A Point For Buying In the Buy Vs. Rent Debate

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Buyers and renters have long argued about which housing strategy is best. Buyers love building equity in their homes and the idea of owning an asset, even if that asset comes with a big heap of mortgage debt. Renters, on the other hand, love the freedom that comes with no mortgage, no responsibility (or cost) for repairs, and an option to move without selling. But which really comes out on top when it comes to the dollars and cents? A new report gives us insights into the better financial option when deciding whether to buy or rent your next home. Let’s dive in with a detailed look at when buying makes the most sense and when you might prefer to rent.

A new report from Trulia, the results found that nationwide you are better off buying if you plan to keep a home for at least six years. The July 2018 result found that buyers save 26.3% on average compared to renters. The result actually dropped from the previous period in renting’s favor due to flattening or lower rents in over 80% of the biggest real estate markets.

The savings from renting only vanish in the two most expensive housing markets, San Francisco and San Jose. In The City By the Bay, you save a narrow 5.8% from renting over six years. In Silicon Valley hub San Jose, the savings from renting came in at 12.2% on average. But in those expensive markets, many would-be buyers can’t afford the million dollar price tags Bay Area homes demand anyway. But in the low-cost cities like Detroit, you can save a whopping 48.9% over six years if you choose to buy!

Buyers have some compelling reasons to pick ownership over renting. Here are some of the major benefits of buying a home instead of renting:

Of course, there are downsides to buying a home as well. But if you plan to keep the home long enough, the dollars and cents should come out in your favor.

If you live in the Bay Area, you may be financially better off renting. Elsewhere, the benefits of renting are more focused on the lifestyle freedoms and low responsibility over a property when you rent. As a renter, you don’t have to budget for repairs or maintenance. That’s all taken care of for you. Further, you are not tied down to the location for the long-run. While you can sell a house at any time, there are real estate agent fees and closing costs, and it takes some time to sell and close.

As a renter, you can just move when your lease ends or as allowed by your rental agreement. You are not tied down to anything, and the only major costs when moving are the moving expenses you would have anyway and a new deposit and first/last month rents. Closing costs for a home can easily reach into the tens of thousands of dollars, so if you plan on moving within a few years renting is the way to go!

When it comes to buying versus renting, there is no absolute right or wrong. Like all things in personal finance, the answer is personal. Choose the housing option that makes the most sense for your unique needs. If you do, you should end up with the best long-term results.

DISCLOSURE: None


The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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