Buying a home versus renting is a big decision that takes careful consideration.
While there are several biased sources that can make arguments for or against owning a home, we’ve found that most home buyers base their ultimate decision on emotion.
Yes, there are some tax advantages of owning real estate, as well as the potential to earn equity or pay a mortgage note off after several years.
However, let’s address some of the more obvious topics:
Benefits of Renting
Lower Acquisition Cost
Compared to the cost of about 1-3 month’s rent payment, it’s obvious that renting a home makes financial sense in the short term.
Lower Qualifying Standards
Generally, proof of employment / income and a decent credit history (or a good explanation) is needed to rent.
Increased Mobility
If you’re planning on moving in the next 3-5 years, then it may become cost-prohibitive if you own due to the amount of equity you’ll have to gain in the short-run just to cover the cost of paying an agent, buyer closing costs, and transfer taxes.
Less Maintenance and Cost
If something breaks, a simple call to the property management company will generally solve the issue in 48 hours or less.
Benefits of Owning
Pets Are Allowed
It may seem like a funny benefit to mention first, but the millions of dog and cat lovers would definitely rank this towards the top of their list.
Peace-of-Mind and Security
You don’t have to worry about a landlord’s financial ability to make mortgage payments on time.
Pink and Purple Walls
You can paint the inside of your house any color.
Tax Benefits
The IRS has created certain tax incentives making it possible for many homeowners to exceed the standard yearly deduction.
Stability
Remaining in one neighborhood for several years lets you establish lasting friendships, as well as offers your children the benefit of educational continuity.
Appreciation of Property
From 1972 through 2005, home prices increased on average 6.5%, according to the National Association of Realtors.
Forced Savings
The monthly payment helps in repayment of the principal amount.Increased Net Worth
Few things have a greater impact on net worth than owning a home.
While the available tax advantages and potential for earned equity are generally highlighted by most industry professionals as the top reasons to own real estate, it’s important to remember that markets go through cycles. However, owning real estate that appreciates more than the rate of inflation may help contribute towards your overall investment portfolio.