Pros & Cons of Renting
Conventional wisdom (and tax law) supports the notion that owning a house is a goal that everyone should have. But renting has many advantages over homeownership, and deciding whether to buy or rent is not a decision to be taken lightly. Here are a few thoughts on the upside and downside of renting.
Advantages of Renting
When you own a home, moving can be difficult if not impossible. To go somewhere else, you have to either sell your place or rent it to someone else. Worst case scenario, you have to sell at a steep loss. When you rent, you can pack up and go at any time. Worst case scenario, you lose your deposit.
Less upfront expense
As any resident of New York City can tell you, rent payments can easily cost more than a monthly mortgage in some parts of the country. However, it will typically cost a lot less to get into a rental than to buy a place. Renters just have to come up with a security deposit and first month's rent, whereas homebuyers need to have enough cash for a down payment and closing costs.
The cash that you save on a down payment can be invested, or used to buy a killer home theater system and pair of jet-skis. (Don't take that as financial advice from HotPads.)
Lower maintenance costs and headaches
When you rent a place and something breaks, you call and complain to your landlord. When you own your place and something breaks, you complain about the size of the handyman's bill.
The best managed apartments even have on-site maintenance that can handle repairs while you're at work and be done before you come home. When you own your place you may have to miss work to coordinate with repairmen and their notorious four-hour scheduling windows.
Lower insurance costs
Renters insurance is basically free. Homeowners insurance, not so much.
Easier tax preparation
Renters have less recordkeeping and shorter forms to fill out when it comes time to prepare there income taxes. That's because they can't claim a mortgage interest deduction and other tax goodies. Which leads us to the disadvantages of renting.
Disadvantages of Renting
The lack of freedom
As a renter, you are limited in what you can do to a property without the landlord's permission. Want to knock down a wall or paint the shutters with HotPads logos? Don't even think about it. If you want to have it your way, you have to own it.
Be especially concerned if you have pets, because this will limit where you can rent and heaven forbid that Sparky likes to chew on things.
No tax advantages
Renters miss out on a lot of valuable tax breaks that owners can claim. These include deducting the interest paid on mortgages, writing off certain repairs, credits for energy-efficient upgrades and more.
No investment or equity
Over time, most real estate will appreciate and create a source of wealth for the owner. Renters build nothing more than an empty register of check stubs. Of course, if you can rent for a lot less than it would own that money can be invested and still work for you.
As a renter, you can not control where you live beyond the terms of your lease. You can be forced to leave at any time, sometimes even before your lease runs out. As an owner, as long as you can pay your mortgage and taxes, you can stay put.