Weighing the Buying vs. Renting Equation

Today’s young people think carefully about whether it’s worth buying their own home. Initially, purchasing property seems like a wise decision, but is it? Property prices keep increasing, and currently, the typical residents of a developed country need help to afford to buy real estate on an average income.

In any case, if these people take out property loans, they must pay to banks. Let’s explore this topic in more detail with some readily available research.

Real Estate Purchase

Purchasing property is justified only when you have savings or a steady income well above the local average. This viewpoint was expressed by the respected Eddie Martini, currently working as a real estate consultant. 

He explains that it’s possible to set a long-term goal of owning property and work diligently toward achieving it. In this case, there is a slight chance of acquiring a home, although it may take a long time. This possibility depends on various factors that should be carefully considered when planning the purchase. 

A lack of credit history or a poor one can work against you. Even if your credit history is good, it can be negatively affected if you’re rejected for some reason, according to Experian’s data.

The location of the property

If you live in the famous state of New York, it’s unlikely that you could buy property in the city center. Surprisingly, even some famous people, whose incomes are much higher than the average New Yorker’s, can’t purchase a condo in one of the tall skyscrapers in Manhattan.

However, if you’re located in the countryside, getting a lovely apartment or a large house doesn’t seem like an impossible task. Even though buying a house is a profitable investment, everything can change over time. Even the external style of the house can be a significant reason for lowering the price for the average consumer, not to mention a potentially unpopular location in your city. 

The condition of the property

If you want to buy a fully furnished and equipped home, it will cost much more than a primary, unfinished option. Choosing an unfinished canvas has the advantage of allowing you to pick furniture that suits your specific preferences.

The furniture aspect is particularly relevant in European countries, where some homeowners sell their properties “as is.” In the United States and Canada, on the other hand, you’re more likely to come across essentially empty properties, requiring you to furnish and decorate them according to your tastes. In this situation, if you live in these two countries, it’s essential to check the structural condition of the house.

Renovating it can involve significant expenses, exceeding any potential savings you aim for. 

After buying real estate

After buying real estate, a significant part of the financial burden is reduced. Some countries require property taxes to be paid annually, but such places are relatively few, and, in most cases, the only consideration involves the monthly payment of utility bills.

Even if you decide to rent an apartment, this responsibility usually falls on the tenant, as few landlords provide discounts. Additionally, you will be responsible for unexpected breakdowns and checks of the home’s structural stability, ensuring it doesn’t suddenly collapse.

These challenges don’t arise on a monthly or even yearly basis, making them a manageable burden if you have some financial backup. Buying real estate should be considered if your plans involve staying in one place for more than two years, according to the insights from Treadstone Funding.

Potential Issues and Benefits of Homeownership

In the course of the text above, we’ve already discussed some potential problems you may encounter when buying and owning a home. Let’s look at some other things to consider if you’ve decided to buy a home and maintain it.

HOAs

You’ll almost inevitably have to deal with a homeowners’ association (HOA). Now, it all depends on the area where you live. In some places, HOA rules can be quite strict and can limit your ability to profit from your property. For instance, your association may completely ban short-term rentals, which you may have counted on when making the purchase. Furthermore, as a homeowner, you’ll have to pay fees to this community. These fees usually range from $200 to $2,500 per year. Any renovations to your home are also often subject to the HOA’s approval, so you can’t just change the appearance of your home as you please.

Costs

Buying a house is costly not only because you have to pay for the property itself but also for associated services. For instance, you’ll need to pay a certain percentage to start the buying and selling transaction. In some cases, you’ll also have to pay for private mortgage insurance. You’ll also need to thoroughly inspect the entire house for problems since any issues you overlook will eventually be yours. And just because there are no problems now doesn’t mean there won’t be any in the future, requiring you to spend even more on repairs.

Property Rental

Living continuously in rented housing has become a common trend today. They not only fail to see any problem with it but see only positive aspects. And indeed, there are quite a few favorable aspects. However, does this approach work well in the long run? Let’s take a closer look at this matter now.

The question of profit

Let’s start by looking at the positive aspects and the research conducted on this topic. A respected magazine called “Today’s Homeowner” conducted an economic study in various American cities. In 46 out of 97 cases, long-term renting was significantly more cost-effective than owning a property.

However, in all other situations, the balance favored property owners who could use their properties for financial gain. Their research revealed that in areas where property ownership is predominant, these owners could save at least $170,000 over thirty years. 

The question of mobility

If you own real estate, you are essentially tied to it. You cannot, in a single moment, abandon everything and move to another country, selling your property and buying it there. It’s not impossible, but it’s an arduous task. It’s much easier if, before that, you were renting an apartment, left it, and started renting elsewhere from a different landlord. In essence, endless possibilities for mobility open up before you.

However, there is one catch, which, for specific individuals, is of great importance. If you don’t have the money or lose your source of income, you are effectively left without a place to live. You won’t have the opportunity to return to a specific place because it won’t exist.

Long-term perspective questions

Renting an apartment is beneficial when you are young and full of energy. You can move as often as you like and allocate any amount to your rented home. If you’re unsatisfied with your landlord, you can find a new one. Now, imagine being 60 or 70 years old.

You’re renting an apartment without a stable source of income. With age, the desire to move diminishes, influenced by the changes in values that occur in the lives of almost every person. If, by chance, the landlord changes and you face eviction, it becomes a personal tragedy.

Furthermore, you won’t be able to leave anything to your children, and they will lack that beloved home to spark nostalgia and return to reminisce about the good old days. These seemingly unimportant aspects hold great significance for the entire family. 

Potential Issues and Benefits of Renting a Place

We’ve also discussed some potential benefits and significant downsides of long-term renting. Let’s look at some other ones that are equally important to consider but haven’t been mentioned in the text above.

Less Stability

We’ve mentioned this before, but remember that you’ll be at the mercy of your landlord. If they need to sell the property quickly, you won’t have any say in the matter. You’ll have a lease, but extending it might not be an option, regardless of your preferences. In fact, the property owner can abruptly decide not to renew the lease, putting you in a vulnerable position if you haven’t negotiated this in advance. This significantly threatens your freedom and stability.

Lack of Interior Freedom

By this subheading, we mean that the property owner may not allow you to customize the interior to your liking. In your own home, you could do as you please as long as your changes don’t affect the external appearance of the house (assuming there are no intrusive HOA rules). If you’re renting a place with a particular style, the owner is unlikely to permit you to remodel it to your taste.

Unpredictable Prices

If you’re a property owner, property values almost always rise for you. If you’re renting, prices are also rising, but not in your favor. If you’re a long-term renter, you’re in luck, as your prices tend to increase less noticeably in most cases. According to the U.S. Bureau of Labor Statistics, if you’re looking for new housing, rental prices will increase by 12.2% in 2022. If you’ve been renting a place for a while, the price increase for the previous year was only 3.5%.

Conclusion

Owning your real estate can be a sensible choice in some cases, but it requires careful planning. You need to plan for the long term and save up for your own home, which you can later use as a financial asset.

You’re lucky if you’ve received a flat as a gift or inheritance. It’s a valuable investment that appreciates over time, regardless of location. While you’re young, you can take advantage of renting, but consider having your own place where you can spend your retirement years and raise your children. This is your ultimate goal, and property ownership is a wise decision. What’s your opinion on this matter? Feel free to share your comments below the article. All readers are eager to hear your thoughts on what’s better: renting or owning real estate.