Renting Vs Buying a Home. Are you Throwing Your Money Away Renting?

It is the question many people find themselves in. Should they buy a house or rent? Both have pros and cons, but many believe that buying over the long term is the better option. While that is true, it is also not the 100% give in that it is made out to be and when you factor in other costs of maintenance/ownership, plus the extra time it will take you to do those things, the gap between the two starts to shrink. Lets look at the pros and cons of buying a house.


Buying a House Pros- 

Actually own something- The house is yours and no one can take it from you if you keep your payments up.

Value most likely will go up- While it can go down, generally speaking if you stay there for at least 5 years you will break even or make at least a little profit.

Can make changes at house and make it truly yours- Don’t like that wall? Smash it! Want more space? Build an addition! Want to replace carpet with wood floors? Do it!

Want to remodel your kitchen? Go ahead in YOUR house. If you rent, you better enjoy it and make the best of what you have!
Photo by Jason Briscoe on Unsplash

Stability- Most likely if you purchase a home, you are planning to stay there at least for a few years. Unless you are flipping the house or are okay with losing money, if you buy a house you know you will be there for a minimum of 3 years and probably more.

Solid Long Term Investment- When buying a house if done right, if you stay there long enough and maintain the house, over time you will make money on it.

Buying a House Cons-

Lots of information/things to be aware of- There is plenty of paperwork and things you need to know, learn, and do research on. Why? Because EVERYTHING is on you. While some townhouses and developments might have exceptions, generally speaking everything is all on you. All of this takes time to maintain and manage along with added expenses.

Little to no flexibility- Stability was a plus in the pros section, but it can also be a con of buying a house because now you do not have the same flexibility you had when renting. You are saying when buying a home this is my residence for years to come. If you are uncertain about work, the area, or anything like that, buying a house limits many of your options.

More risk than renting- While monthly payments may be similar, there are more expenses with a house that are not there with renting so unless you have the extra cash flow or savings to handle it, buying a home is not cheaper.

This might be how you feel about buying a house. The question to ask yourself is how much risk can you handle? How solid is your bridge/foundation?
Photo by Valentín Betancur on Unsplash

Now obviously there are some situations where these pros and cons may not be 100% true to each situation. Maybe you are moving from a high rent area and the state you are moving to the cost of living is much lower. Buying could be the better option for you. The main message we are trying to convey is don’t just go with the average logic and mindset that buying a house is cheaper than renting. You really need to do your research and plan to spend/save more than just what the monthly mortgage is. Let’s look at some renting pros and cons since it gets such a bad reputation. 

Renting Pros-

Flexibility to move if needed- This is HUGE if your job is not stable, you do not have a large savings, or your debt is high especially if your savings is low. If something breaks, you do not pay for it. With renting you mostly just have to worry about paying your monthly rent. If something breaks, most likely your landlord will cover this.

Most things are taken care of- For example, lawn care and general maintenance so that means more time for you to do other things and less money you are spending. That is another under talked about aspect of home ownership. Unless you have the money to take care of things that break or lawn care, most likely those responsibilities will fall on to you. If you are already strapped for time, buying a home does not free up your time. If anything it will be the same or take more of your time. Even just the whole buying process takes a lot of time. This isn’t necessarily a bad thing, just something you need to be aware of to make sure you can invest the time in doing the research/planning/looking of buying, then maintaining when you own it. 

Less risk, less stress- Because of the flexibility to move and have money for repairs or appliances if things break, no matter which way you slice it, renting is much less risky. While some might look at this as people being nervous to make a big decision, it actually can show good sound planning and financial responsibility. If you are paying down debt or building your savings, or are making sure you job is stable before you make such a large purchase. We think that is a very smart decision! 

More people need to feel this way about renting. It is not as good of a long term plan (think 10+ years), but it is a great short term or transition plan.
Photo by Valentín Betancur on Unsplash


Renting Cons-

Hope to have a good landlord- If you don’t you could be in for rough time. This one is pretty self explanatory and something you do not have to worry about when owning a house.

