Chaylyn Sefton
Is Renting or Buying A Home Better?

Renting vs. Buying
One of the most common questions pondered by first-time homebuyers before purchasing a home is this, "Would renting or buying be best for me?" While we can't answer that question for you, we do want to help you answer it for yourself. Keep reading for the Pros and Cons of each option to see which is best for you!
Renting Pros
1. No Long-Term Commitment
Most apartments or houses available for rent have short lease period of 12-24 months. This is perfect for someone who plans to move within a few years, a college student who doesn't want to live on-campus at their college, or a small family wh doesn't need much space.
2. Lower Responsibility
Often, especially in the case of apartments, some utilities, pest control, trash, and water are included in your monthly rent payment. Additionally, apartment complexes, and some houses, ask you to pay a maintenance fee that is built into your monthly payment which covers plumbing and repairs as well as lawn care so you don't have to worry about it.
3. Predictable Payment
Another benefit that comes with renting is the predictable monthly payment. Sometimes, if utilities aren't included in your rent, you will see a slight increase or decrease in utilities such as electricity and gas. However, for any utilities included in your monthly payment, there will be predictability. A full list of monthly charges will be provided to you upon touring, generally, and this price will remain for the duration of your lease. Private properties such as homes can differ, but the monthly price of renting is always predictable, either way.
Renting Cons
1. Payments Don't Build Equity
This concept is pretty simple. When you pay your monthly mortgage, and especially if you pay more than your minimum payment, you are paying toward the principle of your home. This increases the amount you will get from a sale in the future should you decide to sell. With the case of renting, your monthly payments are building up your landlord's wealth, not yours. Whether it be to an apartment complex or a privately owned property, this can feel like throwing away money.
2. No Tax-Breaks
Though tax breaks on selling a home have changed over the years, there is still one break that is helpful. This is that you won't pay any capital gains tax on the profit you reap after selling your home, up to a limit of $250,000 for single taxpayers and $500,000 for married filers. However, for those who rent, there are no circumstances under which you could be eligible to deduct the cost of rent on your taxes.
Buying Pros
1. Payments Build Equity
In contrast to renting, owning a home can help you build credit and equity. Paying your mortgage, especially with payments higher than the required minimum, reduces your principle. This means that if you decide to sell later, you will be able to receive more money upon closing.
2. You're in Charge
Owning a home means that you are the boss and have the biggest say in your lifestyle and family decisions. Owning a home would also remove much of the risk of having to move because you are not under a lease of 12-24 months. Do you have pets you don't want to part with? Apartment complexes and other rental properties can be finicky about dogs, cats, rabbits and reptiles, but if you own your house, there aren't many rules you would have to follow about pets- barring any rules of your HOA. Do you love gardening or redecorating? Need a place to store your boat or cars? As a homeowner, you can more easily enjoy these activities without worrying about logistics or restrictions.
3. Stability For Your Family
Psychologically, owning a home often imparts a sense of permanence and stability to homeowners. If you buy a home and you have -- or intend to start -- a family, a home can serve as a safe haven for children and adults alike. Being a homeowner in a neighborhood of homeowners also often leads to a sense of community. When you own a home, the desire to maintain a stable environment can be an emotionally satisfying experience.
4. Tax Advantages
In the United States, the government encourages home ownership by giving homeowners several tax advantages. As a homeowner you'll be able to deduct any property taxes you pay, and you also can deduct any mortgage interest paid. The mortgage interest and property tax deductions on a home can be quite significant and result in several thousand dollars yearly in your pocket. Putting away income tax savings can create a substantial nest egg over time.
Buying Cons
1. It Is Harder to Move
While renting brings a certain level of freedom and less commitment, ownership creates roots. So if you want to move, you'll need to market your house and wait for a buyer to offer the right price before you cash out the equity in your home. Depending on the market, you may end up waiting a lot longer than you'd like before you can move elsewhere.
2. HOA Fees
Depending on where and what you buy, a homeowners association or condo association could require you to pay hundreds of dollars a month in fees. The association may increase fees to keep pace with inflation or at times impose special assessments to pay for capital improvements. You may exercise little control over the amount or timing of these fees, especially if you don't sit on the association's governing authority.
3. Property Taxes
Be prepared to pay several thousand dollars a year in property taxes, which for many municipalities constitute the bulk of their revenue. In some parts of the New York metro area, the average tax bill tops $10,000. Your municipality imposes your property tax based on your home's assessed value. You probably won't always agree with the assessed value and hence the property tax amount, and you might attempt to appeal the assessment, but you are obligated to keep your property clear of tax liens.
The Rule of 20
So now you know a few pros and cons for each option... What now? If you’re truly undecided or you’re trying to make a logical decision based on the numbers, consider the Rule of 20. According to this rule, multiply your annual rent (i.e., monthly rent times 12) by 20. Compare that figure to the value of homes in your area. If the purchase prices are lower, it may be more cost-effective to buy. However, if the multiplied rental value is higher, it may make more sense to keep renting.
Conclusion
Whether to rent or buy is one of the biggest financial decisions you may make. To figure out what’s right for you, you need to balance the costs that go into renting versus the commitment that goes into buying. Although the financial pros and cons of each option are important, ultimately renting or buying is a personal decision.
Where Does Lincoln Realty Come In?
Aside from providing information and resources like this article, Lincoln Realty is a team of experienced and knowledgable brokers with a heart for helping others. If you are considering renting or buying or if you need help figuring out the best option for you in your community, we would love to talk! Call our office to discuss your options today!