When you are living under a roof, chances are you are either renting it or you Own it. Let’s skip “What about free accommodation.?” for now. So, we will bat around the major pros and cons of Renting & Owning a Home. I would like to start with Renting as most of us rent a house before we own a home when we are on our own.
Renting
Pros
- Fixed Monthly Expense
- Flexibility
- Worry-Free Living
- More Choices to Invest Your Savings.
- Living in Hotspots
Cons
- Unpredictable Rent Increase -May have to move suddenly
- You are not building equity
- No Tax benefits
- No Pets Policy
- Freedom with Boundaries
PROS
Fixed Monthly Expense
When you are renting you know how much you pay monthly. Even if the utilities may vary from month to month you still have a ballpark value of your monthly expenses.
Flexibility
You can move in & move out from place to place, city to city if you are on a monthly lease. If your work requires a lot of traveling or you have the flexibility to work from anywhere, renting might save you a lot of money.
Worry-Free Living
When renting you don’t have to worry about the Repair and Maintenance of your house unless you break things. Maintenance includes Lawn mowing, Cleaning, Snow shoveling in some places, monitoring everything, etc.
More Choices to Invest Your Savings
You know that you need to pay a down payment to buy the house. The more the value of the House, the more the down payment would be. While renting you can use the same amount to invest in different things that might compound the investment.
Living in Hotspots
You can have a lake view from your house now and the next month you have the flexibility to move downtown. Renting will allow you to live in all the Hotspots in the town (If you enjoy packing and moving).
CONS
Unpredictable Rent Increase
You may end up paying more rent than you are paying while renewing the lease because most properties’ rent will go up. Also, if you break the lease you need to pay the penalty in certain cases.
You are not building Equity
Admit it, you are paying someone’s mortgage if you are renting a whole house unless you are sharing the place. The rent you pay is not building any equity.
No Tax Benefits
Renters don’t have any tax benefits as their Landlords do. More on tax benefits will be on coming blogs.
No Pets Policy
Say no to the landlord if he doesn’t allow pets. But, in most cases, it’s the other way around. You like the place, but the owner doesn’t lend you the place as you have a cute cat or a lovely dog.
Freedom with Boundaries
No painting on walls, no customization, no laundry more than once a week, No Guest allowed, and the list goes on. You have your freedom in your place with a bold boundary line.
Owning
“Yeah, this is my own house and I customized it as per my taste” – How does it feel saying this.? Well, I can imagine how it feels. Did you notice that I mentioned Renting a House and Owning a Home in the introduction paragraph to this blog.? Because House and Home are two different things. Emotionally it is always good to own a home and now let’s explore the financial aspects of it too.
Pros
- Pride of Ownership
- Asset
- Tax Benefits
- My House, My Way.!
- Privacy
Cons
- Additional expenses than Renting
- Initial Expensive Investment
- Sudden Surprises, oh sorry Shocks
- Illiquid Asset – Long-term commitment
- Choosing the right one
PROS
Pride of Ownership
It gives you confidence, a feeling of stability, and, settlement when you own your home. It’s always a Backup for your Future Plans and who doesn’t like the pride of owning their Home.?
Building your Asset
The monthly mortgage you pay will be building your equity in the home and you can use this equity for your additional Real Estate Purchases. You can also rent out the space you don’t live and that might cover some of your mortgage payments.
Tax Benefits
Homeowners enjoy tax benefits on their mortgage payments and a few other things at the end of the tax year.
My House, My Way.!
Paint the living room as you like, customize the kitchen, plant your favorite flower in your backyard, all these can be done when you own a home. You can have multiple pets and say nothing. You can even raise a Dinosaur if you own the place, wait, I don’t think that’s possible.
Privacy
You have your privacy when you own the entire place and you can enjoy your time with your friends, guests, and anyone you like to spend time with.
CONS
Additional expenses than Renting
Owning a house will give you additional expenses like Homeowners Insurance, Pest control, Tree Trimming, Garbage pickup, etc.
Initial Expensive Investment
You have put all your savings sometimes for the down payment of the House. This might be a Financial burden if you are not ready for it.
Sudden Surprises, oh sorry Shocks.!
You might end up having a sudden surprise for changing the roofing, Fixing the washrooms, or changing the damaged garage doors. These are all sudden surprises until the bill on these things shocks you.
Illiquid Asset
House is one of the largest Illiquid Assets. Selling a house includes transaction fees, and closing costs and sometimes takes a longer time than usual if you are in urgent need of capital. Moreover, owning a Home means a Long-term commitment sometimes.
Choosing the Right one
Buying a House is by far the most expensive purchase that many make in their Lifetime. So, if you don’t like it, it’s pretty hard to change the house after buying it. That’s why always get expert advice while buying a house, consult with someone who has extensive market knowledge and can guide you to buy the home that you need. A Good Real Estate Agent can make this process like a Cake Walk.!
A few more challenges with Buying a Home is you have to stick with the schools around your neighborhood (only in some parts of the World) and, sometimes you end up spending more to decorate it and buying furniture to fill out the space.!
So, What’s the Best thing Buying or Renting.?.?
Well, it depends on the position you are in, both, Personally and Financially. Actually, the best time to buy a house is when you can afford it. Renting might be a better thing, but Owning a House is the best. And there is always something better than best, in this case owning your House and buying the second one and renting it.
More on this better than the best thing will be in the coming blogs…