At some point, events in your life may dictate that you move into a larger space. Whether you need more room for a growing family or because you want a proper office to run your business from, moving into a home may best meet your needs. If you do move into a home, is it better to buy or rent that property?
Reasons to Rent a Home
Renting a home is a lot like leasing a car. You make monthly payments for the right to use the space much like you would if you own it. Once the lease period ends, you are free to seek out other housing options or renew the lease if your landlord allows it. Renting is ideal for those who may only be in the area for a year or two on business or who plan on buying a home of their own in the short-term.
By renting a home, you don’t have to worry about any of the maintenance. If the toilet leaks or the water heater goes out, the landlord is responsible for fixing that issue. The landlord may also be responsible for paying someone to mow your lawn or remove snow from the driveway. For those who are not handy or have a disability of any kind, having someone else take care of the maintenance may be the best reason to rent as opposed to buying.
Renting is also ideal if you don’t qualify for a mortgage or can’t get a loan to live in a preferred area. When you rent, you can send your kids to a better school district or live in a nicer property than you may be able to if you buy. It is important to keep in mind that you will have to go through a tenant screening process prior to renting to ensure that you will pay your rent and use the property in an appropriate manner.
Reasons to Buy a Home
When you buy a home, you are responsible for all the maintenance and upkeep. This means that you mow the lawn or shovel the driveway or pay someone to do it for you. You are also on the hook if the toilet fails or the roof needs to be replaced. However, there are many benefits to buying a house.
Each payment that you make helps you build equity in your property in two ways. First, the loan balance goes down every month when you pay your lender. Second, the home will appreciate in value over time, which means it will be worth more when you sell compared to what it was worth when you bought it. When you are ready to sell, this equity can be used to upgrade your current house or as a down payment for your next home.
As long as you do your due diligence during the tenant screening process, you could rent your home or a portion of your home to a tenant. Buying a duplex or turning your basement into a rental suite could allow you to offset some or all of your mortgage while living in the house full-time. Paying down your mortgage faster may allow you to buy more properties that can help generate a consistent revenue stream for yourself both now an in the future.
Whether you decide to rent or buy a home depends on your unique circumstances. If you aren’t ready to commit to a property or to a specific area, you should rent. If you are ready to put down roots and build wealth, buying is the way to go.