There is a natural appeal to owning a home. Up until the housing crash in 2008 most people considered owning the way to go for a number of reasons. However, there are also some advantages to renting. Depending on your situation, you may find that renting may be a better short-term option – or you may just be dying to own your own place. Either way, it can be worthwhile to consider some of the advantages and disadvantages of each approach.
A good approach to figuring out what may or may not be best for you is to speak to a qualified Realtor in the area you are thinking about relocating to. I consulted with one of the best Realtors in Franklin MA that I happen to know has been in the real estate industry for almost three decades to get his take on renting vs owning. Bill provided me with some really excellent considerations to think about.
Renting Vs. Owning
Get the lay of the land. Moving into a new area can be challenging at the best of times. You have searched the internet for information, visited the new town and maybe even talked to a Realtor. The problem is, none of these may be enough to know the areas you prefer long term.
Renting gives you a temporary base to find exactly the neighborhood you are looking for. You can use the time in your rental to really scout out not only towns you like but also narrow it done to specific neighborhoods. When you have time to do this kind of research you will more than likely not make a decision that you will regret later.
Fix credit problems. If you want the best rate on your mortgage it can help to have a solid rental history. You may have had problems in the past with on-time rental payments or even credit card debt. Now is your chance to clean things up. Do all that you can to get your credit up to standards to get a rate you will want for the long term.
Address money or job troubles. You may not be in a career you see as long-term. You may not be making the money you need to get the house you want. Renting gives you breathing room to match your rent to your current budget and explore career opportunities.
Free from responsibility. One of the best parts of renting is that your landlord is responsible for the repairs to your residence. If the HVAC unit goes out, you will not be the one paying for the repairs.
Equity. This is the biggest draw for many people towards buying. Instead of paying your landlord’s mortgage, you are paying your own. Over enough time you should build equity in your home that you can use for a number of things. Wait long enough and you may be able to sell for a profit and move into an even better home. Some of the greatest fortunes in our country were made by those who started with very little but ended up as millionaires due to making smart real estate investment decisions.
Control. It’s your house. You can paint it whatever color you like (unless you are part of a home owners association that prohibits it). You can knock down walls, install a bar, remodel the kitchen. It is all up to you. This is another area where the upside of an increase in equity can be made by your investment in your home.
Responsibility. The flip-side to all this control is responsibility. When you own, you are the one paying to repair the HVAC unit. This requires forward thinking and budgeting to make sure you have the funds set aside for emergencies like roof repairs and general home repairs.
Tax benefits. As a homeowner you can take advantage of tax deductions that renters do not have access to. Everyone’s tax situation is different, but homeowners typically deduct things like the interest on their mortgage and property taxes. You even get tax breaks when you sell the property. A married couple can enjoy up to $500,000 in profit from the sale without paying capital gains tax. For a single seller non-taxed profits are capped at $250,000.
Stability. The first time you move into your own place is exciting and fun. The second time you move may be nearly as good as the first. Over the years moving does become a chore, though –especially if you have a family. Owning a home is an long-term decision that allows you and your loved ones the stability necessary to enjoy what life has to offer. It may not be right for everyone, but most homeowners wouldn’t have it any other way.
Use this information to make a sound decision on whether buying a home or renting one makes the most fiscal sense for you. Understand the consequences of each situation and you will be better off in the long run!