Money on rent is gone- That money you spend on rent buys you flexibility, but does not go anywhere. It can be really hard at the end of a rental year, to see how much you put into your monthly rent and know that it was just spent. It is not coming back and it was a large amount that could have gone into equity on a home. That does not mean the money was spent wrongly, but it still is hard to see and should be extra motivation for you to get your finances in order to be able to purchase a house. 

Are “stuck” in that space and can not make many changes- Sure you can decorate the house and make some small changes, but you won’t be making any major changes to your rented living space. This may not be that big of a deal for some, but since the rented space is not yours, there is always two thoughts in the back of your mind when making changes. 1. Is this even worth the trouble if I am going to move in x amount of months or 2. Am I worried about losing my deposit or getting “in trouble” if I make this change?  

This is not supposed to an all inclusive list for either renting or buying and we may be missing some things, but hopefully this is a good start of some things to consider. Your feelings on renting will depend on what your personal situation is and what your tolerance for risk is. If you do not plan on moving in the near future and you have the money, and you feel comfortable about the risk of a mortgage and repairs, then buying is probably the better option. If there is a chance you move either because you don’t fully love the area or you may look for a new job in the next year or two, renting is probably better. Just don’t assume renting is the worst thing you can do and you are throwing your money away if you do it. You are not…unless you plan on renting for your entire life. That would not be a good plan.

The Hybrid Approach (Personal Example)- Currently we rent and have been renting an apartment for awhile. It has worked out well for us and we are saving for our down payment for a house now since we are debt free. We are not 100% sure if we will stay in the same area or job in 2-3 years, but have been waiting for awhile to move out of where we are. We are now looking at renting a house for a year or two and then making a decision about buying a house. This way we would know more about our job situation, we would have more money saved up for a down payment, and we could do some more research to make sure we are going through the buying process with the best information to set us up for success. We are also okay if renting a house costs us a little bit more (nothing too crazy though) and it slows down our savings of buying a house. We know that is a trade off we are making for an upgraded lifestyle now and possibly delaying how soon we could move into a house. 

Before you sign on that dotted line, you need to make sure that you are aware of everything you are getting into. Buying a house does not magically make your life easier, solve your financial troubles, or give you more time.
Photo by Scott Graham on Unsplash

Summary- This is a heated debate and there are many different angles to take with it. Since everybody’s situation is different though, the best thing you can do is to look for examples from other people, do your own research, look at your 5 year plan for your career, what area you want to live in, and what your financial outlook might be. Two other things that make this such a heated debate are detailed next.

First, since more people have debt, especially first time home buyers, it is hard for many to even fathom buying a house right now so renting for them until they can pay down some debt, build some savings, and get some more stability is why they are waiting and okay with renting or even having roommates. The second reason is that there are too many people who are buying houses, not knowing about the process and what they are signing up for, and not having enough money for the down payment and/or maintenance expenses. This is causing people who think buying a house is the ultimate dream, really becomes an expensive asset they need to maintain now and may not be able to.

In 2007 you could argue the banks were at fault and they do deserve blame, but many people took out mortgages for their homes when if they just spent a short time looking at their financial picture, they could have seen that buying a house was not the best choice for them at that time. Buying a house should be a well planned, thought out purchase. There are many extremes to this debate and we want to fall somewhere in the middle. For nearly all of us, it WILL be our largest purchase and we need to make sure we are as prepared for it as possible. At the same time no one should discount renting in the short term to lower the risk and give you more time to get your finances and goals in order. 

More reading on this subject can be found here- https://alifeofproductivity.com/how-i-saved-12000-by-renting-instead-of-buying-a-house/

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3 Comments

  1. Thanks for the nice comparison.

  2. This is great post. It is good to have an analysis before deciding between renting and buying a home.

  3. Great points! I like how you explained the “renting is throwing away money” point of view from both angles and acknowledged this is very personal decision based on your circumstances.

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