Should you be buying a Home vs. Renting a home?

This depends on the reason (why) you are buying a home and on your finances. Can you make the payments regularly and how long do you forward to living in the Home?

Buying a home is the American dream, but it can also turn into a nightmare!

Most Families settle down a purchase a home for stability, raise their kids and enjoy home ownership while watching their investment grow. But home ownership has it's perils; appliances break down, plumbing, roof maintenance, lawn care (sprinklers). But what can be better than watching the kids play in the back yard with the dog, while you sit back and enjoy YOUR Home?

If you are one that is not yet settled down, think you might be moving around, or your job is not very stable - maybe renting is the key for now. It's a nightmare when you purchase a home, then can't make the payment, or get a job transfer and now incur a mortgage and another rent or mortgage at the new location.

“If you rent, you’re throwing away your money.”
“Owning your own home is a forced savings plan.”
“Home ownership is an excellent path to build wealth.”

I am sure you have probably heard statements like these plenty of times, but are they true? Let's take them one step at a time;

“If you rent, you’re throwing away your money.” - Sure when you rent a home you are just paying for the use of the property, you don't own it, and you are not receiving the benefits from any appreciation the property gains. But you also are probably paying less in rent than you would for a mortgage, not paying to repair or replace appliances.

“Owning your own home is a forced savings plan.” - What happens if your property value drops, and continues to drop? Sure, over a long period of time, property values have historically increased and made the above statement true, but then that is why you should establish how long you plan to stay in the home. If you plan to stay in the home for a considerable time, possibly over 5 years, then buying might be a better option.

“Home ownership is an excellent path to build wealth.” - Once again, what is values drop? What if the neighborhood degrades? These are some of the things to consider when buying real estate as an investment. The people who have made money in real estate did not buy their properties as a primary residence. They bought what are considered "wholesale properties" or investment properties.

Most homebuyers don't buy their homes because they are going to save money on monthly living expenses. They buy for stability, to raise a family and enjoy the benefits of home ownership.

Buying a Home vs Renting a Home is definitely something you should not take lightly.

Buy vs. Rent Comparison

The chart below shows a cost comparison for a renter and a homeowner over a seven year period.

• The renter starts out paying $800 per month with annual increases of 5%
• The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000
• After 6 years, the homeowner's payment is lower than the renter's monthly payment
• With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years

This is just a sample comparison. Every independant case is different, and result may vary in different markets. This chart is not taking several factors into consideration, such as increase in property taxes (depends on state), increase in homeowner's insurance, or property value appreciation or depreciation.

Lets continue!

Are you ready to buy a Home?
Buying a home vs. renting
Buying a home and tax breaks