How should you determine whether Renting or Buying is best for you?

Trying to decide on whether or not you should enter into the real estate market can be difficult for most people.  Part of that difficulty can be traced back to your inner struggle to decide which option works best for you and your family, renting or buying.  Regardless of how difficult that decision might be, eventually you will be faced with a choice.  The choice you make will be far simpler if you have properly prepared yourself.  Preparation should begin by outlining any advantages and disadvantages in connection to the decision you intend to make.  As a mortgage provider, I find it difficult to be neutral in this discussion, but I will attempt to be as balanced and as fair as I can be.

Buying a home has been the “American dream” for qualified home buyers for as long as most of us can remember.  Basic human needs require us to have food, shelter and clothing.  Our instincts direct us to maintain these basic needs at all costs. Making a decision about your requirements for shelter can be an emotional task.  Because emotion plays into a decision like this, it becomes even more important for you to properly prepare yourself when making this decision.

Statistically, most people will prefer to buy a home over the alternative, which is to rent.  There are several good reasons on why you should choose to buy, but, in general, people believe that buying a home is just what people gradually will do, as with getting married or having kids.  People are taught early on in their lives that buying a home can imply a certain level of success, thus helping you elevate your status within our society.  Consequently, over the years lenders have made buying a home considerably easier.  So, it is no surprise that home ownership in America is at an all time high. 

In today’s market there are a number of entities working in connection to the real estate market.  These entities are all trying to generate income by soliciting your business.  Those who actually benefit in this situation will differ, depending on what decision you make.  Therefore, each entity will market their position uniquely by illustrating the advantages for renting or the advantages for buying, depending on who you are listening to at the time.  The purpose for this is simple: they want to help persuade you to make a decision that is in their favor. 

Ultimately, you should find a way to eliminate these outside influences so that you are not negatively persuaded in making the wrong decision.  You should begin this process by finding out what works best for you, by seeking advice and guidance from the people you trust and respect.  You should also understand the ramifications for choosing one over the other.  When you have a full understanding of both options, making a decision for yourself and your loved ones should no longer be difficult.  

Renting a home begins by entering into a business relationship between a landlord and a tenant.  The word landlord can be traced back hundreds of years ago in Europe, where it enabled land owners to enforce their authority over commoners who had taken up residency on their land.  Obviously, laws have since changed, but the underlining rights given to a landlord have not changed, even in today’s real estate market.  Landlords will have authority rights over tenants, and these rights can be exercised at any time while a tenant lives in a home owned by the landlord.  For example, a landlord can enter a residence and conduct an inspection at will, which will limit your right to privacy in the home you occupy.  A landlord can also choose to renew or not renew your lease, depending on their willingness to approve future dealings with you.  You can quickly see why that might create a problem for you and your family, especially if you were to become temporarily displaced. 

Don’t stress out too much—renting is not all “doom and gloom.”   For instance, renting will reduce your risk associated with any negative trends found in the housing market.  If home prices depreciate or if interest rates increase, renters will find themselves in a better position to make short term decisions, than those who actually own a home.  For this reason, some people might find it more advantageous to rent when they know in advance that their living situation is temporary.  If you find that you will only be in a particular real estate market for a short period of time, then renting a home would be a practical option.  Keep in mind that the costs associated with a real estate transaction will not be recuperated during the first few years you live in the home.  Therefore, you may actually lose money if you plan to sell your home within a relatively short period of time.

Another advantage renters have over homeowners is that renters are under no obligation for any maintenance or upkeep frequently required on a home, as it begins to deteriorate.  Renters can reasonably expect that the home will be in complete working condition at all times, and if something does go wrong, it will be the homeowner’s responsibility to reconcile the home to an acceptable standard.  Not having the responsibility to maintain a home’s current working condition can help eliminate a certain degree of frustration, time, and cost to you as a person who rents. 

There are many other benefits that can be discussed in order to help you make a convincing argument for choosing to rent versus buy.  However, at the end of the day, you will need to make sure that your benefits to rent outweigh your benefits to buy.  

Buying a home is the “American Dream.”   Most people in America who have the resources and the ability to buy will do so.  Buying a home rewards you with the ability to exercise your free agency within the home.  You are free to make decisions based on what your wants and desires for your home might be.  For example, if you want to have a dog, you can have a dog; there are no pet deposits and no pet restrictions. You can simply buy a dog and establish your own house rules for how you and your dog will inhabit the home together. 

Being a homeowner will also give you the ability to make modifications to your home as you see fit.  If you want to knock out a wall, then you have the freedom to grab a hammer and begin pounding away.  If you don’t like the kitchen cabinets, you can have them replaced.  If you are dissatisfied by the color in your bedroom, you can go to the nearest Home Depot store and buy a color you like.  The ability to make changes at will to a home are liberties assigned to homeowners only.  Renters, on the other hand, will be forced to adhere to their landlords preferences versus their own.

Another advantage to buying a home is the ability to have your monthly home mortgage payments stabilized.  Getting into a home with a fixed rate mortgage will allow you to have the same payments on that home continuously through the years.  This eliminates the risk of your payment increasing over time.  In contrast, your rent payment may be lower today, but you can count on rent payments increasing as time goes by.  Rent increases will certainly follow current market conditions and over time will always go up. 

You should know that over time the payment differences found between your mortgage payment and your rent payment will deteriorate the longer you reside in the same home.  As time goes on, these payments will gravitate towards each other until eventually your monthly rent payment exceeds your monthly mortgage payment.  You can expect this “flip-flop” to happen approximately seven years after taking up residency in the same home.  Every following year the person who is renting a similar home will likely pay more in monthly rent payments than what you will pay on your monthly mortgage payments.

Homeownership is an investment in the net worth of your future.  Every payment you make contributes to your overall prosperity; the more payments you make, the more prosperous you will become.  In contrast, renting a home contributes to someone else’s prosperity; the greater your monthly rent obligation is, the more prosperous they become. 

Trying to decide whether to rent or buy can be a difficult decision for you to make, especially since we have chosen to cover only a select few of the benefits typically associated with these decisions.  These benefits should help you begin investigating what works best for you, but should not be the only things you consider.  Ultimately, you will need to do enough research to help completely satisfy your decision one way or the other.  The quicker you are able to finalize your decision the quicker we can begin helping you meet your needs.