Buying Versus Renting Your Next Home
One of the most common sayings you will hear about homeownership? “Your home is your biggest investment.”
In the literal sense, this is probably true — the price of a mortgage is usually higher than the cost of student loans, vehicle payments, and other major purchases that most Americans make. And it is also true that many homes (especially if they are well-located and well-cared for) increase dramatically in value over the years.
However, looking at your home strictly as an investment can be misleading. Here are a few reasons why:
- Illiquidity. Stocks, bonds and most other investments can usually be liquidated (that is to say, turned into cash) relatively quickly and easily. This is not the case with your home! Selling can be a long and drawn out process — and even though certain strategies such as short selling can help solve this problem in some cases, the fact remains that houses are far less liquid than most traditional investments.
- Carrying Costs. Unlike a regular investment, your home is going to cost you money throughout the ownership process. Paying for repairs, filing property taxes, and managing the interest on your mortgage are a few of the most common examples of this.
- Place of residence. Last but not least, your home serves a practical, day-to-day function that affects your quality of life — you live there, after all! Factors such as proximity to work, study, and social opportunities, along with your own personal enjoyment of the home, are very important, even though they have little to do with the long-term appreciation of your home’s value.
As you can see, homeownership does not necessarily qualify as an “investment.” All the same, it can still be a smart financial decision. Here are a few of the biggest pros of buying a home rather than renting:
- Find stability. Renters must live with a bit of uncertainty. If their landlord sells the property or raises rent, for example, they may need to move when their lease ends. Homeowners need not worry about this — which is one reason why families tend to opt for buying rather than renting whenever possible.
- Build equity. With every mortgage payment you make, you are building equity and increasing your net worth.
- Enjoy autonomy. Want to paint the walls hot pink? Want to remove a wall entirely to combine your kitchen and dining room? Want to add on to the home? As the owner of the property, you are free to make these decisions.
Homeownership is not for everyone, though — and renting certainly boasts a few unique benefits of its own. Here are a few pros of renting a home rather than owning:
- Take advantage of increased flexibility. If a new work opportunity arises in another city, for example, it will be much easier for a renter to pack up and leave than it would be for a homeowner.
- Reduce carrying costs. As we mentioned earlier, interest payments, repairs, and property taxes are just a few of the (sometimes unpredictable) secondary costs associated with homeownership. As a renter, all you need to worry about is making your monthly rental and utility payments.
- Manage fewer responsibilities. Homeowners must oftentimes dedicate serious portions of their nights or weekends to repairs, lawn care, homeowners association meetings, etc. As a renter, you will have fewer of these responsibilities.
Interested in learning more about homeownership and/or browsing local listings in the east-central Virginia area? Then we encourage you to visit Blue Marble Properties online today!