There are hidden costs associated with buying and renting.
The decision about whether it’s better to rent or buy comes down to flexibility, financial and personal.
“It’s one of the biggest financial decisions we make,” said David Weliver, founding editor of the Money Under 30 blog. “I think it really comes down to . . . whether you want the flexibility to move around every few years and to not worry about maintenance and appliances breaking down. If you’re looking to put down roots, looking for a place to stay for more than five years, that’s when buying presents a good option.”
And if you’re single renting may be the best option.
“It’s much harder for a single buyer to qualify for a mortgage,” he pointed out. Unless someone is a high earner, it often takes two salaries.
As for the idea that renting isn’t economical, Weliver said that’s not true.
“We’re conditioned to think that renting is a waste of money, but if you look at it, people spend less overall renting”.
There are costs associated with owning a home potential buyers may not realize, said Ric Edelman, chairman and CEO of Edelman Financial Services. He suggests buying if you plan to stay in the home at least seven years.
“Homeowners spend money that renters never do — maintenance, repairs, decorating — and you need a significant amount of time for the property to grow in value in order for those extra costs to be recovered.”
Homeownership does have its advantages. Real estate values usually increase, there’s pride in ownership, and don’t forget mortgage interest tax deductions.
Renting can help you create greater wealth because it frees up extra cash for investments. “If you doubt this, look at everyone living in Boston and New York [City],” he said. “There are millions of people who live their lives never owning a home. It’s very common in urban areas. These people are not crazy.”
But don’t miss the hidden costs and hurdles associated with renting.
Renters tend to move more often than owners, and there’s often a significant expense associated with moving.
Edelman’s number one tip has nothing to do with finances and economics: Decide what you need in a living space.
“Recognize that your home is not an investment; your home is a place to live,” he said. “You should not be making the decision based on strictly economic factors. You should be basing the decision predominantly on lifestyle — what meets your needs. And once you decide what meets your needs best, the answer becomes clear very easily.”