Rent or Own?

The old conventional wisdom that home ownership should be the goal of every American was abruptly discredited by the recent recession. Today we can no longer be sure that home values will steadily increase year after year. Instead, we see home values rise and fall again and again and we can never be sure how long the next uptick or downturn will last.

Despite these fluctuations, most people agree that real estate will continue to be a good long term investment, so if you plan to live in the same place for the next 10 or 20 years you will most likely find that ownership is right for you. If you like projects, if gardening relaxes you or if you really want your home to reflect your personal style, you should consider buying a home. Interest rates are still low, so those who can make the down payment and want to take advantage of the mortgage interest deduction should consider buying.

For many young people who are just starting out, renting is the only option available other than spending a few more years living with their parents. For many others the choice isn’t that simple. They have to consider numerous factors when deciding whether to buy or rent. One of the most important questions to answer is, “Do I have the 20% down payment and the credit score required to get the best mortgage rate?” If not, you might still be able to get a mortgage but your interest rate will be higher and you might be required to buy mortgage insurance. All of these costs need to be considered when comparing the cost of buying vs renting. You can find tools online to help you calculate these costs.

One of the biggest advantages of renting is flexibility. Most leases are signed for a one year period, so tenants know exactly when their lease will end and are able to plan accordingly. If you are actively looking for a new job or if you are open to exploring new opportunities that might take you to a different area, renting is probably the better option for you. What if a job promotion comes with a raise that allows you to upgrade to a nicer place or if you have a growing family? Maybe you discover a different neighborhood that is perfect for you. If you rent, you can leave at the end of your lease and move into a property that meets your current needs. In general, if you don’t plan to stay in one place for more than 4 or 5 years, renting will most likely be a better option for you. Having to sell a home after 2 to 4 years could mean losing a significant amount of money if housing values fall.

Do you have time for maintenance? Many people work more than the traditional 40 hour week. If you work long hours and come home to find that your dishwasher stopped working, your toilet keeps running or a light switch isn’t working anymore, do you have the time and skills to fix these problems? If you need a technician, an electrician or a plumber, can you make time in your day to meet them and let them into your home? If you rent, you can contact your landlord or property manager and they will make arrangements to take care of these problems while you are at work. Possibly the best part of renting is that the maintenance bills go to the homeowner, whether it’s a bill for fixing a toilet or the cost of replacing the HVAC system or roof. If you own your home you get to pay those bills.

Many people believe that renting means living in an apartment. That is absolutely not true. Rental homes range anywhere from small studio apartments to mansions. They can be located anywhere and can have any number of amenities. By renting, many people are able to gain access to amenities they wouldn’t be able to afford if they bought a home. The more amenities a property has, the higher the rent but keep in mind that as a tenant you will be paying a security deposit, usually one month’s rent, and not a 20% down payment.

The choice between owning and renting is simple for some but not for everyone. Some people are comfortable only if they can live in a place they own while others enjoy the flexibility of being able to change homes as often as they want. The answer is not the same for everyone. We all need to make the decision that is right for us.

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