Real Estate Basics: Rent or Buy?

by c21commonweath_ldowling 23. October 2019 16:24

Not everyone pays attention to real estate, but there are a few topics that seem to rile people up all the time. One topic that’s virtually guaranteed to get people talking is the seemingly innocent question, should I rent or buy?

Why does this topic get people so excited? It's one that everyone can relate to. For years, purchasing a home was something that all successful people did. After so many people lost their homes during the housing crisis, however, the experts started telling us it's better to rent. One problem is that there are good points to be made on both sides of the debate. Here are some usual arguments for buying:

  • Once you pay off your home, it belongs to you. You'll never have to pay rent again.
  • Real estate appreciates in value. If the increase in value is more than what you pay in interest, taxes, and maintenance, you come out ahead.
  • Buying is better for your taxes.

These arguments sound compelling, but there are also solid arguments on the side of renting:

  • When you rent, you don't have to pay for maintenance.
  • Buying a house can tie up so much of your money that you can't save for the future.
  • If the market goes south, renters won't lose their investment.

With so many reasonable-sounding arguments, it’s sometimes difficult to make an intelligent decision.

What's the Bottom Line?

So which is better, renting or buying? It depends on your situation. Here are some questions to help you decide:

How Long Will You Be in Your Home?

Buying usually makes more sense for people who are planning to be in their home for a long time. While homes often increase in value, it can take years for the increase to offset the costs of maintenance and taxes.

What Else Could You Do with Your Money?

Buying a home will tie up a significant portion of your assets, so it's important to know what else you could do with that money. If you are disciplined saver and plan to invest the money in securities, you could come out ahead. If you are more likely to keep the money in your checking account or blow it on an extravagant vacation, you're probably better off buying a home.

What Is the Cost of Buying Versus Renting in Your Area?

Depending on where you live, the amount you pay in rent could be higher than a mortgage. Determine the cost of both renting and buying in your city before making a decision.

If you still aren’t sure whether you should rent or buy a home, the answer depends on your situation. No matter what you choose, make sure you are basing your decision on the best information available.