Advantages of Buying a Home vs. Renting

Are you debating renting or buying a home? Here is everything you need to know about the advantages of buying a home vs renting a home. 

Deciding between investing in short-term living, renting, or buying a home can be challenging. Both options require a significant investment, and the buying process can be overwhelming.

However, many people prefer buying a home than renting, as it provides a greater sense of security and stability. Nevertheless, renting can be an excellent choice if you are still getting ready to purchase your first home, especially when there are plenty of affordable housing options. However, everyone is different, and that decision varies per person. 

Ultimately, buying or renting depends on several factors, including your financial goals, personal preferences, and financial position. It's essential to consider all of these factors before deciding: rent or buy.

Here are the advantages of buying a home vs. renting. 

Renting a Home

Renting a home is a common practice around the world. However, many people do not consider it a permanent solution because it can feel like you're just wasting money compared to buying a home. As per statistics, 45.2 million households rent their homes.

However, there are some benefits to renting a home. These benefits may be why many people choose to rent rather than buy. However, you are limited to many things when renting compared to what you could do if you owned a home. 

When you rent, you know precisely your monthly housing cost, which is indicated on your lease, so that you can plan. Sometimes, your landlord may include another cost within that amount, such as utilities, HOA, or any other fees. 

As a renter, you can also face a rent increase each time your lease is up and you want to renew. These rent increases can be more significant depending on your location, which you have no control over. 

However, renting seems favorable for people who are not ready to put their foot down on a significant investment, people who can not afford a house yet, or even people who move around a lot and can not stay in one place. Renting can be suitable for many people, but realistically, many do not rent their whole lives; it is seen as temporary. 

Choosing to rent or buy your home is a significant decision affecting your lifestyle and financial health. There are many things to consider about whether renting is for you, so keep reading to learn more about renting vs. buying before you make a big decision. 

Buying a Home

Homeownership brings both tangible and intangible benefits. Not only do you own that property, but you can also make every decision about the look, design, or anything you want to do to that home. 

However, if you are buying a home, changing your mind about where you live can be expensive because the housing market is constantly changing, and you may be unable to sell your house quickly. 

Buying and owning a house tends to be higher than renting even if your mortgage payment is lower than rent because of many other expenses that go into having a home, such as:

• Property taxes
• Trash pickup
• Water and Sewage
• Homeowners Insurance
• Natural Disasters (etc.)

Owning a home comes with more commitment in terms of finances, time, and labor than renting. This is an investment that can go up and down in value. If you fail to make any payment, you can lose your home quickly and evict, and you lose your whole investment. 

Buying a home is a complex and lengthy decision you should make. It costs more to own a home in the short term compared to rent, and there are many things you need to consider before making that large purchase. 

Is Renting Cheaper than Buying?

The cost of renting vs. buying depends on how long you stay in the same house, which depends on economic factors and trends. Depending on the housing market and financial conditions, it is recorded that you should not buy unless you plan on living in the home for about 3-5 years. 

However, there is yet to be a definitive answer to this question. Everything depends on your situation and the benefits of each of these. Renting can be a predictable expense, but owning a home can be more affordable, depending on your situation. 

Buying a home is a good investment overall while renting is not an investment. Regarding real estate, factors like location, maintenance, environmental concerns, economy, and value come into play, so there are many things to consider, such as whether it is cheaper to buy or rent for you. 

Differences Between Renting and Buying

Renting and buying are two different options for acquiring a place to live. The responsibilities associated with each of these options differ significantly. While renters have duties other than those of homeowners, the costs vary depending on individual lifestyles and needs. Understanding these differences can help you decide whether renting or buying is the right choice for you.

Monthly Payments:

Owning:

As a homeowner, you make mortgage payments which are with interest and principal on the loan you took out. In many cases, your mortgages are set up for 30 years, and after 3- years, you will own that property. 

Renting:

When you rent a property, you will be required to make monthly payments, which is your rent, to the landlord or the company renting the property to you. This money covers the cost of any repairs or maintenance that the property may need. It is essential to understand that you will not own the property but will be borrowing it for a specified period per the lease agreement.

Property Taxes

Owning:

As a homeowner, you will pay local property taxes, which you can deduct when you file your income taxes. If you fail to pay these taxes, you can have a lien taken on your property and may risk losing the property to foreclosure.

Renting:

When you rent a property, you don't typically pay property taxes directly to your landlord, but they may stipulate you do so as part of the lease. If that is the case, you can file it with your taxes like homeowners. Most of the time, in your lease, there will be taxes and other costs that go into that instead, but as a renter, you can not lose the property due to the failure to pay taxes.  

