So you’re new to the real estate world and you’re looking for a new home. One problem, you’re not sure if you should rent or buy. Is it better to own or rent? Today we explore the advantages of renting and owning to help create a clearer picture for you to decide.
Related: Why You Should Buy an Investment Property While Renting
Factors You Need to Consider
There are several factors to consider before deciding if it is better to own or rent property. It is a decision that will affect your lifestyle as well as your finances. Consider the different factors: where are you, and how long are you there for? What’s your financial stance like? What are the local market trends in your area? And most importantly, what does the future hold for you?
Deciding if it is best to own or rent is personal to a person’s circumstances, position, and location. The United States real estate market is HUGE and very diverse, so what makes sense in one neighborhood or city or state may not in the other. So how do you decide if it is better to own or rent? In general, from a real estate point of view, it is encouraged to own at least one property as a source of income, even if you’re renting out somewhere else. For insights on thousands of properties nationwide, use Mashvisor to search for and find the best property for your investment.
Advantages of Renting
Flexibility
The first perk of renting a home is flexibility. This is especially important if you’re the type of person who moves around a lot, whether it’s relocating for a job or simply because you like to move and experience life in different cities. Moving is much easier, less time consuming, and less costly when you’re renting a home. It’s not as easy if you own a house however; selling is much more difficult, and you may even be forced to sell at lower than your property’s value if you need to make a quick sale. Other aspects of flexibility include that of other investing options, the extra time you gain from not having to manage multiple properties, among others. Consider those when you ask yourself if it’s better to own or rent?”
Renting is cheaper . . . or is it?
Generally, if home prices are affordable, it is cheaper to rent rather than buy. And with home prices skyrocketing nationwide, it is no surprise many prefer to rent. In the short run, this might make sense, but as long as home prices are increasing, so will rents. So while it may be cheaper to rent now, in the long run, it definitely makes more financial sense to buy a home.
It’s less of a hassle
As a tenant, you needn’t worry about issues like repairs, maintenance, and renovation. Those are the landlord’s responsibility. This also means that ideally, you shouldn’t encounter any extra monthly expenses to your rent. As a result, you have some sort of financial predictability when it comes to renting. On the other side of the equation are the rather unpredictable expenses that come with being a landlord. In addition to mortgage and (possible) rent payments, you may need to tend to and pay for repairs, maintenance, and renovation – something a tenant never has to deal with.
It’s less risky
When it comes to determining if it is better to own or rent, it’s important to assess the risk factor. And renting property is much less risky than owning it. When you’re solely renting a property, you avoid fluctuations of the real estate market and economic instability. This means that there is no potential for loss. Decreases in home values will not affect you if you do not own property.
Advantages of Owning
Making money
The primary advantage of owning property is that you can turn a second home into a steady source of income by renting out, whether traditionally or through home sharing services such as Airbnb. Owning a home as an investment property can help you generate income and cash flow if you keep occupancy rates high. This in turn will help cover any expenses you may have, and generate profit, and hopefully plan for your retirement.
Stability
With owning your own home comes a sense of stability. You’re in more control of your choices, you have housing security; you never have to face uncertainty of not being able to renew your lease, and increasing rents are entirely a problem of your past.
Equity building and appreciation
Real estate investing allows you to build home equity and wealth. Homes are appreciating in most cities around the US and are expected to continue in that direction due to demographic, economic, and market trend shifts. So if your goal is to sell your property in later years and gain on appreciation, then it’s easy to decide if it is better to own or rent. However, don’t rely on appreciation because sometimes, comparing appreciation in years over expenses incurred may indicate that it’s not worth it to invest for appreciation.
Related: Is It OK to Invest in Real Estate Just for Appreciation?
Tax benefits
Owning property means you get to enjoy tax benefits such as mortgage deductions (which renters do not have). In mortgage deductions, mortgage interest is deducted from your tax obligations. Not all homeowners qualify for tax benefits, and not all states apply the same law, so make sure you acquaint yourself with the legal aspect of home-ownership if it’s a step you’re about to take.
The Bottom Line
So, is it better to own or rent? As (almost) always, we don’t have a concrete yes/no answer. It wholly depends on where you stand as an investor. You’re going to need to evaluate and weigh out the advantages of each. Our advice at the end of this discussion is that you should buy at least one property in your career as a real estate investor. After all, this is what the business is about!
Related: Top 5 Sources for Your Rental Property Search
