several years ago, a group of families moved into the West End when it had just started to transition. They bought their homes for less than $100,000 and as the area changed, with more and more people moving in, the prices began to rise. They rode the wave up and now there is a home in the area that just went under contract for over $400,000! So, the purchase of a home is one of the greatest investments you can make in your lifetime!
DEBUNKING COMMON OBJECTIONS TO BUYING
down payment and closing costs
I’ve talked with a lot of people that seem to feel as if buying is out of reach for them, once they hear about the down payment, closing costs, and this mountain of money they seem to need to cover the upfront costs of a purchase. What many don’t know is that there are several down payment assistance programs available where you can get as much as 5% of your purchase price and you don’t have to pay it back! I have a friend that closed recently that only had to bring a little over $700 to the closing table!
being locked into an area and won’t be able to move if I need to.
While this is seemingly the case there are many options available to the homeowner. Depending on the state of the market at the time, they might be able to sell their home and make a nice profit! If this is not the case and they have too little equity built up in their home they can rent it out, cover their mortgage and then some, until the market goes back up.
Overall I would say that while renting can help you overcome some short-term hurdles, buying is the best long term solution! Home ownership is a great way to build wealth for both you and your family and to stake your claim in real estate. I used to sell cars which are nice to look at but depreciate in value, while homes appreciate in value to the benefit of their owner. Come see me and I’d love to help you in your path to home ownership!