Renting vs Buying: What’s better for you?
Emily Brandenburg
The future is coming at a rate much faster than any of us can really comprehend, and before we know it, we’re going to be in college and thinking about how to be a functioning adult once we’re done. If you’re not going to college, it’s coming even sooner than you think. It’s a pretty terrifying thought, at least to me, but I’ll be here to help you begin to decide what you might want to do once you’re out of college, or at least the dorms, and looking to find somewhere to live.
Now, this house, apartment, or condo might not be where you’re going to live the rest of your life, and that’s perfectly reasonable. However, it’s gonna be a place you’re living in for a sizable portion of your new adult life, and you need to make sure it’s a good place to be. So, let’s assume you’re faced with an option: to rent this beautiful home, or buy it. Sure, it might be a one time offer, and this house might really be what you want to start a whole family in, but is it really in your budget, or even your best interests?
According to Dave Ramsey, you’re not ready to buy a house until you’re completely out of debt. Assuming that you go to college, the majority of us are going to have to pay for at least one year out of pocket, which means you’ll also most likely have to take out loans, resulting in the dreaded debt. In any case, if you have any sort of debt, whether it be for college, a car, or really anything that you might use it for, it’s not a good idea to buy a house.
However, if you don’t plan to go to college and/or have no debt, there are still more factors at play in your decision. For instance, if you’re not sure where you’re going in life, listen to the advice of Jennifer Franklin; she says “if you’re moving to an unfamiliar city, have an unstable job situation or don’t know what neighborhood will feel like home, renting for a period of time can be a great option”. This is an excellent nugget of information to think about. You need to be in a stable mindset to buy your own home, and know that this is where you want to stay for a long time. If that’s not a definite answer for you, then consider renting instead.
There are economic advantages and disadvantages to these decisions as well. When it comes to buying a home, you have a chance to increase your wealth. What I mean by this is that you can use the taxes you pay for your house, whether it be mortgage interest or simply property taxes, you have the opportunity to use those as deductibles. That means you don’t have to pay as much tax as you would previously. However, there’s a lot more fees involved as well that you don’t have to pay by being a renter. As a renter, you just have to pay your renter’s insurance, but as a homeowner, you need your homeowner’s insurance, homeowners association fees, property taxes, and a higher utility bill.
When it comes to renting, it’s much better in today’s market to rent than buy. According to CNBC, “the monthly costs of buying and owning a home that you occupy are up 14 percent over the past year, more than three times the annual increase in rent rates nationally,'' which isn’t a good thing. That means homeowners are spending much more than usual on their bills, which isn’t good for the economy since it results in less money being spent on goods and services. There still contains the disadvantages of not being able to do what you want in terms of customizing and decorating, as well as monthly payment being likely to increase.
As always, no decision can be made without at least some tradeoffs involved. There’s the advantages of buying your own home and having complete privacy and freedom to do as you please, also bringing the disadvantages of higher monthly costs. There’s also the advantages of renting such as having more flexibility in where you want to live and not having to pay for utilities, and the disadvantages of inflation having a large control over your renting cost and not being able to fully customize your home. This is a decision you’ll have to ultimately make yourself, but I hope that I’ve helped you begin to think about it before you’re stuck in this situation!
Works Cited
DianaOlick. “It's Better to Rent than to Buy in Today's Housing Market.” CNBC, CNBC, 11 Sept. 2018, www.cnbc.com/2018/09/05/its-better-to-rent-than-to-buy-in-todays-housing-market.html.
Franklin, Jennifer Bradley. “Renting Vs. Buying A Home: Which Is Right For You?” Bankrate, Bankrate.com, 8 Oct. 2019, www.bankrate.com/real-estate/renting-vs-buying-a-home/.
Ramsey Solutions. “Should You Rent or Buy a House?” Daveramsey.com, Dave Ramsey, 27 Apr. 2019, www.daveramsey.com/blog/buy-vs-rent-myths-busted.
