Renting vs. Buying

This is an age-old debate. Nearly every article I come across (usually written by the Real Estate Sales community), the argument is swayed in the direction of buying. Let’s attempt an objective outline of pros of each:

Pros in Renting:
1. Lower risk associated with decline in Real Estate markets- when Real Estate values dropped drastically between 2008 and 2011, Homeowners and Real Estate Investors took the hardest hit. Tenants, although affected in other ways, didn’t (directly) feel the brunt of the decline.
2. Greater mobility- once the term of your lease has run its course, you are able to relocate easily. Whereas, if you have a home to sell, it may take months and if the market is stagnant, sometimes even more than a year to make it happen.
3. Smaller time commitment- Usually your agreement on a lease lasts for 6 to 12 months, as opposed to 15 to 30 years relating to a mortgage.
4. Little or no maintenance- For example, when the hot water heater goes on the blink, a simple phone call and/or completion of a simple work order is all it takes. No money out of pocket, no hassles.

Pros in Buying:
1. Lower risk/greater opportunity associated with rising Real Estate Values- When the market is moving upwards, rental prices have a tendency to increase while Homeowners typically have a level payment. Also, Homeowners benefit from the capital gains associated with increases in market value, turning their home into a nice investment. During those times, Tenancy really feels like throwing money away.
2. End of payments in sight- Since the loan is amortized over a certain period of time, eventually you’ll own your home outright and your monthly payment commutes to a big ZERO (excluding taxes and insurance of course).
3. Pride of ownership- for those who enjoy upgrading and improving their home, the financial benefit goes directly back to them. Tenancy makes it quite difficult to do this, unless your Landlord allows it and is willing to invest in those improvements– finding such a Landlord is a rarity.
4. Less money out of pocket- I know this seems counterintuitive, however today there are loan programs in which a Buyer will have to pull fewer dollars out of pocket than a Tenant. After calculating only first month’s rent plus a Security Deposit, the Tenant has more into a property than it takes to execute a purchase. All it takes to do this is work with a Real Estate Professional who is aware of these programs and that knows how to structure the offer to make this occur.

So, since we’ve ended up with a 4-4 tie, we can expect the debate to continue! Actually, the best answer to the question, “Is it better to buy or rent(?)”, is “it depends”! It depends on which of the above are most important to you. There you will find your (own personal) answer.