Renting or Owning: Financial Benefits of Each Option
Not long ago, the experts agreed that buying a home was, without question, the smartest financial decision for anyone in the market to move. Today, however, renting is back in vogue, and not because consumers are careless. In fact, quite the opposite is true. Shoppers are smarter now than ever, and that knowledge is fueling the trend.
So what do these uber-educated individuals know that you don’t? Good question. Seeing the financial benefits of both choices side-by-side will give you a clear picture of which option – renting or owning – is best for you.
Best of Both Worlds
“As a 40(ish) mother of 3, I have been a renter, owner, landlord, and even at one time lived in a camper on a friend’s property,” says Holly Grate, now a successful real estate agent in Washington DC’s vibrant suburbs. “There are benefits found in each of these situations – except maybe for the camping excursion,” she laughs.
Grate joined us to offer her expert perspective on what makes each option attractive.
- Renting doesn’t affect your debt-to-income ratio. If you’re like 70 percent of Americans, you would need to take out a sizeable loan to afford to buy a home or condo, and that means the credit monitoring companies will take notice. While consistently paying a mortgage on time builds credit, sometimes your goals are not to beef up your score, but to stay agile.
- Renting can be short term. “One of the joys of being a renter is the flexibility it can offer,” says Grate. “If you know the job you’ve just taken will only be a one-year commitment, renting would offer the most benefit. Trying to find the perfect place isn’t as big of a concern either,” she says. “Don’t love it? Oh well, it’s only a 12-month lease!”
- Renting requires less responsibility. “A huge benefit of renting is just that – you aren’t the owner,” says Grate. “Roof is leaky and in need of repair? Call the landlord! The dishwasher has ceased to wash? Hello, landlord!” The time, energy, and headache saved in home repairs and maintenance sometimes actually is all it’s cracked up to be.
- Renting lets you test drive neighborhoods inexpensively. Grate tells the story of a geographic area she and her husband fell in love with when they first moved to our nation’s capital. Instead of buying, they rented a home there and learned over time that their dream community was quite the opposite. “Thankfully we were just renting and not committed for the long haul,” she says. Renting lets you leave quickly without needing to attract a buyer or labor through the closing process and all its costs.
- Buying means investing. When you write that check each month, it can go to a landlord, never to be seen again, or it can go into equity, which will – at least partially – be recovered when you resell or pass down the home.
- Buying allows pride of ownership. When faced with the choice of renting or owning, consider whether you tend to enjoy expressing yourself in other areas. “Having a home to call your own brings the freedom to decorate and renovate as often as your paycheck will allow,” says Grate. “Watching a home become something that is completely yours is a thing of pride and beauty.”
- Ownership offers a number of tax deductions. If you dread every spring season because of the taxes you always owe, having a home of your own may be a refreshing change.
No matter the route you choose, make sure you are set-up financially to handle the cost that each one brings to the table. If you need help getting started, call your friends at CESI
What benefits have you experienced with renting or owning? Leave a comment below!
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