Choosing to rent or buy your home is a major decision that affects not only your lifestyle but also your financial health.Real estate ownership is an investment that is likely to build equity and a source of tax deductions. Renting also has its advantages, including little to no responsibility and flexibility. However, people often believe that buying a home, rather than renting, is the more financially sound decision.
Renting- Renting means you can move without penalty each time your lease ends. However, it also means you could have to move suddenly if your landlord decides to sell the property or turn your apartment complex into condos. Less dramatically, they could just increase the rent to more than you can afford. If you rent, your landlord will often take care of all the repairs and maintenance, throughout the course of your lease agreement.
Buying- Homeownership brings intangible benefits, such as a sense of stability, belonging to a community, and pride of ownership. However, it is not good for restless or nomadic types. Real estate is the original illiquid asset. You might not be able to sell when you want if the housing market is down. Even if it’s up, there can be significant transaction costs when you sell. Changing your mind about where you want to live is far more expensive when you own.
Here are some expenses you may incur a homeowner that you may not have to pay as a renter:
Repairs and maintenance
Pool cleaning (if you have one)
Lender-required flood insurance, in some areas
Earthquake insurance, in some areas