As the housing market continues to fluctuate, you have to wonder if it’s better to rent or buy your home. On one end, rising apartment rates in cities across the U.S. are making homeownership look more appealing to the once precautious buyer. However, there’s no longer a guarantee that the money invested in a home will net a similar, or higher return. Before deciding to rent or buy your next home, there are some important differences between renting and homeownership that you need to think about.
Let’s take a look at some of the pros and cons of renting versus owning a home.
Pros of Renting
For those afraid of commitment, (maybe you plan on leaving your job in the next couple of months or don’t see yourself living in the city for the long haul) renting offers you autonomy. Signing a year or month-to-month lease gives you the opportunity to change your plans on a whim. Let’s look at some of the other pros of renting:
You Can Pick Up and Move: Unlike with the ownership of a home, you’re not locked in to your apartment. If your job should require that you move to another state or town, you can. If you’re the extra-squirmy type, a month-to-month lease offers you the freedom you need if you don’t see yourself settling down in one place for too long.
Maintenance Included: As a homeowner, if the dishwasher leaks or the air conditioning unit breaks down, you are responsible for the repairs. This isn’t the case as a renter. All you have to do is call up your landlord or superintendent, and they will send their maintenance team to fix it free of charge.
Lower Insurance Premium: Apartment complexes are beginning to require that their prospective tenants have a renters insurance policy. Much more affordable than homeowners insurance, renters insurance covers the cost of all of your damaged, lost or stolen personal possessions. And thankfully these days, it’s not even hard shopping for insurance packages. Sites like CoverHound help you compare renters insurance from several reputable companies so you can find a policy that fits your needs and still saves you money.
Dodge a Depreciating Asset: Because the housing market is in a constant state of flux, owning one’s own home isn’t a guaranteed positive investment anymore. If you bought your home for $700,000 and the market took a downturn, putting its value at $400,000, you have now lost $300,000. While renting an apartment is a guaranteed draining of funds, you need to be wise in the home you end up purchasing and hope for a little luck to stay in the green.
Cons of Renting
All things come at a price; unfortunately, that’s just the way life goes. While renting has plenty of positives, it also has a few drawbacks:
Pet Ownership: If you own a dog, finding an apartment with an open pet policy can be a tough. Many landlords are wary to rent to tenants with pets for fear of damage to the unit caused by a rambunctious chewer. And if your pup’s a barker, you’ll have angry neighbors whom will more than likely complain to the landlord. It’s also worthy to note that some apartments simply aren’t big enough for your fur baby to run around in, leaving for a complacent-at-best, depressed-at-worst pet.
Payment Increases: With homeownership, you always know what your mortgage payments are going to be. As a renter, your monthly rent payment is subject to change, especially with a month-to-month lease. Because rents are on the rise in the urban areas, landlords are looking to lease to the highest bidder.
No Tax Breaks: Come tax season, homeowners can deduct home repairs, property taxes and mortgage interest payments from their federal income tax. Renters do not receive any tax breaks for renting.
No Equity: Homeowners (when the housing market is stable) build equity. Over a certain amount of time, real estate (when the economy is running smoothly) appreciates. This can make the house you purchased for $700,000 worth $1 million. Renters do not their unit and thus do not enjoy any property value fluctuations.
What is most important to think about of course is how you want to spend your money and where you see yourself in the next five years. These answers will help you to determine whether it is better to rent, or not to rent.