Roughly 32 percent of the U.S. population rents their home, according to the National Multifamily Housing Council. What the statistic can’t tell you is why. People choose to rent or own for a variety of reasons—it can be about freedom, lifestyle preference, and sometimes it just comes down to a matter of money. If you’re trying to figure out whether you should rent or buy, take the following into consideration.
Good Reasons to Rent
Fresh out of college isn’t the best time to buy a home. You could decide to change jobs or relocate, and you may not be able to afford housing expenses like repairs and utilities. Renting enables you to simply call your landlord to fix anything that goes wrong. You have greater freedom to move if you decide you want a less expensive place or to switch neighborhoods. And if you don’t like being tied down, renting gives the flexibility to take a job in a new city without having to sell your home first.
In some areas of the country, it’s better to rent than buy. CBS News reports that in the Wydown Skinker neighborhood of St. Louis, it would take 7.7 years of home ownership to save money buying over renting. It’s also difficult to predict the ups and downs of real estate. You could find yourself with a home that loses value and end up selling it for less than you bought it for.
Home ownership also means tying up your down payment in a house instead of investing the money into a retirement or high-yield savings account. Meanwhile, your rental deposit is returned if you comply with your rental agreement.
But Then Again, You Could Buy
Depending on your location and housing preference, buying is usually more expensive than renting a home, at least at the start. Closing costs, taxes, private mortgage insurance, maintenance fees and homeowners association fees add up, as do emergency repairs. Of course, the mortgage payment you make each month goes into building equity in your own home, so when you sell you could not only recoup your money but turn a profit. If you rent, that money is simply gone. To help you figure out which is better in your particular situation, use the New York Times rent vs. buy calculator.
Buyers can make any renovation they wish to their home, whereas renters cannot. It’s your place, and you can do whatever you want with it. During lean times, buyers can even customize their own property and rent it out.
Coming up with the cash for a healthy down payment is often a big obstacle for those who would like to purchase their own home. Some people choose to borrow the money from their 401(k) or IRA. Others sell their future structured settlement payments for a lump sum of cash now. Check out a company like J.G. Wentworth on FaceBook to learn more about selling your future payments.
Still struggling to decide? Remember that the only right answer to renting or owning is living somewhere you can afford. Don’t needlessly stretch yourself thin or get in over your head. What you really need is a safe, comfortable place to live in.