Renting Vs Buying: The Futile Debate
Adulting is hard. Coupons are the new baseball cards, 401k’s are an engaging conversation topic at “parties”, and staying up past 10 is just absurd. Additionally, it’s in this phase that making the decision to purchase a home becomes realistic.
Your friends and family will judge you on your pro-renting or pro-buying stance, and you will quickly feel the pressure to settle into a humble abode. What most don’t see, nor understand, is the ocean of grey area between buying and renting.
Before deciding whether or not you should purchase a home or remain a renter, let’s shed some light on this grey ocean, as well as the objectivity on either side of the renting vs buying debate.
A Friendly Debate
Status is a unfortunate force in most of our decision making processes. Instead of report cards, we as adults are handed life checklists. With a home as one of these requirements, we are programmed to believe that owning a home is, and always will be, the best option. For debate’s sake, let’s take a look at each sides strongest arguments.
- Mine! All Mine! Once you have paid off your home, it’s yours. Eliminated a monthly expense is one of the most gratifying feelings in adulthood.
- Depending on your homes appreciation over time vs. all expenses incurred over the same period of time, you may see a big return.
- Tax credits can curb the cost of homeownership.
- Your home is your canvas. It gives you the opportunity to make any changes you want.
- Contrary to popular belief, renting isn’t throwing away money. You are providing you and your family with shelter.
- No interest or taxes
- No need to pay for repairs, maintenance, or other issues
- No need to mow lawn, remove snow, monitor sump pump, etc.
As you can see, some black and white objectivity does exist within the renting vs buying debate. Neither is inherently good nor bad.
Where the grey area comes into play is when viewing individual, unique factors.
Circumstance & Personal Factors
The current housing market isn’t in my favor. I don’t know where I will be in my career 5 years from now. My family may see planned, or unexpected, growth within the next few years. When deciding whether or not to purchase a new home or keep renting, certain factors are too often overlooked.
How long will/would I be living in the home?
If you are unsure of how long you would even be living in a new home, it may be a wise choice to pump the brakes on purchasing. Your family may see significant growth, or your career may relocate you to a different city. Either way, jumping the gun without carefully considering these potential events may lead to an overwhelmingly complicated situation.
If you are faced with a buyer’s market, while renting costs are high, it may be in your best interest to buy. On the contrary, renting may give you some much needed time to save while waiting for the market to shift. It’s not always a good time to buy. Don’t let anyone tell you otherwise.
A big piece of advice is to find a financial advisor. Based on your current situation, as well as the current stock and housing markets, they will be able to tell you whether investing in stock market, instead of a home, will give you a better return on investment.
As much as people will push you towards one side or the other, stay focused on what is best for YOU, not what others think is best for you.
Purchase Vs. Investment
Yes, a home has the potential to be a great investment. However, in order to make it so, you must do more than simply purchase and wait. Many people purchase what they can’t afford, solely based on the myth that all homes will see a return in the end.
Because real estate hardly keeps up with inflation, seeing a worthwhile return on investment requires the satisfaction of multiple factors. These factors include:
- The nature of the housing market
- Your neighborhood attractiveness and price points
- How much additional capital you put into your home
- Other important factors
Although your home may not see a high return, it’s not necessarily a bad purchase. As long as you make sure to avoid becoming house poor, your personal situation may make purchasing an appropriate decision.
Your life is far to precious to be dictated by others. Additionally, it should never be dictated by a checklist. Never make a decision, especially purchasing a home, simply for the sake of it. Give careful thought to your situation, needs, and personal desires. The renting vs buying debate should be done on a internal level, with the winner always being you.
Once your decision has been made, make sure to secure your assets and belongings with homeowners or renters insurance.