RENTING VERSUS BUYING A HOUSE
You’ve probably heard that renting rather than buying a house is a waste of money.
You’ve heard that instead of wasting money on rent, you should invest in a home and build equity. Instead of helping your landlord pay off their mortgage, you should buy a house that you can pass down to your family.
Is renting, on the other hand, such a waste of money? Or have you been duped by the real estate industry?
After all, selling your houses is their livelihood. The main source of income is from commissions on house sales.
However, I am not a realtor or a mortgage broker. Whether you buy a house or not, I don’t make any money.
I’m only here to provide you with an objective response to the issue: “Is renting a waste of money?”
“No!” is the short answer. Renting isn’t a waste of money because it allows you to be more flexible in your life and career, provides access to a variety of conveniences and conveniences, and may save you money and worry.
Let’s look at whether you should buy or rent a home in more detail now.
Why Isn’t Renting a Waste of Money?
1. When you rent, you have access to a wide range of amenities.
A gym or fitness center, a pool, a laundry room, an outdoor entertainment area, and 24-hour security are all on-site amenities that many traditional apartment complexes have, among other things.
Purchasing or outfitting a property with luxuries like a pool, a home gym, or a security system may be out of your price range. These things have a high initial cost and require a lot of continuous care.
You may be able to get these things for free or for a small fee when you rent, but they are a lot cheaper than buying them for your own house.
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2. You Can Get Closer to the City’s Conveniences
Do you wish to take advantage of the advantages of living in the heart of the city? Instead of purchasing a property, you should consider renting.
If you enjoy going out, you’ll want to be near popular restaurants, cultural events, museums, trendy nightclubs, and other entertainment options.
Renting an apartment or a house in the city center is significantly less expensive than purchasing a home in the same area. For example, an apartment in San Francisco’s most popular district, Downtown District 8, costs on average $2,620 per month.
It’s different in San Francisco. Homes there sell for about $1.2 million, which means a monthly mortgage payment of $4,370.
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3. Renting lets you be more adaptable.
Renting allows you to modify your address to suit your needs and lifestyle.
If you buy a house, you should be quite certain that you enjoy the area because you’ll be living there for the next few years.
Your age may not be the only thing that changes with each passing year. As a young professional, being close to busy nightlife scenes or just steps away from the beach may be your current focus.
However, after a few years, you may choose to return to a home in a peaceful neighborhood where you can unwind after a long day at work.
If you have children or plan to have children, you should thoroughly investigate the school district. Your kids will be able to go to good schools and get good education based on where they live.
You might come upon a house that appears to be a good deal. However, if you’re not careful, you could end up in a school district that is underfunded, with schools that are unable to give your children adequate educational support.
So buying a house isn’t a good idea if you’re not confident you’ll stay in it for at least a few years. Getting a house, moving in, and then selling it will take a long time to pay back.
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4. It’s Better for Your Career to Rent
Are you looking for a new and interesting work opportunity? If all you have to do is move out of your apartment and potentially pay a lease break charge, you’re more inclined to take advantage of the opportunity.
When you own a home, though, things get a little more complicated. You’re stuck in one place for the foreseeable future because you’ve spent a lot of money on a home.
The stress of having to sell your home would most likely keep you from looking into jobs that require you to move.
You will not only have to go through the hassle of locating a decent real estate agent, but you may also lose money.
You haven’t offset the initial cost of buying a home if you’ve only held the property for a short time. On top of other fees, you’ll have to pay a 5–6 percent real estate commission on the transaction price. Furthermore, the urge to sell your home as soon as possible may lead you to accept a lower offer.
Having a mortgage on your shoulders also pushes you to keep a specific level of income. As a result, you may miss out on job possibilities that pay less but have superior long-term benefits.
For fear of getting fired, you’re also less inclined to speak up when you’re dissatisfied at work or complain when you observe something that goes against your principles.
You will benefit from renting if you don’t have a clear picture of your future work path or if you want to optimize your income possibilities.
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5. There are many hidden costs to owning a home.
