Consider the pros and cons before deciding to rent or buy a home

Posted by Tom Kalinski Founder RE/MAX of Boulder on Monday, September 16th, 2013 at 2:30pm.

Whether a recent college graduate with a new job, a young but growing family or a senior looking to downsize, most Americans will at some point ask themselves, “Should I rent or buy a house?” The answer is vague yet still true: “It depends on the state of housing and your circumstances,” according to Yahoo!

The old adage that “It’s always better to own than to rent” was shattered after the U.S. economy tanked and the housing bubble burst in 2008, and many Americans were drowning with upside-down mortgages (they owed more than their homes were worth). Suddenly, renting a home wasn’t such a bad idea.

Yahoo! provides these points to consider to help break down the decision, so that neither the emotional or economic issues receive more than their fair share of consideration:

Pros of renting  

  • Lower upfront costs – While home buyers must come up with funds for a hefty down payment, closing costs, a home inspection and possibly other costs, renters merely need first and last month’s rent and, if applicable, a pet deposit – a difference of a few thousand dollars compared with tens or even hundreds of thousands of dollars if you buy. Renting provides freedom and flexibility, so those new to the area can rent and use the time to check out neighborhoods to see where they might want to buy as well as test an area without committing to it.
  • Better investments – Invest the money for the down payment and house costs in the stock market or other opportunities that might provide a better return on value.
  • Career mobility – It’s easier to get out of a lease or to sublease than to sell a home for those who think they may need to move in the near future or are considering job changes that would require relocating.
  • Income uncertainties – Whether it’s a pay increase or decrease, either can affect borrowing ability and the ability to pay a mortgage.
  • Time to establish credit – Renting will assist those with no or poor credit to qualify for a mortgage by creating a history of on-time rental payments.
  • No maintenance – When renting, the pipes that leak or the oven that doesn’t work are the landlord’s responsibility – not the renter’s.

 The downsides to renting include:

  • No control over the fluctuation of rent.
  • Limited freedom in decorating the home or apartment.
  • Lack of equity-building ability.
  • Subject to landlord’s decisions.

 Pros of buying

  • Build equity – Renters don’t own anything, while those with mortgages increase their degree of ownership in their homes every time they make a payment. They can also borrow against their equity in their homes to pay for major purchases or refinance at favorable rates to help fund major purchases.
  • Tax deductions – Home owners can deduct mortgage interest as well as their property taxes – a benefit renters don’t receive. And if home owners meet certain requirements, the IRS won't apply a "capital gains” tax on the profits from the sale of your home. Also, those who work from home may be eligible to take deductions for their home office and portions of utilities.
  • Creative control – Home owners can put as many or as few pictures on the wall, paint their homes whatever color they like (granted they don’t have a homeowners association that restricts them), and they can add on to their homes as they see fit – because they own it.
  • Maintenance choices – Those who own their home can decide what repairs or improvements they will do themselves or if they’ll hire someone. Renters are at the mercy of the landlord as to when repairs are made and how.
  • Pride of ownership – It might not make sense for everyone, but owning a home is still said to be the American Dream.

While a home is touted as a good investment, giving folks a place to live as well as other financial and emotional gains, many financial experts caution against purchasing a home simply as an investment, according to Yahoo!. Remember that the dynamics of real estate markets across the nation vary greatly, requiring consumers to  know well their financial situations and the market in which they are looking to buy a home.


Tom Kalinski 
Owner and Founder
RE/MAX of Boulder

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