Rent or Buy: Is Home Ownership Right For You?
There is a prevailing sentiment that renting a home is somehow inferior to owning a home. The “American Dream” sees homeownership as one of the essential and defining requirements to being complete and productive. However, readers may be surprised to hear that there are circumstances where renting might actually be a better financial option than buying a home or maybe a more practical option based on a person’s occupation or lifestyle. Likewise, it is also true that buying property doesn’t necessarily mean that it will appreciate over time. And there are always additional unknown maintenance and repair costs facing homeowners in the long run.
The truth — it turns out — is much more complicated. We are going to explore each option objectively without concluding that one is simply better than the other. Instead, we will focus on when it makes sense to rent vs. when it makes sense to buy a home and dispel some common myths in the process.
Renting Isn’t the “Worst” of the Two Options
A false dichotomy is a comparison between two ideas that place each in opposition to the other. The tendency to oversimplify our understanding of a concept based on its supposed opposite forces us to side with one over the other. It makes us blind to broadening our perspectives on an issue. We miss all the grey areas in between.
Renting vs. Buying is a False Dichotomy
We miss all the specifics and exceptions when we conclude that buying property is better than renting. The truth is that living costs money, no matter how you go about doing it. When renting, it is true that you aren’t building equity from paying your monthly rent payment. It is also true that your landlord can raise the rent as they see fit.
However, as a renter, you are not responsible for damage, maintenance and repairs, whereas a homeowner would be. Yes, you may be renting at $1,200 a month, $14,400 annually, but a homeowner might need to replace a roof, fix a sinking foundation, or replace, repair, and renovate whole sections of a house.
The point is that there are many costs associated with homeownership that renters do not have to worry about.
What is Your Occupation and Lifestyle?
Are you looking to start a family, or prefer living with friends or alone? Does your work require that you move from place to place every few months, or are you always on the go for work? Modern Americans are less tied to their hometown and have more opportunities for alternative employment than those of previous generations.
Settling down and buying a home might not be the best option for a single person who often travels for work. In this case, paying a mortgage on a home that is rarely lived in seems a bit frivolous — especially since nobody is there to look after and maintain the property for long stretches of time.
Additionally, a person who works for a few years in one area but knows they will be relocated is better off renting. If their employer places them at a location for a year-long position, what is the sense in buying a house if they know they will only be in the area for a year?
Or, let’s say a young college student needs a place to live while attending school. In this case, unless they came from wealth, buying a house for them to live in for a relatively short period of time (two to four years) makes little sense.
There Are Financial Risks Associated With Home Buying
Homeownership is generally thought of as an investment that gains wealth over time, and, usually, this is true. However, several factors can cause a home to lose value over time. Neighborhoods are subjected to changing trends that can cause their overall wealth to decline. For example, a large manufacturing plant can close, leaving people behind as their jobs move elsewhere.
On the opposite end, there could be a significant residential housing boom in an area, flooding it with an ample supply of homes. This brings prices down based on supply and demand. A house bought 15 years ago for $350,000 might be valued at $350,000 today due to these factors. However, when inflation is considered, the actual value has decreased over time.
Home Ownership Has Intangible Benefits
Owning property provides people with a sense of stability and security. With renting, there is always a risk of rent increases or the landlord selling the property to a developer. Though there is less inherent responsibility when renting, there is also less control over certain circumstances. Homeownership may cost more over time, but if your personal values, lifestyle, and family goals are aligned with settling down in one place and homesteading, then the greater responsibility and financial costs are worth it.
It Doesn’t Come Down to Money in the End
If you take anything away from this article, it should be that living costs money no matter how you go about doing it. Whether you choose to rent or buy doesn’t come down to finances because there are expenses and risks associated with each that last a lifetime. Really, the question comes down to what system best suits your lifestyle, goals, and family obligations.
Renting offers you a sense of freedom — you can move anywhere after the lease ends. You are not responsible for the more expensive aspects of homeownership like repairs, maintenance, and renovations. If your job takes you from place to place or you’d prefer to invest the money you’d spend on a mortgage on other assets, then renting is a perfectly reasonable financial choice.
On the other hand, homeownership offers a sense of security and stability that renting cannot. Though it comes with greater responsibility, maintenance and repair costs, property taxes, and the like, ultimately, it is your property. Barring a foreclosure or eminent domain, it can’t be sold out from under your feet.
Which is suitable for you and your life goals?
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About the Author
Veronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area. She writes for the Law Offices of David M. Offen, a successful bankruptcy attorney in Philadelphia.