Renters often find themselves in a dilemma as to whether it makes sense to continue renting or buying a home. Buying a home makes the most sense, especially when you have a long-term view. Yes, even in today’s real estate market.
Rent – Benefits
Renting can have some advantages depending on which part of the country you live in. The main advantage is that the monthly rent can be lower than that of an equivalent mortgage. A secondary benefit is the fact that maintenance and improvements to the property are the responsibility of the owner. However, these advantages pale in comparison to the disadvantages of renting.
Rent – Disadvantages
The disadvantages of renting are significant. If you have the opportunity to buy a home or condo, it almost always makes sense to do so.
The biggest downside to renting is the loss of value. Suppose you rent a residence for $ 1,000 per month and live in the residence for two years. You will have paid a total of $ 24,000 in rent, a pure expense. The $ 24,000 is simply gone and you will have nothing to show other than the time you spent at home. Compare this to what your landlord has earned.
Rent payments are closely aligned with the homeowner’s mortgage payment. Using the example above, let’s assume that your $ 1,000 rent is exactly equal to your mortgage payment. For two years, he indirectly paid off the landlord’s mortgage, helping him build value in the house by paying off the loan. Furthermore, the lessor benefited from the appreciation of the property.
By appreciation, I simply mean the amount of increase in the home’s value. If the rent increased by $ 20,000 in two years, the owner got a windfall. They may have seen a $ 24,000 gain in appreciation and payments that lowered the mortgage. As a tenant, you have made this possible. Without a doubt, the owner would like to thank you.
Now, what would have happened if you had bought a similar house with similar financial data? You would have seen an increase in YOUR wealth of $ 24,000, not the owner’s wealth. If you rent, these numbers should make you grit your teeth.
If you are renting, you should go out and buy your property. After all, isn’t it time to make the money work for you and not the owner?