The ultimate debate. The question of where you’re going to live. To rent… Or to buy.
As we grow, we typically dream of owning a home, decorating to your hearts content, and creating a cozy and warm atmosphere for family and friends to gather. But, some thing we don’t always realize, is that we can create that same sensation while renting.
Today, we’re going to go over some of the benefits and drawbacks of each and allow you to make the decision of what’s best for you and your family. While many believe owning a home is a necessary step in (a) the American Dream or (b) “adulting”, others disagree and believe their money and efforts are better spent elsewhere.
Before you purchase, it’s best to consider each side separately from each other and decide from there what best fits your situation. As is the ebb and flow of life, both options are perfect for many – but what’s perfect for you?
Owning Your Own Home
Making your home your own. Do you want to add a wall-window, or take one away? Replace the refrigerator or enjoy an ultra-modernized kitchen? Or perhaps you just want to hang family photos and not worry about patching any holes. All of these things, and more, can be done when you own. Not to say y won’t be able to hang photos or paint a wall, but the process will be worry-free. Complete freedom to decorate, remodel, and personalize are major benefits to purchasing your own home.
A sense of community. When you by a house, you’re typically looking to stay in the neighborhood for a few years. Your children, or yourself, may create lasting friendships out of your neighbors further instilling that sense of community.
Though a lease can instill the same concepts, either party can usually eliminate the lease with enough notice. Not so much when you own your home, unless you neglect to pay your mortgage. This offers security in the homestead and allows you to make plans, such as long vacations or invite people over for long periods of time, without the consent of your landlord. Planning on your elderly parents moving in? Or staying for six months? In a rental, it may require permission from the landlord or signed consent to have more parties than outlined in the lease. Definitely a perk of owning in our book!
Equity and appreciation are two words homeowners throw around all the time, and for good reason. Historically, real estate has offered long-term sustainable growth across the nation, between 1972 and 2014, according to the National Association of REALTORS©. In the last year alone, Seattle has seen appreciation in the double digits with the booming, local real estate market. It’s like a ready-made savings plans.
Most upgrades and renovations increase the value of your home, or at least the curb appeal, and, as an owner, this is a fabulous thing. This can directly correlate to your financial security and put leverage in your pocket if the need arises. And remember, that’s all yours. Not your landlords. Not the investors. Yours.
While all that sounds amazing, another thing to consider is the predictability of owning your home. You know what your monthly mortgage payment will be – and it shouldn’t really change all too much. It will go up and down, depending on new tax levies and changing rates, but you shouldn’t see hundreds of dollars of difference every year – which can be the case in some rental instances. Keep in mind, federal tax benefits may be changing given the 2017 Tax reform bill, otherwise known as the Tax Cuts and Jobs Act (TCJA).
The short breakdown:
- Complete freedom to personalize and decorate.
- Remodel and renovate to your hearts content.
- Community and neighborly relationships.
- Ownership and domicile security. You don’t need permission.
- Monthly payment goes towards ownership and fiscal growth.
- Upgrades, renovations, and appreciation increase your home value and leverage.
- Create your own maintenance schedule.
- Consistency and predictability in payments.
Drawbacks to owning:
- Hefty downpayment, means saving prior to purchasing and after closing.
- The ball (and maintenance) is entirely in your court. All maintenance must to scheduled and paid for by the homeowner.
- Damages could mean last-minute costs.
- Less flexibility, regarding where you live, unless you’re willing to sell your home.
Renting Your Home
Renting your home is also the preference of millions of people, world-wide. Whether you’re investing in other areas of your life or just renting to foster saving, renting proves an excellent option for many.
The maintenance-free life is a great one. As a renter, you don’t have to worry if anything stops working or malfunctions. It’s a simple call to the landlord or property manager and they’ll handle the fix and let you know when to expect the contractor to stop by.
Depending on your circumstances, you may enjoy the flexibility renting offers. If you plan on travelling a lot, moving for work, or just settling down outside of your immediate area, renting is probably the best option. If you plan on moving within a few years or your job requires that you move every few years, the upfront cost of purchasing could net you a negative figure when you go to sell your home.
Cost of the purchase price aside, you may drown in home repairs, updates and general maintenance. Not only are things like tree trimming, lawn mowing and gutter cleaning timely, but if you don’t want to do it, it could cost you a pretty penny per year to have these things done for you. Tack that on to your monthly mortgage, and you may reconsider purchasing.
If you’re in the situations where other investments or priorities top homeownership, renting is the next best thing. It allows the comforts of home, without the hefty initial price tag. You’ll have the upfront cost of moving and deposit/security, but that usually in the 10’s or 100’s of thousands.
The short breakdown:
- Simple decorations with less housework.
- Maintenance free.
- Call your landlord or property management company with any domicile issues.
- No long-term commitment to the home or area, allowing complete flexibility.
- Fluid savings with liquid dollars for alternative investments.
Drawbacks to renting:
- No leverage or appreciation of home, though you may make this up in other monetary investments.
- Variable costs and revolting rental increases.
- Limited ability to personalize your living quarters.
- No tax incentives.
All decisions come with drawbacks, such as rentals offer no appreciation or leverage for the tenant and owning means you’re in charge of everything, including damages and liability, but do the drawbacks overcome the benefits? There isn’t any right or wrong answer; just the answer that’s right for you. To lease, or to own? What’s your preference?