I thought it was interesting how you should be out of debt before buying a house. I know some people that think they’ll be able to buy a house a few years after college; this is usually not realistic, unless all of their college costs were covered by a scholarship or family member (or other source). In my opinion, the advantages of buying a home aren’t really important until you have a family. I wonder what percentage of couples with children rent, compared to those that own their house.
ReplyDeleteI have never really considered this before but I guess it makes sense. I think it's kind of funny how the American dream has changed so much. Renting a house has become a new norm, instead of owning a house. It makes sense though. If you aren't sure if you're going to live somewhere for long, renting would be a much better choice.
ReplyDeleteThis was a really good post. You put everything into reality, it can be hard to think about that in a few years we all will be dealing with all of this. I think it is smart to wait to buy a house until you are out of debt and are ready to have a family. It's important to really prepare for something like it. It is not a light subject, you have to make sure you are making the right decision at the right time.
ReplyDeleteAgastya Asthana,
ReplyDeleteIt seems like renting can be seen as a trial period of staying in a home. You can test out how you like your environment and then make a decision whether you want that place or not. The opportunity cost for renting a house is significantly low than buying one because renting doesn't have you commit so if you plan on moving you don't have to go through the hassle of finding a buyer to sell the house to and the paperwork to transfer the ownership to them. With renting you just don't pay the rent and move out. For long term, however, buying is a better option because the land will gain value over the ears and you won't to keep paying the monthly rent and simply just pay a face value of the house.
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ReplyDeleteI really liked this post, I thought that it was a good amount of information that you included. I liked when you mentioned that if you want to buy a house you really should have a stable job. People being in college might be switching from job to job to pay for college or to save for renting/buying a home. I enjoyed that you named where your information came from in your post, personally I just don't know who those people are. This article is still pretty relevant with more and more people today moving out sooner, wanting to own a home or move out into their own space to start their future. Renting or buying is a pretty tough decision and I think that this post is a really place to go to for advice on what is the better option for an individual.
ReplyDeleteThis blog post was very well said and organized,and it really brought light to a topic that you probably wont even get taught in high school. Finding out where your gonna live, and understanding how renting a property versus buying a property is a drastic difference that your gonna need to make one day. You also talked about trade offs towards the end which is a very good thing to know in life. I even enjoy how you talk about the economic advantages, and disadvantages towards the end and how you elaborate on them as well. I thought this was a very well sourced piece, and you even credited people at the beginning of your paragraphs too. Very well done blog!
ReplyDeletePersonally, unless you're only in the area temporarily, it's always worth it to buy instead of rent, especially in the long term. Of course, while there are tradeoffs like growing bills mentioned in the post, a landlord has to pay their bills as well, so they'd likely raise rent costs along with it. I can see this advice coming in handy, though. My sister has a friend who's married, and she's living in an apartment in order to pay off student debt (as well as credit card debt from many other bad financial decisions), and while it comes with some trade-offs, its a bit less stressful than having to take care of the costs that come with a house.
ReplyDeleteI understand your point of view on how renting is much a much better option for the vast majority, however, I disagree with this opinion. Because as you said in this blog post, renting is in a much higher demand in today's economy, that sounds like a perfect opportunity to buy a house and put it up for rent. Living in a tidy and small apartment is not an ideal situation for people to be in, and living in a house ( even though it is being rented out) is a much better living condition for a majority of people-- especially individuals who have recently just graduated. Although a good percentage of Americans are in debt, and even those who aren't, the only way to have exponential growth financially is to have multiple sources of income. Real estate investing is a great way to inquire income. To do this-- you must buy a house.
ReplyDeleteThis was a really well written article, as it brings to light a big decision that many people most likely are not educated enough about. At least for me, I definitely learned a lot of new information from reading this and it was interesting for me to discover. A lot of good points were brought up, such as looking at amount of debt and familiarity of the city, that would for sure help people make a decision whether to buy or rent. Additionally, the pictures and diagrams really added to the article.
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