I’m sure you’ve heard it before: “Don’t rent! You’re wasting your money!” It’s one of those age-old sayings that keeps repeating itself over and over again. But is that advice good for everyone? Or is it any good at all? Let’s explore the renting vs. buying a home debate and discuss some pros and cons along the way.
Too often, renting gets dismissed as something that people have to “grow” out of. But it might surprise you to know there are major benefits to renting.
Homeownership can be great, but renting gives you flexibility. You have the ability to change where you live after your lease is up. The changes can be big or small. You can change what type of housing you have or even change the city, state, or country you live in!
Con#1: Your Housing is Not Your Asset
When you rent, you’re giving money to your landlord each month. While there’s nothing wrong with that, it can be thought of as a con if you’re looking to grow your wealth and net worth.
The price of homes has grown immensely recently. By some reports, home prices rose almost 19% last year!
For homeowners, they are dancing in the streets as they see their net worth and home equity grow. People looking to become first-time homebuyers and renters aren’t dancing so much at this news. So yeah, that could be a big con for some.
Pro#2 Less Maintenance
The amount of home maintenance and repairs the landlord has to do over and over is just insane. In other words, home ownership is a full time job.
When you consider the time and cost of home maintenance and repairs, renting feels more relaxing.
Con#2 Rent Can Increase, while Home Loan can be Fixed
The national median rent increased by 10% in 2021, compared to the previous year.
Unless you’re in a rent-controlled housing situation, this can spell trouble for people who are looking to make ends meet and haven’t seen their incomes increase anywhere near that amount.
Pro#3 You Don’t Need to Save Up a Lot to Purchase
If you need a place to live, renting helps you find housing more quickly. You don’t need a down payment. Instead, you need a security deposit plus the first and next month's rent.
Renting is the clear winner here in terms of the amount of money you have to scrape together to get yourself the keys to a new place.
Con#3 Long Term Investment
Just like stocks and other assets, the longer you hold your home, the more wealth you’ll create. Even over the last 5 years, the median home price has increased by $100,000.
Of course, this varies where you live and when you buy. But in comparison to renting, statistically, homeownership does help you build wealth.