Buying a home can be a great financial move, but there’s no guarantee that you’ll always come out ahead. Renting can also be a smart way to build wealth, if you follow a few guidelines. Laura covers the pros and cons for owning and renting so you know which option will make you richer.
3. Being insulated from market downturns.
Renters stay protected from potential market downturns, such as recessions and real estate bubbles that pop. In fact, renters may come out ahead if rents go down when the economy struggles.
Over-inflated housing prices can even burst and cause prices to plummet in micro markets, such as certain towns or neighborhoods. Timing and location is everything in real estate.
4. Paying less per month (in some areas).
As I previously mentioned, where you live is a big factor in whether renting or owning a home will be cheaper. But no matter what, renters get to skip many expenses that homeowners can’t because their landlord is responsible for upkeep on the property. You don't have to worry if your air conditioner stops working or you see water dripping from the ceiling.
In addition to money savings, renters save time when a repair isn't yours to make. Homeowners must find the right professional, request bids, make sure the company or person is insured, decide whether to make a homeowner’s insurance claim, and take time off from work to manage repairs.
Should You Buy or Rent a Home?
Just like many issues in personal finance, the answer to whether you should be a homeowner is “it depends.” Your financial situation, goals, and lifestyle are unique.
There’s no right or wrong answer, nor is there a cut-and-dried way to compare the cost of renting to the cost of owning a home. Plus, there are non-financial considerations that may tip the scales for you in either direction.
On one hand, the pride of owning a home is something many people want to experience. You may yearn to have your own patch of land and space to spread out. The sky’s the limit if you want to decorate, remodel, or plant a garden.
Like many issues in personal finance, the answer to whether you should be a homeowner is “it depends.”
But getting a mortgage is a big commitment that must fit in with your financial goals, such as investing for retirement and paying down debt. Just because you qualify for a mortgage doesn’t mean homeownership is right for you.
A good rule of thumb is to never buy a home unless you’re certain that you’ll live there for at least five years. You never know how long it could take to sell.
On the other hand, renting can allow you to avoid the cost and hassle of maintenance. If you travel frequently for pleasure or work, it can be easier to leave an apartment vacant than a home you own.
Some apartments offer on-site services and amenities such as a 24/7 concierge, dry cleaning pickup, a clubhouse, pool, gym, guest suite, and theater. If you use these amenities regularly, consider what they’d cost if you didn’t rent.
If renting saves money and reduces stress so you can accomplish your financial objectives, it may be the way to go. The key is investing your savings that you would have spent on a home. But if buying a home has more advantages and you’re willing to put down some roots, then owning an affordable home is a terrific goal.
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