Renting or buying: what to consider

When it comes to figuring out your home situation, there are a bunch of areas to think about. This isn’t a comprehensive list, but we felt these were important areas to consider before making any kind of decision.

Location

As the saying goes, “location, location, location!” You have to ask yourself: do I want to be in the city or a suburb? Or do I want to be rural? Do I have to commute or can I work remotely? Is there public transit or do I have to drive?

These questions will give you a good idea if you should rent or buy. Part of this includes the neighborhood or overall area as well. The property itself may be nice, but the area may lack certain qualities. Like the nearby schools may not be that great or the area lacks space to walk a dog. Location also includes everything that’s around the property.

Price

We’re going to be real. It’s rough out there. According to Rent.com, nationwide rent prices have gone up 7.8%. And according to the S&P CoreLogic Case Shiller Index, housing prices went up 19% in January 2022. It’s looking mighty pricey out in these streets. To put this in the real world, average rent rates for San Francisco sit at $3,230 and average home prices are sitting at $1.4million!

On the surface, it seems cheaper to rent. But not every city is like San Fran. If you have the money for a down payment to buy a house, monthly mortgage payments are often lower than paying rent (not including additional costs). Then you may have to consider Mortgage Protection Insurance (MPI). It’s a type of insurance policy that allows families to continue to make mortgage payments after the policyholder dies. Are mortgage protection plans worth it? Well, the average cost of a MPI depends on your circumstances, but you may pay as low as $50/mo for a bare-minimum policy.

Freedom

If you’re someone who wants to transform a space, then renting may not be right for you. Since you don’t own the property and are expected to return it at some point, you can’t make too many changes. Some landlords won’t allow their tenants to paint walls or hang up artwork with hooks. So if you want to indulge in your home flipper instincts, renting may not be for you.

But freedom also may mean the freedom to move when you want. When you own, you’re building roots in the area. So bouncing around is a bit more difficult than if you were renting for only a year or small amounts of time. And if you want to move from an owned property, you have to wait for buyers, which can be longer than expected. Whether you rent or buy, there are varying freedoms for each.

Ownership

There's pride in owning something. A real #adulting vibe. And with that comes a sense of stability. Stability helps if you have a family or want to start one. And if you’re secure in your work position, love your location, and can afford it, finding a space to make entirely yours can be a great feeling. On the flip side, ownership doesn’t have to be your goal. That feeling is intangible, so if it makes you feel good, great. But you should ask yourself whether ownership is right for you.

Building wealth

Here’s the dooziest of them. For most of the 20th century, many in the US have relied on homeownership as a means of wealth generation. Check it, in 2019, housing wealth represented nearly 75% of all the assets for the lowest-income households. If you don’t have much, at least you know your house has got you. And homeownership can build equity over time. This is called home appreciation, where your property builds value over time. There’s a chance you can even receive a profit once you sell your property in the future.

Renting doesn’t generate wealth, unfortunately. And it can feel like you’re throwing away your money. Sure, it allows some short-term cash flow, but you won’t see any kind of return in the long run. You may see your security deposit returned to you, but that’s about it. If you want to build some delicious wealth, buying a home may be more your speed.

So should you rent or should you buy?

That’s the real question, isn’t it? And honestly, it comes down to who you are, what you want, and what you’re willing to do for it. Is renting an apartment worth it? Or is buying a house more worth it? Honestly? Renting can offer things that buying a home cannot and vice versa. Even something as out-of-left-field as life insurance should be considered when thinking about these things. A life insurance death benefit can be used to pay off a mortgage or other debts your loved ones may have after you’re gone. There’s a lot to think about when considering whether or not you should rent or buy. But there are no wrong answers. Only opportunities and possibilities.