Renting vs. Buying Pros and Cons
Should you rent or buy?
Should I buy a home, or rent? If you’ve asked yourself this before, you’re in the right place. This is a common question and is largely based on your lifestyle, how long you plan to live where you're going to move, and personal considerations.
Here are some pros and cons of each for you to consider:
According to rent jungle, the average rent in Seattle is $2,100. If we take this number as a target rent, trulia’s rent vs. buy calculator tells us that buying is 29% cheaper than renting! Given this, even when accounting for the costs of ownership such as maintenance, taxes, and closing costs, it’s hard to argue in favor of renting in that situation.
Pros of Buying:
It's an investment
If you're paying rent at an apartment, you're paying someone else's investment. If you plan to stay in your home, it will likely increase in value and give you a substantial return on your investment.
You build equity
- When you subtract the amount you owe on your home loan from the total value of your house, the amount left over is your home equity-the “dollar” value of your home that actually belongs to you. In a sense, paying your mortgage is a form of savings, since it increases your home equity which you can tap into if you need money in the future.
- You can deduct a lot of expenses in relation to your property from your taxes, allowing you to cash in big time.
- Home ownership offers you freedom to create the living environment you want. You can own pets, paint rooms, renovate the kitchen, all without having to get approval from a landlord. In addition, these typically increase the value of your home and give you a larger return on investment.
Cons of Buying:
You're locked in
There's a lack of mobility when you buy and if you like to jump around frequently, you could end up losing money.
Upfront & Closing Costs
- Down payments, earnest money, closing costs and more can add up if you don't have it.
Repairs and Maintenance
Are all your responsibility.
Seattle has one of the fastest growing rental rates, largely due to job growth, and I don’t see that slowing down in our area. We’ve heard the horror stories of people being forced out of their apartments due to the continued increase in rent, which is something that can be avoided with ownership. Envision you’re paying the same price for your home each month for the next 30 years while other rental rates are increasing.
Renting can still be a great option if you enjoy mobility and the lack of maintenance and repair costs. Financial benefits of home ownership are long term and owning a home is a big responsibility. When comparing upfront costs, renting is favored over buying, at least in the short term. If you need a place to live and don’t have decent sized cash reserves beyond a rental deposit, renting is usually the better option.
Pros of Renting:
- As a renter, you’re not responsible for home maintenance or repair costs. If a toilet backs up, a pipe bursts, or an appliance stops working, you don’t have to call an expensive repair person – you just have to call your landlord or superintendent.
If you're unsure where you want to settle down, renting can be a good way to find out what community best suits your lifestyle.
Less Upfront Cost
- Typically, the only upfront costs you're paying as a renter is a deposit.
Cons of Renting:
- Unless you're in a rent to own situation, every penny toward renting is gone and you're not building your wealth.
- Especially in Seattle, you won't have any control over this.
No Tax Benefits
- Unlike owning, you can't cash in on a lot of the expenses of owning at the end of the year.
- No pets? I can't barbecue on my porch? I can't paint that wall?
In conclusion, buying can be cheaper in the long run, you won't risk paying a fortune in rising rents, and you reap many additional tax benefits of owning. On the other hand, renting can make sense for some based off of length of residency, personal considerations, and lifestyle desires.
If you are in this crunch, let's first find out if it truly makes sense to buy or rent, based on your financial and lifestyle situation. You can also look at trulia’s rent vs. buy calculator as a guide.
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