The housing market is constantly changing, making it feel like uncharted waters when deciding whether to purchase or rent a home. What may come as a surprise is that in gated communities the number of homeowners is almost equal to the number of renters in the same communities. Around 46.6% of residents rent, while 50.4% own their homes. With numbers like these, what are some of the pros and cons of owning versus renting homes?
When it comes to purchasing a home, there are some costs that new homeowners often overlook. When purchasing a home you need to put down a good lump sum of money. In addition to that, homeowners need to have a good deal of savings. When purchasing a home, there are plenty of unexpected costs that can significantly drain your bank account. Home repairs are also an added expense.
The housing market is steadily continuing to rise in price. While housing prices are continuing to increase, it doesn’t seem like this is a bubble that will eventually break. The rising housing prices have also been attributed to supply and demand. Not many houses are currently going on the market, meaning that homeowners that are selling are more likely to get their set listing price or even more.
One pro of purchasing a home is that with some simple renovations, the value of the home can significantly be increased. When purchasing a home, you want to increase the value of the home before you sell it, otherwise, you risk losing significant money from your initial purchase.
When looking at renting, one of the most significant pros is that you, as the renter, are no longer held accountable for unexpected costs. While you may initially think that you can afford a house when comparing mortgage rates to rent rates, that is not the only cost factor that needs to be taken into consideration.
Create a Stronger Financial Portfolio
Possibly one of the biggest pros when it comes to purchasing a home, is that it benefits your financial portfolio. Becoming a homeowner also increases your equity if you do renovations to add to the value of your home. While the term ‘home renovations’ may have you picturing a slowly draining bank account, small home renovations can be done affordably and can add a surprising amount of value to your home.
Purchasing a home also benefits you as a homeowner when the tax season rolls around. On your taxes, you can claim a mortgage deduction, which, especially for first-time homeowners, can be a big relief.
Homeowners who also purchase a vacation home can have an added source of revenue. With many vacation homes being empty most of the year, with 42% of vacation homeowners using these homes solely for vacations and gatherings, there is a market to temporarily rent or use these properties for Airbnb. This can be a nice additional revenue source.
Age Has a Big Impact
When looking at the difference between renting and buying a home, there is another factor that is still prevalent, and that is age. Many younger people continue to make the decision to rent as housing prices increase. A survey done by the U.S. Census Bureau discovered that 65% of Americans that are under the age of 35 are renting. There are a few factors that can be attributed to this. The number of homes that are available for purchase as well as the price tag behind them can drastically affect the decision of renting versus purchasing a home.
So, whether you make the decision to rent or to purchase a home, there are pros and cons to each. You have to consider all of the costs associated and ensure that if you make the decision to purchase a home, that you have a reserve of money set away in the event of an emergency. If not, renting provides you with that safety net of not being responsible for repairs and renovations. Contact an investment advisor today to learn more about your options!
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