One question crosses everyone’s mind: Should I buy or rent? Making such a decision is not one that should be made lightly. When making such a decision, one should consider all of the advantages and disadvantages while considering factors such as finances, lifestyle, plans, and features in a home that may be important. Understanding the importance of this decision-making process, we have compiled a write-up discussing the advantages and disadvantages of buying vs. renting.
Personalizing Your New Home
When purchasing a new home, there are several expenses besides the actual purchase of the house. This includes appliances, renovations, furniture, closing costs, legal fees, etc. It is important to note that certain yearly charges must be paid, including property taxes. When purchasing a condominium, there are typical monthly condo fees. However, the ability to personalize a home is one reason many buy it. Personalization includes painting and customizing rooms such as bedrooms, kitchens, bathrooms, etc.
Tax Benefits
Owning a property provides several tax benefits, which arise from the ability to deduct property taxes and mortgage interest from their income statements. Such benefits are not afforded to renters. People can save a significant amount of money by enjoying these benefits. This saved money can be reinvested, resulting in lower monthly expenses. Simply put, if someone has enough money to purchase something, they can save considerable money in the long run.
With that said, a potential downside is that renters are not tying their capital down, as people buy property that doesn’t earn income. But one can potentially later receive a significant capital gain if he resells the property. Ask an accountant for further information.
Creating Equity
One of the most significant benefits of being an owner is having something that is yours. However, there are several financial benefits to owning a home. The first is that you need to spend your money on rent. Instead, the money spent goes towards something you own or will one day own. Equity is being built. For renters, one can pay for years and years and have no claim to the place. The second benefit is the ability to earn rental income in the future. If the homeowner decides to move in the future, they can rent the property out and net rental income. The ultimate advantage of owning a property is the possibility of earning income through its sale. However, it is essential to remember that making a profit is not always guaranteed, and there is always a risk that the property’s value may decrease, just like any other investment. However, renters need the opportunity to make such a profit.
Maintenance
One advantage of purchasing is maintaining the property with your level of care. You don’t have to rely on a landlord to resolve issues. By purchasing a condominium, you benefit from higher maintenance standards in these buildings. Such structures are consistently maintained, and a homeowner can participate in decision-making.
When purchasing a co-op or condo unit, several advantages exist. Firstly, these buildings are typically equipped with higher-quality finishes, top-notch appliances, luxurious amenities, and more spacious living areas. Compared to rental buildings in New York City, co-ops and condos are maintained with more excellent care and pride. In addition, homeowners who own a condo or co-op can be actively involved in the management of the building if they wish to do so.
Downsides to Buying
The biggest drawback of purchasing a property is the initial expense. One will need a substantial down payment (usually around 20%) to purchase. For example, if one buys a property for $300,000, the down payment will be $60,000. Please note that the mentioned amount does not cover additional expenses such as closing costs, mortgage applicant fees, legal fees, insurance, etc.
Advantages to Renting
There are several advantages to renting. The first is monetary. Renting is typically cheaper upfront as one is not required to make a sizeable down payment. Furthermore, opting for a rental option provides a hassle-free and uncomplicated long-term financial commitment as one does not need to worry about selling or renting the property. The legal obligations are also more straightforward, as one only needs to sign a lease agreement instead of a mortgage document. For newcomers, renting allows them to discover the city and its neighbourhoods and decide which community they want to live in long-term.
Down Sides to Renting
The biggest downside to renting is equity. Even though one pays rent for a more extended period, they do not own or even a portion of the property. If one decides to move, they will receive nothing in return. Moreover, rental payments are not tax deductible.
As a renter, you may feel powerless regarding several aspects of your living situation. For instance, if the property lacks proper stairways or an elevator or the bathrooms and kitchens are in poor condition, there is little you can do about it. Even if the landlord allows you to customize the apartment, the associated costs may be too high for a temporary living arrangement. Furthermore, having a problematic landlord can make things even worse. Therefore, it is advisable to carefully consider the landlord before entering into a rental agreement and have a meeting to determine how cooperative they are likely to be.
