Many renters find themselves in a state of perplexity – they often ask themselves at least once, should I keep renting or should I buy a home? And often, the answer to this perplexity is buying a home, especially for those who think of the bigger picture. You better believe it applies even in a crowded market for real estate.
Renting – What Are the Pros?
Depending on which part of the country you are from, renting has its share of advantages. A primary advantage is that your monthly rent payment may be less than an equivalent mortgage (but that’s usually not the case, especially with the rising cost of rent). And because the landlord would be financially responsible for shouldering maintenance, repairs and home improvement, you could also save more money that way.
Also, you don’t have to come up with a down payment to get into an apartment or other rental property like you would when buying a house, so the barrier of entry is lower.
In addition, most rental agreements are not a long-term commitment, so it’s pretty flexible to just stay your stay and then just move on somewhere else to live if you choose to.
Still, these advantages pale in comparison to the disadvantages of renting.
Renting – What Are the Cons?
The disadvantages of renting are significant. The disadvantages, in fact, are so obvious that if you had a chance to purchase a home, you would not think twice about doing it.
The biggest disadvantage of renting is the loss of value. Let us assume the following given – you live in an apartment for rent for two years, and through the course of your stay, your monthly rent was $1,000. That means $24,000 worth of rent paid over a span of two years, nothing but straight expense. The $24,000 is simply gone and you will have nothing to show for it other than the time you spent in the home. You have everything to lose, while the landlord has everything to gain.
Rent payments have some form of congruity to the landlord’s monthly mortgage. So let us now assume that the $1,000 rent is equivalent to the mortgage payment of your landlord. So for two years, you have been indirectly abetting your landlord in his goal to build equity in the house as he pays down his loan with your rent money. In addition, the landlord will benefit from any appreciation of the property.
Appreciation, in case you are not familiar with the term, means the increase in an item’s value. If the rental appreciated $20,000 in two years, the landlord has received a windfall. They may have seen a gain of $24,000 in appreciation and payments lowering the mortgage. If only your landlord could give you a plaque of appreciation. Not!!! Most you’ll get is maybe the words “it’s been a pleasure doing business with you”, and then they’re on to the next renter!
Now, what would have happened if you had purchased a similar home with similar financial figures? You would be enriching yourself, and NOT your landlord by $24,000, but through your property’s appreciation. Now I understand that people are at different times in their live and have different situations, but this is seriously something to think about.
I know what you’re probably thinking right now…”OK…but with if the home falls in value?” Well in this case you are the property owner, so you have the power to do several things: You can consider holding on to it until the market rebounds; you could consider selling it; heck, you could even consider renting out a room in your home and have someone else paying or offsetting your mortgage!
Either way, that beats paying your landlord’s mortgage and building his equity and power. Also, there’s homeowner assistance programs that exist to help homeowners that are going through a struggle.
So if you’re renting right now, you should at least start looking around and checking into the advantages of owning your own home. Maybe you’re ready and maybe you’re not, but at least check into it and explore all the benefits that home ownership has to offer. After all, isn’t it time to make your money work for you, and not a landlord?