Renting vs. Buying Your First Home
Are you facing a big decision regarding purchasing your first home? Many people feel quite clueless when deciding between getting a rental or buying a home.
Both decisions have their pros and cons. The best choice depends on your personal preferences, lifestyle, and financial outlook. In this article, you’ll learn all about the different aspects to make your final resolution.
Advantages of Renting
Freedom is important for many first time homeowners as they tend to be younger people. Rental properties give you the freedom you need as moving to another city or even another state is easy.
You just need to have a look at the contract to know what the terms of cancellation are. Sometimes you might need to pay a small penalty if you want to leave outside the established lease. Still, you’ll be significantly more mobile compared to buying your own home.
Another benefit of renting is having less responsibility. Of course, you’ll be responsible for any damages or other issues, but you won’t have to sweat about maintenance, fixing old appliances, and so on.
Your landlord will be tasked to take care of all these potential problems. That means less financial burden compared to having your own home.
A rental property will allow you to invest money in other things. In most cases, the Onsite PM team says, renting a place is cheaper compared to the mortgage when you take insurance and taxes into account.
If you want to save money for something specific or use investment opportunities not connected to real estate, then living in a rental might just be the key to unlocking a surplus of money.
Disadvantages of Renting
Restrictions, restrictions, and even more restrictions. While you have the freedom of not being tied down to a particular place for 20 or 30 years, you won’t have the freedom to make a lot of changes to the property.
And planning to get a pet might be a deal breaker for your landlord. That’s why it’s very important to sort out any potential issues before signing a contract. There are many rules that you might not have thought of beforehand.
What if the owner decides to sell the unit? You’ll need to find a new place. It might not be that easy when they raise the rent as well.
Quite a common situation involves the tenant leaving the apartment or house because the rental got a bit too expensive. You should always check the regulations in your area. Raising the rent is heavily regulated and your landlord can’t just send you a bill with surprising numbers out of nowhere.
Another disadvantage is leaving the property with empty hands. Home ownership is an investment that comes with more payoffs.
In the case of rentals, you can’t get any cash proceeds, home equity, or just ownership that could be handed off to the next generation. Fixed mortgages might actually amount to less in the long run because rent often grows higher and higher in time.
Advantages of Buying
Owning a property is a value in itself. You are able to call it your own home without any restrictions. Handing it over to the kids is a realistic plan.
And imagine all the freedom that comes with owning your own home. Want to paint the walls or do some serious landscaping? No problem, because you are the boss. Many people love the feeling of complete freedom that comes with home ownership.
Don’t forget about the tax benefits! The details depend on your location and particular situation. There are many states out there that exempt homes from property tax assessments up to a certain amount of money.
Also, you might be able to gain the upper hand through federal tax deductions. This means you have to itemize the federal income taxes first.
You might turn your home into an investment property even if you didn’t plan this initially. It’s a great way to minimize your mortgage and insurance payments.
Earning rental income doesn’t always mean you’d have to leave the property. You can use just part of the house for rental space. In high-value areas, even basement bedrooms are quickly rented out.
Disadvantages of Buying
Home ownership is a lot of responsibility. You have to take care of anything that’s broken or needs work done. For some people, this means a lot of stress, especially when the home has aged and needs a lot of maintenance to keep it going.
Buying a new home won’t mean that you can just relax for years on end. There are always unexpected issues that crop up that need to be resolved quickly in order to avoid bigger expenses down the road.
The initial investment can be quite a lot of money. Even if you don’t outright buy the property, the down payment can still carry a hefty price tag. In some areas, mortgage payments could easily exceed the average rent prices.
As noted, one of the advantages of buying is building equity over time. This benefit comes with the risk of financial loss. When the value of the properties in your area decline, you are looking at the harsh reality of that situation dragging down your home’s appraised value as well.
So, what are the pros and cons of renting or buying your first home?
Renting your first home gives you the freedom to move, fewer responsibilities, and the potential for investing the money elsewhere. The downside is having plenty of restrictions on what you can do inside the property.
For some people, this might mean serious lifestyle constraints. And you are faced with the risk of having to move to another place because the owner decides to sell the unit. Owning property gives you unlimited freedom to do everything that you want as you’ll be your own landlord.
Tax investments might be a nice incentive as well, depending on your particular location. But buying a home isn’t a perfect decision. You’ll face demanding responsibilities and the risk of financial loss. Take time to reflect on your circumstances and future outlook to make the best decision possible.