The Pros and Cons of Renting Versus Buying a Home

Posted By Winston Bowdre
Is it better to rent or buy a home? This is a question that everyone has to process at some point in their lives. It's not always best to buy and it's certainly not always best to rent. A person's lifestyle, financial situation, relationship status, and employment all play roles that can sway the answer to one side or the other.
Here's a simple infographic to help breakdown some of the pros & cons to the question:

Should You Rent or Buy a Home?

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After viewing the pros and cons above, let's look at how they apply to different areas of a persons life.
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Easy To Move On

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When you rent a home, you are free to move on as soon as your lease is expired. There's no house to sell. This is one of the most common reasons for renting a home, rather than buying. If you are unsure of how long you will be living in an area, renting is usually your best option. Selling a home is a lot of work and expense, so it makes sense to buy a home when you are sure that you want to stay in the home for a few years. This allows you to build up equity and make money when you sell, which you cannot do when you rent.
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No Property Taxes

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For many homeowners, property taxes are the 2nd highest cost of owning a home, next to their mortgage payment. Home owners insurance is a close 3rd for expenses, which is another fee that you do not have to pay when you rent a home...or do you? I have heard the argument that the cost of property insurance and home owners taxes are enough to make people rent, rather than buy. But think about this, the landlord of the property that you rent is also paying property taxes and insurance. So, who is really paying the property tax and insurance? It just makes sense that the cost of the tax and insurance are being passed on to the tenant. This means that tenants are inadvertently paying the taxes and insurance for their landlord, just not directly. There are also tax advantages to owning a home as well.

No Maintenance

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Every home needs maintenance and repairs over time. When you rent a home, the repairs are passed on to the landlord or property management company. This is a very popular reason to rent. Of course, there are down sides to this as well. Some landlords and property management companies are not very prompt or easy to work with. Just do a quick Google search for reviews on property management companies in your area. You may find a long list of tenants who have complained that it took days or weeks to fix issues in their rental properties that should have been fixed immediately, as well as smaller issues that never got fixed at all. However, if you have a good landlord, your maintenance worries are minimal.
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You Can Make It Yours

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When you buy a home, you are free to paint, change fixtures, tear down walls, or put up new walls. It's your home and you can do whatever you want with it. When you rent a home, you are not allowed to change paint colors, fixtures, or remodel. Having the freedom to do what you want with your home is one of the greatest benefits of homeownership. Many times when you rent a home it's hard not to want to make changes to it to make it feel like your own. Many people want to own a home for the freedom to make it the way they want it. A home is a place that captures many memories, which is why you want it to reflect your design choices.

No Payment Hikes

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When you agree to the terms of your mortgage, chances are very high that you will have a fixed rate. This means that your mortgage payment will not increase over the life of the loan. The security of knowing your payment amount will never change is very comforting. It's common for rental properties to have payment increases every time that the lease is resigned. Especially in Dallas-Ft. Worth where rents have increased dramatically over the past few years.

Build Equity

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When you buy a home, a portion of your payment goes straight to paying off your mortgage. Every time you make a payment, you earn equity in your home. As the price of your house appreciates, your mortgage goes down and your equity steadily rises. If you buy a home in an area that appreciates well and you pay down your mortgage over 5+ years, you will have a nice chunck of equity to use however you like. You can use your equity to move into a larger home, refinance and take some cash out, or leave it alone and let it grow!
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Increasing Rents

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Rents nationwide seem to be rising fast right now. In Dallas/Ft. Worth, rents have been steadily rising over the years. This makes it hard to plan your future finances when ou don't know what your rent payments are going to be after your lease expires. Once a lease is expired, a landlord can raise the rent as high as they want. If you disagree to the new terms, you'll need to find a new place to live, which is also and expense and very exhausting. The unknown future of rents can make tenants feel insecure and unsettled.
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Lease Deadline

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When you sign a lease, it will most likely have a deadline. Many leases are structured for one year. Once the lease is up, there is no certainty that you will be able to renew. Sometimes landlords will sell the rental property after the lease is expired, or have family and/or friends move in. The future is always uncertain when you rent a home, which makes long term life plans more difficult and uncertain.

No Equity

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Every rent payment made goes straight to the landlord. You do not have any ownership or equity in the property. This is the hardest part of renting for most people. Know that every dollar or your rent is gone for good is discouraging and causes tenants to look into owning their own home. Rent always costs much more in the long run. Imagine renting for 10 years as opposed to paying down a mortgage over 10 years. The person who pays down their mortgage is going to have a nice chunck of equity when they sell, as opposed to the person who rents and has no equity after 10 years.
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Need Money For Down Payment

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When you buy a home, it's common for the mortgage company to require you to put a certain amount of money into the deal as a down payment. This is usually between 3% to 5% of the cost of the home. There are down payment assistant programs and other mortgage options for certain people, so this is not always a con to owning a home. There are misconceptions that home buyers need as much as 20% down, but this is usually not the case. The best way to find out is to talk to a mortgage lender and know your options.

The Cost of Selling

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Selling a home can be costly. REALTOR® fees can run from 4% to 6% of the sales price of your home. If your home needs some work before selling, you'll also have to come up with the money to make those necessary updates or repairs. Selling a home is much more stress than buying a home. It usually requires months of planning and preparation to really do it right and make the most amount of money when you sell your home.

Homeowner Responsibilities

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When you own a home, it is your responsibility to maintain the property. You'll need to work on the landscaping, have the heater and air conditioner serviced, and repair any damages to the property. Your home owners insurance will typically help you with many of the most costly issues, like roof repairs and major damages. The rest is up to you. I personally prefer this because I can fix problems, like a broken garbage disposal or ceiling fan, and replace old items with new high end items to make my house run smoother. My dishwasher and garbage disposal are virtually silent since I replaced them recently, and I prefer to do these things myself.
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Both renting and buying have their advantages and disadvantages. It really comes down to the stability of your living situation. If you have a career that is moving forward and you feel like you are going to be in your current city for a while, buying a home makes much more sense. If your life is up in the air and you don't know what next year is going to be like, renting a home makes a lot more sense. Buying a home costs less in the long run and builds your financial situation. Renting a home is expensive and always leaves you without any true ownership or equity.

Taking time to truly look at all of each option can help you plan your life to move in the direction that benefits you the most. If you plan on buying a home, there is a ton of information online to help you. Start with this article that explains how to buy your first house. It will give you a quick overview of the home buying process and help you identify where to start. Good luck and happy hunting!

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Hi There! I'm Winston Bowdre, the broker/owner of Winston Alan Realty and the creator of much of the content on this website. Thanks for taking the time to read this article. I hope it was helpful to you. Please feel free to share this article on social media with someone who might benefit from it. I appreciate your time here on this site as I am always open to suggestions and ideas from our readers. Feel free to contact me anytime at [email protected] or call/text me at 214-935-1014.