Should you rent an apartment/house or purchase your own home? The conventional wisdom is a resounding “BUY!” The theory goes that renting simply makes the landlord more money while the renter gets nothing out of it. This is only half true. Of course the landlord makes money, that’s why landlords do what they do. The obvious drawback to renting is that you’ll never own the property.
What are the advantages?
As a renter, the responsibility of a mortgage doesn’t hang over your head. Apartment leases are usually six months to a year. If employment situations change, families grow, wanderlust takes, renters need not worry about off loading a home. Instead, the possibilities of subletting and negotiating with the landlord (especially if renting a private residence) are available. At the worst, the renter has a year and then they are free and clear. Homeowners have no such guarantee. If a homeowner is unfortunate enough to have purchased in an area that is no longer growing, depreciated in value or had some outside event like a major employer leave the area, they may not be able to easily sell. Further, those that experience unforeseen financial difficulties may risk losing their home in a foreclosure.
Another advantage to renting is maintenance. If the A/C unit goes out in the middle of a triple digit summer, the homeowner must tighten the belt and find a way to fix it. A renter by contrast calls the maintenance hotline. The ancillary costs of owning a home are endless: lawn care, pool maintenance, A/C, foundation cracks, roof leaks, termites, fence repair, exterior painting, remodeling, etc.
Finally, renters do not pay tax on the apartment/home they rent, but homeowners pay tax on homes they own. Taxes will vary from place to place and depending on the value of the home, but rent costs nothing in taxes. Also, many homeowners don’t actually pay off their homes before they move on. So the homeowner doesn’t make positive gains, then essentially the landlord was the bank except that the responsibilities of maintaining the property was on the individual.
Realistically, the question requires that the individual examine what they want out of their home situation. Neither option is superior to the other. Rather, the answer is unique to the financial situation of the individual. Before buying it is important to consider the state of current and future financial standing.