Insurance

Owning:

As a homeowner, homeowners insurance must cover the dwelling, including any damages caused by water or fire, and your belongings. It should also provide liability coverage. Because homeowners insurance has to offer more coverage than renters, it can cost up to 8x more. 

Renting:

When you rent a property, you will have renter insurance, which is less expensive because it only covers the cost of your personal property, not the whole building. It also includes personal liability. 

Finances

Owning:

To buy a home, you need a lot of financial leverage as a homeowner. Your 20% down payment and good credit score provide leverage to get you a property loan. To do so, you need your finances to make these payments. 

Renting:

When you rent a property, the financial standards are not as strict. Mostly, it would be best if you had the amount of the deposit, good credit, and the ability to make your rental payments on time. 

Equity

Owning:

As a homeowner, since you own the home, any appreciation in value is yours. Most homes rise in value over time but can also fall. When you sell, you can also cash in that equity as a profit, and you can borrow on the equity you have accumulated through a variety of loan options as well. 

Renting:

When you rent a property, you do not earn or lose equity because you do not own your home or place. 

Advantages of Buying a Home

When buying a home can be rewarding, but it is also a big commitment. Let's look at what some advantages are of buying a house below. 

• Build Equity: You can build equity over time and help grow wealth. 
• Control: You can gain more control over your living situation by not having to move frequently, changing the look of your home, and doing whatever you want without asking permission. 
• Constant payments: Buying brings regular monthly payments that do not increase as the market grows, so you can budget wisely instead of worrying. 
• Tax Benefits: You can receive tax benefits from buying or selling a home depending on your financials. 
• Stability: You can create more stability in your community when you buy. 

Advantages of Renting a Home

When renting a home, you gain flexibility but may incur higher costs depending on the housing market. Here are some advantages of renting:

• Short-Term Savings: In the short term, renting is less expensive than buying because you do not need large down payments or loans. 
• Flexibility: You have more flexibility when renting because you can change your home and move around whenever you want, so it is suitable for people who are not set on a place.
• Build Credit: Renting can build your credit if it is not firm yet to buy a home. 
• Less Responsibilities: When you are a renter, you are not responsible for maintenance or repairs, so you have fewer responsibilities than owners
• No Property Taxes: You do not have to pay any property taxes when you are a renter because you do not own a property. 

Should You Rent or Buy?

How long do you plan on living there?

This is the most asked question. If you do not plan to stay where you are for longer than 3-4 years, it would be best to rent. If you are on the border, be safe and rent instead. 

What are your finances like?

Tenure is the most critical factor when deciding between renting and buying. Your ability to finance a home purchase is essential but varies because of different financing options. However, you should know whether you will be in place long enough for finances to matter. 

What is the state of the housing market where you live?

The housing market is constantly changing and can vary by location. Limited inventory can lead to higher costs, and the market can be a seller's or buyer's market. It is essential to know the current state of the market, housing rates, and affordability before making any decisions.

What is your job security and satisfaction?

If you're happy with your current location but unhappy with your job or uncertain about the stability of your job, it's essential to prioritize your career before settling down. You don't want to risk losing your job and being unable to afford your living situation.

Methodology

We used information and data from different sources and our data to determine the advantages of buying a home vs renting a home.  There were various data to use, so we put them together to predict the advantages. 

• National Association of Realtors
• Investopedia
• IProperty Management
• Fortune

We used The following sources to gather most of our information about the advantages of buying a home vs renting a home. 

FAQS

What are the top benefits of buying a home rather than renting?

Some of the main reasons people buy rather than rent are control, wealth, more options, putting roots down, more excellent financial stability, and earning equity. 

What is the 5 percent rule in rent vs buy?

Take the value of the home you are considering, multiply by 5%, and then divide by 12 months. If you can't rent for less than that, renting may be your decision compared to buying a home. However, that does vary. 

What are the cons of renting?

Some cons of renting are being unable to enjoy tax deductions, your rent will most likely grow, you are not building equity, it is difficult and expensive to have pets, and you are not free to do what you want with your space. 

Advantages of Buying a Home vs Renting - The Bottom Line

Buying a home can be a good investment in the long run, while renting is not an investment. Regarding real estate, several factors like location, maintenance, environmental concerns, economy, and value play a significant role in determining whether buying or renting a property is cheaper.

Deciding between investing in short-term living by renting or buying a home can be challenging. Both options require a considerable investment, and the buying process can be overwhelming.

The decision to rent or buy depends on various factors, including financial goals, personal preferences, and financial position. It is necessary to consider all these factors before arriving at a final decision.

Before you buy your next home or make the big step to move, contact one of our helpful real estate specialists, who are eager to help you find the perfect home.