Renting vs. Buying
Buying a house is a pivotal part of the American dream. You grow up, get an education, start a career, build a family, buy a home, and settle down. But what if you’re not ready to settle down? Should I rent or buy is a serious question many people ask themselves any time they’re in a transitional period. But it’s not a question anyone should answer lightly.
Buying is a long-term commitment. But it’s also an investment in your future. Renting means you aren’t responsible for home repairs and other expenses that seemingly pop up from nowhere when you’re a homeowner. But that also means you have less control over your home.
There are pros and cons to both. So, should you rent or buy? Let’s break it down.
Buying – Pros and Cons
Buying a home is a decision that no individual or family should make without some serious thought. Even if you’re in the financial place to buy a home, it can still be the wrong time.
- It’s an investment in your future. Buying a home allows you to gain wealth incrementally over time, and all you have to do is live your life. Your personal wealth increases with every month that passes. Plus, every payment you make gets you one step closer to homeownership. That’s money you’ll be spending on rent, anyway, so why not use it to buy?
- You have more control. You don’t have to ask permission for anything. If you want to renovate parts of the house, add a new room, or paint the walls a bunch of crazy colors – you can! If you feel the urge to get a roommate, rescue a Great Dane, or install a skylight – go for it! When you own the house, you have complete control over it.
- Lower Cost. Barring any severe issues that need fixing, mortgage prices can sometimes be lower than rental properties. That means you can actually save money by investing in your future.
- Passive income streams. If you want to eventually turn your home into a passive income stream, you can turn it into a rental property! This will obviously only work if you own more than one property, but the road to owning multiple properties typically starts with one.
- You’re stuck. Maybe not forever. Obviously, you can always sell your house and leave or buy a new one, but that takes time. This isn’t like renting, where your lease runs out every year, and you can just pick up and move wherever you want. You have less freedom when you’re buying a house because you’ve planted roots.
- Property taxes and homeowner insurance. Nobody wants to spend more money on taxes or pay the premium on yet another insurance, but when you’re a homeowner, you have little choice. Florida’s property tax rate is about .98% annually, which is lower than the U.S. average. The average cost of homeowner insurance per year is just under $2,000.
- Repairs can be expensive. Speaking of extra expenses, what happens if you need to replace your HVAC system? What if there’s a leak, the water heater goes out, or you need to fix a faulty foundation? These are all issues that you can’t call a landlord to fix because, for all intents and purposes, you’re the landlord. As a homeowner, it’s your responsibility to fix any issues that may arise.
Renting – Pros and Cons
Most people dream of owning their home, but sometimes that’s not the right decision. For all those who aren’t sure if they want to invest in their forever home, renting might be the best option.
- Repairs and maintenance fees aren’t your responsibility. Your landlord’s in charge of that. If your water heater breaks, cabinets need to be replaced, or you have a pest problem – it shouldn’t cost you a thing! In most cases, even if rent and mortgage payments equal out, renting is far less expensive because of the accrued maintenance costs that come with the normal wear and tear on a home.
- You aren’t nailed down. If you’d like to backpack across Europe or move to another state on a whim, it’s going to be a lot easier to wait out a one-year lease than a 30-year mortgage. Renting gives you the freedom that buying doesn’t. If you aren’t ready to be settled down, then renting might be the right choice for you.
- You need more time to prep, build credit, and save money. If you aren’t financially prepared to buy a house, then renting is the perfect option for you! Leasing allows you to live where you want and take the time you need to prepare for your dream home.
- Unstable and unregulated pricing. While you’re within the term of a lease agreement, you should be protected. But once the lease has ended, the landlord can choose to raise the rent to whatever price they want. As a result, you could see sudden significant shifts in your cost of living. If you’re forced to move because of a sudden rent increase, that’s also problematic because moving is both stressful and expensive.
- Living restrictions. Landlords control a lot of what’s allowed on their property because they own it. They dictate the color of the walls, whether you have carpet or hardwood, or whether or not you can have a pool in the backyard. They can also disallow pets (or charge an extra premium for them). Renting might ultimately mean less freedom over where you live.
- You’re potentially throwing money away. Let’s say you’re spending $1,500 a month on rent. After three years, you’ll have spent $54,000. That’s a lot of money that you’ll never get back. In fact, you might’ve been paying someone else’s mortgage instead of your own.
Renting vs. Buying – When to Buy
Before you think about buying a home, you should first evaluate whether or not you’re financially ready for it. What’s your debt-to-income ratio? Do you have enough set aside for a down payment? Are you ready to settle down? These are all super important questions you need to answer before you take the plunge.
Do your research and understand what you’re getting into. This is a huge decision that you shouldn’t rush into. As we mentioned above, renting is always a great option if you’re not quite ready to buy. It can also give you the time you need to save up money for a down payment or improve your credit score.
When you are ready to buy and looking for your dream home in Jacksonville or anywhere in Northeast Florida, contact the Welch Team. We’d love to help you get started!