If I had a dime for every time I’ve heard, “The mortgage payment will be the same as my rent,” I could purchase a house in cash. But I’m going to establish some equity. So, buying is preferable to renting! It’s a waste of my money to rent it.
People who think this way aren’t aware of all the extra costs that come with owning a home.
Is your refrigerator broken? Is there no hot water for a shower? If you rent, all you have to do is submit a maintenance request. Management will handle contacting a plumber or a repairman and pay for the work.
If you own a home, however, you will be the one to fix it, or worsen it, and then get an expert to fix it.
Regular maintenance charges, like painting, HVAC filters, and landscaping, are also incurred as a homeowner. Appliance and home item replacement is another expense that is frequently underestimated.
Not to mention the cost of property taxes and homeowner’s insurance. Despite the fact that every homeowner is responsible for them, many people overlook them when calculating the cost of a home.
All of these extra fees eat into the value of your home. So, you could pay off your mortgage for years while only earning a 1% annual return on your investment. Worse, by the time you want to sell, you may have seen $0 in real appreciation.
Renting is less stressful.
Having a home comes with a lot of pressure. You are completely responsible for maintaining the structural integrity of your home.
Remember how we talked about repairs and upgrades? Finding the money to pay for them over time isn’t the only issue you’ll have to deal with.
You’ll need to identify qualified tradespeople you can trust to execute an excellent job. You’ll have to sift through dozens of advertisements to find the right plumber or electrician.
And you’ll always be concerned that you’re being taken advantage of since you don’t know how much these services cost.
It takes a lot of time to own a home. Instead of enjoying lunch with friends or seeing the city, your weekends will be spent mowing the lawn, cleaning the pool, or power washing the house siding.
Renting relieves a lot of burdens by allowing the managing agency to take care of all of the necessary repairs and maintenance.
Don’t Want to Buy a House? When was the last time you felt like that?
When Is Buying a House a Good Investment?
So, with so many advantages to renting rather than purchasing, when does it make sense to buy a home?
As previously said, purchasing a home makes financial sense only if you intend to remain in it for at least a few years. As a result, you must be familiar with the location and certain that you want to live there in the long run.
Otherwise, you risk losing a lot of money because you won’t even be able to repay your initial purchase price before selling.
A rent vs. buy calculator can help you figure out when your break-even point will be. The longer you plan to stay in a home, the more money you’ll save by purchasing it.
And the best way to cut down on the overall cost of purchasing a home is to put down as much money as possible.
You should strive to put down at least 20% because this will save you money on private mortgage insurance.
If you’re buying in a high-priced location, this may be an unattainable objective. However, the larger your down payment, the lower your monthly mortgage payment and the less interest you’ll pay in the long run.
If you’re short on cash, I’d recommend a 5% downpayment as the absolute minimum.
You might be a good candidate for homeownership if you have a clear picture of your future and don’t plan to move to a new area or change your job.
Do you have a firm grasp on how many homes you can afford?
Let’s return to those previously mentioned hidden costs of property ownership.
Keep in mind that you don’t just have to pay your mortgage. Maintenance, property taxes, and replacing broken household objects must all be paid for.
That’s not all, though. Don’t forget about your other financial objectives!
Will you be able to save enough money for retirement each month after paying off your mortgage? Will you be able to save enough money for your children’s college fund or to pursue your passion? Will you have to give up your hobbies or cancel your yearly family vacation to finance this house?
If you’re unsure whether buying a home is suitable for you after saying “no” to any of these questions, take a look at my course, Buying a Home: From Contemplation to Closing.
There, I’ll help you determine whether now is the ideal moment to buy a home and how much you can realistically afford based on your financial goals.
Many people will try to persuade you to purchase anything. You must recognize that this is your choice. You are the only one who can decide whether or not buying a home is right for you.
I’ve had numerous meetings with clients who believed they needed to buy a property because others told them they would be foolish not to. However, after weighing the pros and cons of renting versus buying, they decided that owning a home was not for them, at least not right now.
Now it’s up to you to figure out if you’re ready to buy a house, or even if you want to.