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  • Writer's pictureMeghan Thrasher

Financial Impact of Owning vs. Renting a Home

Updated: Mar 9

People often say that owning real estate is better than renting because it is presumed that owning is a good investment, but this is not necessarily always true. It is true that owning a property does build equity, but that does not necessarily make it a "good" investment. For example, consider what happens in a flat or downward trending real estate market. It is possible that one could earn enough return on an alternative investment to make up for what one misses in equity buildup while renting. In order to make an educated buy vs. rent decision financially, you have to analyze the possible rates of return you can attain given various likely scenarios. You have to consider things like inflation, interest rates, cost of repairs and upgrades, property taxes, insurance rates, the real estate appreciation rate in your area, and other factors. Over the last several years, owning has definitely been a great financial boon for lots of people, but as the real estate market settles and appreciation rates begin to flatten or decline in some areas, this will change.

What about the costs associated with owning a home? When you rent, your monthly costs are usually more fixed because you generally don't have to contend with the cost of home maintenance and repairs. You also get to skip property tax concerns and things like HOA fees and homeowner insurance costs. To be sure, as a renter your monthly payment will likely be more than a mortgage payment would be for the same house. And, you have to consider that your rent payment is likely covering the costs of all those owner expenses anyway. Otherwise, the owner won't be making any money on your rent. But, again, at least your costs are constant, and you won't have to deal with figuring out how to fix things or who to hire, etc.

Another factor to consider is how long you plan to live in a given location. Generally, buying a house doesn't pay off financially until you own it for a number of years. This is due to the typical slow appreciation rate of real estate combined with the costs of buying and selling a home. If you are planning to live in a particular area for just a year or two, renting is probably your best bet.

Consider these factors to best determine which route is best for you, or let us help you decide! Reach out anytime for all of your real estate needs.


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