Rent vs. Buy

by Matt CoupNovember 15, 2009

Homes are one of the most costly investments you will make in your lifetime; but it doesn’t have to be that way. You can optimize your living arrangements to better suite your needs and desires. Buying a home can often times be to your advantage, but there are times when it may not be. Therein lies the question: “Should I rent or should I buy?”

Start by asking yourself these questions:

  1. How long will I be living there?

    • If you plan on staying in a particular location for a long period of time you should consider buying a home.
    • If you move often, renting would be more of a benefit to you. You can move when the lease it up; but, when you own a home and have to move, you usually have to sell it or rent it out. This can take up a lot of time and money. However, if you decide to rent your home out, it can be a great investment.
  2. Do I have/want a family?

    • One of the many elements of the American Dream is buying a home to start your family. Owning your own home will give you a sense of security and origin. “Putting down roots” will establish you and your family as part of a neighborhood and a community.
    • If you’re not looking to start a family or happen to be single, it may not be to your advantage to own your home. Renting will increase your flexibility in these cases. When you are young, a lot can change over a short period of time, and you want to be in a good financial position when these changes occur.
  3. Taxes and Equity?

    • Taxes are a confusing subject, and when you add home ownership and renting into the mix, it becomes even more confusing. Just to straighten a few things out, it is important to understand that even if the value of your home decreases, over time, the mortgage balance decreases and equity builds. There also tend to be more tax advantages available for homeowners. Your mortgage payments are tax-deductible under most circumstances. Unfortunately, there are many variable costs to owning a home and it is unarguably a larger financial investment.
    • Renting allows for more fixed cost and less obligation. This would be especially beneficial if there are high-interest rates or property values are deteriorating in that particular area. However, no matter what happens to the value of your property, you will never gain equity, nor lose. There is also little or no tax advantage to renting. It all goes to your landlord.
  4. How strongly do I feel about self-expression and personalization?

    • Being able to make changes and renovations to your home to match your needs and personal style is one of the perks to owning your own home. You will have the freedom to change wall colors, add carpet, and even knock out a wall for more space.
    • Renting does not usually allow for such versatility. Even if renovations are permitted, you are normally required to return the space back to its original condition.
  5. What about maintenance?

    • If you should decide to rent you can look forward to less work in the form of maintenance. The landlord is usually responsible for maintaining the property with little or no up-front cost to you. This may be a perfect situation for you if you’re single or don’t have the time or money to deal with extensive maintenance issues.
    • Owning your home doesn’t offer such a sweet deal. You are responsible for all work needed; whether you hire someone or do it yourself. However, it may be the case that this is not a disadvantage to you at all. Many homeowners take pride in maintaining their homes.
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Matt Coup