Pros and Cons
Finding a place to live is one of the most complex and consequential decisions you will ever make. And while you will need to consider things like the amount of space, the amenities available, and the neighborhood, those are not the features to focus on first. You will want to start by deciding whether to buy or rent a home. There are pros and cons to both options, and the right choice will be different for everyone. Use this quick comparison to help you debate buying vs renting:
Buying a Home
- Build Equity – The value of a house you own is likely (though not guaranteed) to go up over time. The increased equity can provide a nice nest egg for retirement or increase your borrowing power.
- Get Creative – You are free to customize a house you own in almost any way you want. That makes it much easier to turn a house into a home.
- Save on Taxes – Home ownership makes you eligible for a number of tax benefits. Writing off your mortgage interest and property taxes can help you save significantly during tax season.
- Pay for Maintenance – Homeowners are solely responsible for any maintenance the property requires. When all the bills are added up, this can cost you over $1,000 a month on top of your mortgage payment.
- Upfront Investment – Buying a home requires you to pay a down payment. Rates vary, but it is not uncommon to pay 20% of the total purchase price up front. Even for a modest home, this means paying tens of thousands of dollars up front.
- Lose Flexibility – Selling a home is a difficult and uncertain process. If you need or want to live elsewhere, making the transition can cost more and take longer than you expect.
- Purchase – You should seek legal assistance in drafting an Offer to Purchase to make sure you are legally protected in the purchase, and if issues come up after closing. Without proper legal documents in place, your dream home can turn into a nightmare overnight.
- Plan for the Unexpected – Homeowners needs to take additional steps to plan for the unexpected. Estate planning documents should be put in place to say what would happen to the home if the homeowner were to pass away. If two individuals buy property together, they should consider how they will take title to the property (e.g. “joint tenants with rights of survivorship” or “tenants in common”) and what would happen if something happens to one of them.
Renting a Home
- Gain Flexibility – Renting allows you to move someplace different in little to no time and without the hassle of trying to sell a home.
- Lower Costs – Landlords typically perform all maintenance and may even cover some utilities. Depending on where you live, the monthly cost of renting tends to be less the owning.
- Simplify Lifestyle – When someone else is responsible for cutting the grass and fixing whatever breaks, you spend a lot less time performing stressful labor.
- Lose Freedom – Most landlords restrict how you’re allowed to modify a property and how many people/pets occupy it. Renters have less overall freedom to live as they choose.
- Sacrifice Equity – No matter how long you live in a rental property, you never build equity. Renting is never an investment opportunity.
- Live with Uncertainty – Your landlord could choose to increase your rent or ask you to move out unexpectedly. There is much less certainty when you live on someone else’s property.
- Read the Fine Print – Renters should read their leases carefully before signing, so there are no surprises down the road. Depending on the landlord, some terms may be negotiable.
- Get Everything in Writing – All verbal agreements should also be written in the lease. If it’s not in writing and there’s a dispute down the road, it could turn into a “he said, she said” situation. For example, if a landlord promises to fix certain items, the promises should be put in writing.
This guide is not meant to sway you in one direction or another. The purpose is simply to illustrate that both buying and renting are more complicated than they seem. Both also involve committing to contracts and other legally-binding agreements. Considering how important it is to have a place to live, you will want to be certain these agreements are fair, complete, and transparent before you sign. No matter which housing option you choose, reach out to an attorney from Schloemer Law Firm to help you make sure you are legally protected.