Buying Vs. Renting: Pros and Cons

ESTATENVY speaks to industry experts about the benefits and disadvantages of both

Choosing your home isn’t easy. Throwing in the buying versus renting debate on top of it all can make the decision even more stressful. Invest now in your dream home? Or find that affordable rental while you save your coins?

ESTATENVY sat down with longtime brokers Lindsey Richardson and Mike Kelly of the Richardson Kelly Group to discuss the pros and cons of both options to help you make the right choice.

Advantages of Renting a Home

One advantage to renting a home is a shorter term commitment and more flexibility to move more frequently and "try before you buy" in neighborhoods across the city. This choice is especially helpful when you're new to an area and don't know the city well. Another advantage to renting is that renters don't have many of the upfront costs needed for a home down payment and closing costs associated with buying a home and can move with little investment. In most cases, you can rent a home with as little as a move in fee or security deposit.

The final advantage to renting is less responsibility of home/yard/appliance upkeep as this falls on the landlord/management company to keep these aspects of the property in good condition. While you'll want to be sure to keep these in good condition to receive your security deposit back, you won't be required to shovel the sidewalk and mow the lawn on a regular basis.

Disadvantages to Renting a Home

A common disadvantage of renting is that rent may increase more frequently than fixed interest rate mortgages, causing a constant need to move or monthly costs to go up year over year.

Another disadvantage is the inability to make the space your own. Many landlords will not allow you to paint wild colors or designs and you may have to hold off on that dream light fixture or flashy backsplash you've had your eye on.

The largest disadvantage to renting is investing in your landlords’ future instead of your own. Renting will be cash out each month from your hands to your landlords’ pockets instead of into equity on your own home and the opportunity to build future wealth over the course of a 30-year mortgage being paid down.

Advantages of Owning a Home

There are many financial benefits to owning real estate. Owners are able to enjoy tax benefits and build equity through paying down their loan and realized appreciation. Instead of having the full rent check go to your landlord, owners have a portion of their monthly payment go towards paying down their loan balance. While appreciation isn't guaranteed, buying a home in a good area can be potentially very lucrative if the area remains in high demand.

Owning a home provides stability. With a fixed mortgage rate, your monthly mortgage payments will remain the same, unlike rents, which are typically increasing year after year. Locking in a fixed rate mortgage gives you the ability to set a budget long term and know your yearly expenses for your largest personal budget item.

As a homeowner, you have the freedom to make improvements and design choices to fit your personality. Your landlord probably won't be cool with you painting a large dragon on your bedroom wall, but if you own the place, you can bask in the glory of your fire-breathing reptile mural on a daily basis.

Disadvantages of Owning a Home

On a long-term basis, owning real estate is a stable investment, but there is no guarantee that your home will increase in value and it can potentially lose value. It's important that you perform your due diligence prior to making an offer because there is risk involved in owning real estate.

While you do have the freedom to paint dragon murals, you are also on the hook for making potentially unexpected repairs. As a homeowner, it's important to keep up with regular maintenance of the mechanical systems, but you can't always predict when the systems will go out. Making repairs can be expensive and an overall unpleasant, time-consuming experience.

Buying a home typically means having to put down a large down payment that may require saving for years. A typical down payment is 20% of the purchase price. There are many financing options available that will allow you to put down less than 20%, but these loans normally include higher fees such as private mortgage insurance or a higher interest rate.

Overall, making the decision between buying and renting your future home is a decision that takes time and a lot of research. Once you’ve found the right path for your future, don’t be afraid to take that leap of faith toward your next chapter.