Over this past year I have been asked the question “Torben, should I buy or rent?
So I decided to compile a list of pros and cons for you to consider before leaping into homeownership. I have come to find that it is not a one size fits all scenario. It comes down to where you are in terms of personal and financial development, your end goals, and what fiscally makes the most sense based on the current market.
Pros of Renting
No Property Taxes
As a renter, you do not pay property taxes on the home you are renting. You leave that expense to your landlord.
No Maintenance Expenses
You are not on the hook for maintaining a property unless your lease says otherwise, which is very uncommon and negotiable.
Homeowners Insurance is not required
Renters insurance is less expensive than homeowner’s insurance. Renters insurance works to protect your personal content inside of the rental and not the home itself.
Flexibility
You have more flexibility as a renter versus a homeowner. If you are moving to a new city and do not know what neighborhood is right for you, renting for some time can be beneficial. If life throws you a curveball and you need to move quickly, depending on your lease term, you can provide the appropriate notice and leave within weeks. Or in many cases, you can sublease your rental until your lease agreement expires, or worst-case scenario, break the contract and pay a fee to exit. Lease term lengths are negotiable and are based on what your landlord will agree to.
Utilities
In some instances, landlords will pay for several utilities like garbage, water, and sewer. This is not the case with every rental agreement however it is not uncommon, especially when renting in a duplex or four-plex.
Cons of Renting
Inability to personalize your space
As a renter, you lack the ability to make your rented home your own. In most cases, landlords will do the bare minimum in terms of upgrades, and maintenance. You should also factor in that you will likely be using dated appliances and furnaces which increase your energy costs.
Lack of stability
You may feel an increased lack of stability as a renter versus a homeowner. Your landlord may increase rents as your lease agreement expiration date nears or may choose to sell the property to a new owner who would like to move in themselves, which means you need to move out.
Paying a landlord’s mortgage off, as opposed to your own
When renting, your monthly rent payment may be paying down your landlord’s mortgage on the property. But if you were a homeowner, that same rent payment could be paying down your own mortgage for a similar or less amount.
Closing of a lease can be frustrating & costly
When you sign a lease, you will pay a security deposit along with first and last month’s rent to your landlord. You may find that getting your security deposit back at the end of your lease is often challenging as the landlord’s standards of how you leave your rental are quite high. This results in a landlord keeping your security deposit, which is an added expense to renting that should be factored into the equation.
Furry friends are not always welcome
You will find that landlords do not always allow pets and if they do, they will charge a hefty “pet fee.” This is becoming an increasingly larger problem for renters in Marin County. This said, your dreams of having a dog, cat, or becoming the next Tiger King may be put on hold.
Pros of Homeownership
Furry friends are most always welcome
As a homeowner, you set the rules. If you want a dog, you can have a dog. You want a cat, consider it yours! Just keep in mind that if you do decide to purchase a home in a neighborhood with an active HOA that the CC&R’s (covenants, conditions, and restrictions) do not specifically state no pets. In some instances, HOA’s do have the right to ban certain breeds of dogs, chickens, and other animals.
Homeowners Tax Incentives
Interest paid on a mortgage is often tax-deductible.
Real estate appreciates with time
Historically, real estate increases in value over time. This is especially the case in Marin County, California.
Customize and update your home to your liking
As a homeowner, you call the shots. Unlike a renter, you can update your home whichever way you like. If done strategically, all of these upgrades will increase the value of your home.
Builds your credit over time
A mortgage will help build your credit over time, provided you pay on time. Adding a mortgage to your credit history also helps diversify your credit.
Predictable monthly housing payments
When you have a mortgage, you have predictability. Your mortgage payment does not change year to year unless you refinance. Ultimately, your mortgage will be paid down in entirety and you will have 100% ownership in a solid asset that continues to increase in value while you pay taxes and maintain the property.
Cons of Homeownership
You must pay property taxes
As the owner of a home, you are now obligated to pay property taxes.
Maintaining a Home
You will need to maintain your home as necessary. Keep in mind that if you do purchase within an HOA, you may be liable for monthly or annual HOA fees and your home must be kept to a certain satisfactory standard as outlined in your neighborhood CC&R’s.
In synopsis, renting vs. buying comes down to what your goals are. In some cases, renting makes a lot of sense and in most cases, purchasing a home is a better option. Especially if you desire to put down roots and stay in the same place for an extended length of time.
If you have any questions about the home buying process or would like to discuss the pros and cons in more detail, please feel free to reach out.
Torben Yjord-Jackson
®Realtor – CalBRE # 02050831
Contact Torben
Want to learn more about the home buying process? Check out our blog post Home Buying Made Easy -Understanding the Process.
