Financial Pros and Cons of Renting vs. Buying a Home

 

March 17, 2020 

According to U.S. Census figures, about two-thirds of American families are homeowners. But buying a house or condo may not be the best choice for every family in every situation. Renting offers the following advantages:

Greater Flexibility

When renting a house, apartment, or condo, you have the option of moving at the end of the lease term. No need to contact a realtor, no hassle with buying or selling. For those who want to keep their options open, especially in terms of job location or dwelling size, renting may prove the better choice.

Opportunities to Invest Elsewhere

Instead of plowing your savings into a home, you might get a better return by contributing to mutual funds or other investments. Depending on the housing market in your city, the annual increase in your home’s value may barely outpace inflation.

Lower Cost

Apartments are often smaller than homes, so heating and cooling expenses tend to be lower. If you don’t have a lawn, you won’t incur the cost of water to keep it green. Roof leaking? Appliances on the blink? Call the landlord. Home repair and maintenance aren’t normally your responsibilities.

Of course, as many realtors and financial analysts rightly point out, homeowners also enjoy significant advantages:

Greater Flexibility

Ironically, homeowners enjoy certain freedoms denied to renters. If a homeowner wants to paint a wall or hang a picture, he or she doesn’t answer to a landlord. Installing a doggy door isn’t a problem. Hiring a remodel contractor to tear out a wall is perfectly acceptable. Don’t try this if you’re a renter.

Increasing Equity

One of the greatest advantages to buying a home is the likelihood of increased equity over time. As long as your mortgage is being whittled down by monthly payments, you’re building equity—even if your property value remains stable.

Lower Taxes

The ability to deduct mortgage interest and property taxes (if you itemize) can significantly lower your end-of-year tax bill. Renters must forgo this benefit.

Clearly, the choice to rent or buy a home depends on individual circumstances and tastes. If you’d like help with this important decision, give us a call.

Contact Your CPA to Discuss Your Tax Situation.

Contact Your CPA to Discuss Your Tax Situation.

Bringing clarity to your financial world.™

Bringing clarity to your financial world.™