Should I Rent or Buy? The Age Old Comparison Updated for Today’s Real Estate Market
February 26th, 2009 categories: Buying a Home
As Spring rolls into view many people in Northwest Arkansas and around the country are considering their housing options. One of the biggest questions in today’s real estate market is “Should I rent or buy?” Especially in today’s economy, this is an excellent question. Let’s examine the pros and cons of both renting and buying and see which one makes the most sense for you and your family.
Examine your situation
A decision to rent or buy boils down to just a couple of things.
How long do you plan to stay in the house?
If you have plans to stay in the home for less than two years…I would favor renting instead of buying in this market. Because of tax laws as well as purchase and selling fees…renting is much cheaper than buying when you are considering a shorter time-frame.
If you plan to stay in the home more than two years…buying is usually the better choice because because of appreciation, tax deductions, and a few other factors.
What is your financial picture?
If you have a low credit score (right now below about 610), high credit card balances, lots of expenses, and your job or career is transitory in nature…..you will be much happier renting. Contrary to popular belief, home ownership is not for everyone. The popular notion that everyone deserves to own their own home is most of the reason for our housing crisis. If you are bad with money and cannot paint a sound financial picture then you should definitely rent. Remember that there is nothing wrong with renting. Even well-off families and individuals rent because they don’t like the idea of being tied into a mortgage. They are benefiting as we speak.
Weigh the pros and cons
Renting Pros
- Easy to uproot and move with little notice
- Low maintenance costs
- Repair and maintenance taken care of by another party
- No insurance is required (tenant insurance is highly recommended though)
- Many choices and good rental rates in current market (but getting tighter)
- Much cheaper to move into a rental
Renting Cons
- Easily evicted from home if late on rent or owner goes into foreclosure
- Often don’t get deposit back
- Cannot modify home to your preferences
- Maintenance and repairs may be slow to be addressed
- May be locked into a specified period for lease (year or more)
- Owner has the right to enter your property with notice (no real privacy)
Buying Pros
- Build equity over time
- Receive a tax deduction for interest paid on mortgage
- Receive a tax credit when buying a home of $8,000
- Do anything you want to the home, it’s yours.
- Repairs and maintenance can be done quickly and effectively by you or someone you designate
- No one may enter your property without your permission (if they do, call 911)
- Earn money from the appreciation of your home (especially if you buy soon, near the bottom)
- Use your home to get a line of credit or home equity loan
Buying Cons
- Home ownership can be expensive with mortgage payments, insurance, property taxes, repairs, and improvements
- Unexpected expenses can be harmful to your wallet
- Home may depreciate in value
- Expenses associated with purchase and sell of home can be significant
- Most buyers must put at least some cash down to qualify for a loan
In the end, a lot of the decision comes down to your preference. Would you rather have the portability of renting or the stability of home ownership? When counseling potential home buyers I always try to help them make the decision more financial than personal. If you can afford home ownership, I believe it is the better option for most people. If you cannot, renting can be a responsible and rewarding decision.
Are there any other pros and cons I have left out? If so, just leave me a comment and I’ll be happy to add it to the list. If you are trying to figure out what to do in your unique situation, please contact me so I can help you make the most informed decision possible.
