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Renting versus Owning

Making the decision to own or rent is certainly not black and white. There are many factors to consider. Here are some of the main points we think anyone looking at renting or owning should consider. Renting may be the perfect option for one person, while owning may be a better fit for someone else. It’s important to take one’s financial situation, time availability, family needs, and more into consideration before making a final decision.

  1. Wasted Money? Consider the Differing Expenses with Each Option. People often say renting is like “throwing away your money” because you are not building equity. However, when renting, many expenses that come with homeownership are included in your monthly rent or are not your responsibility at all. Some expenses that come along with homeownership but are typically not included when renting include: home repairs and maintenance, homeowner’s insurance, pest control, landscaping, property taxes, flood or earthquake insurance (depending on where you live), certain utilities, and more. Depending on the area you live in and the condition of the market when you buy your home, you can make a hefty profit (or in unfortunate cases, suffer a financial loss) when you go to sell your home.

  2. Predictability. When you sign a lease, you have an agreed upon dollar amount paid monthly (generally) that does not change over the course of the lease. When you own a home, although you have a set monthly mortgage payment, you can have unexpected costs that can pop up at any time. One month you could have your normal mortgage payment or a repair that costs hundreds or thousands of dollars that may or may not be covered by your homeowner’s insurance. Another huge expense when owning a home is the mortgage interest paid over the course of your loan. It can really add up!

  3. Stability and Longevity or Flexibility? Homeownership can be great for folks who love being a part of a neighborhood/community, like consistency, and plan to stay in an area for a long time. It might not be great for those, however, who like change, move frequently for work or just generally like the ability to be spontaneous with their job and living situation. Leases generally last for 12 months and have a relatively minor penalty for breaking the lease agreement early. When owning a home, however, there are significant costs when selling. You also have no control over the condition of the housing market and may not be able to pick and choose the best time to put your home on the market in order to get the biggest return on your investment.

  4. Repairs, Maintenance and Home Improvements. Are you handy? Do you enjoy fixing projects around the house or working on home improvements? What about mowing the lawn, watering flowers, cleaning a generally larger square foot space? These are all things to consider when owning versus renting. Generally when renting, all maintenance and repairs are paid for and handled by the property owner/management. When you own, these are all your responsibility. So if you don’t have the desire, skill or time to do these things yourself, you’ll have to pay to hire someone to complete these tasks for you.

  5. Homeownership – Is it an Investment? Another common myth people will often hear is that homeownership is a great investment and sure way to build wealth. In many instances, this can be the case. In many cases, however, this may not be the case. Homes are not guaranteed to appreciate in value and there can be a variety of factors that impact whether your home increases, decreases or maintains its value. You also have to factor in the cost of maintenance and repairs over the length of time you owned your home. One perk that homeowners get that renters do not is the ability to get a tax deduction for your mortgage interest and property taxes. The deduction is not a 1:1 ratio, however, and these expenses are not expenses renters incur either way.


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