A battle that is debated continuously in the personal finance world. If you want a simple answer, it will depend on your situation right now. Here, we discuss some of the pros and cons of each and why we ultimately became homeowners ourselves.
The perks of buying a house
I mean it doesn’t even have to be a house-house. You can decide to live in a townhouse, or a condo, or even in a trailer or tiny house. Once you decide to buckle down and buy, there are a few things we considered such as:
Cost of renting vs monthly mortgage payments
Most people (like us) can’t afford to buy a house in cash so we go to a good old financial institution, a trusted friend or a relative to borrow money from.
But *gasp* if you get a mortgage, you take on a lot of debt, and you end up paying more for the house because of the way banks structure your payments. You’re not just paying the purchase price for your house, you pay almost 80% more on a 30 year loan. I’d rather invest that money somewhere else!
That paragraph above is what I read in forums all too often. To me, that’s what your personal beliefs are and kudos to you for that. For me, I know I have to live somewhere and even though we pay interest at a very low mortgage rate, it is the cost of doing business for us.
Case in point: even with PITI (principal, interest, property taxes and homeowner insurance), we still end up paying less than if we were renting. Heck, even with HOA fees and private mortgage insurance, we still pay less than if we were renting in our area.
We were once renters in an apartment complex 3 miles from our current house and every year, the price of the rent kept going up 5% on a minimum, whereas our mortgage will remain constant for the next 11 years.
Not to mention we got our mortgage at 3% per year. So in the long run, we save an average of 2% on a minimum, plus we get to keep the house. Great, huh?
Of course not everybody’s situation is the same. If we decided to live in Miami for instance (which we will never do), we would become renters.
Why? Well, I don’t want to buy in Miami. It might be underwater soon because of climate change. Plus, it’s expensive to buy there. Same for New York City. We will definitely be renters there. Have you seen the housing prices in Manhattan? Crazy. Not to mention all the other costs associated with owning in the City. No thanks.
Buying property can lead to side hustles
When you own, you can turn around and rent your spare bedroom or even your entire place out on the home sharing website Airbnb. Hopefully they allow it in your community, or you can just be discreet about it!
Your neighbors can’t kick you out, you own that property, and you can do as you wish with it. Want a fancy white picket fence? Sure. You can also be that grumpy person hanging outside with a shotgun on a rocking chair yelling at people to ‘Get off my property!” Point is, as long as you follow the rules governing your HOAs (if you have any), stay up to date with payments and with your mortgage, then you have all rights to stay put.
If you’re a renter, you run a risk of being kicked out of your place when you get caught renting the spare room or even subletting the house. Let’s face it: it’s a hassle to always move around, looking for another area you would like to live in, and at a budget you are comfortable in. Also, if you are looking for specific layouts or amenities, you likely won’t find that in the cookie cutter apartment complexes that exist pretty much everywhere. Even the luxury ones look all the same.
Moving also entails costs. You have rental application fees, costs of moving your stuff around (if you have a ton of stuff, which we do; we are not minimalists or Mustachian in that sense), and of course, rising rent.
However, home ownership means rising costs too. Think HOA and property tax increases as well as the costs of maintaining the property as it gets older, and more appliances and other components of the house need repairs or replacements.
Speaking of maintenance
When you rent, you don’t have to think about the appliances being broken or the roof needing to be replaced and all that stuff. You just tell your landlord something is broken, and the landlord will send someone to fix it. It is less stress and less hassle.
Now, if you are the owner of the rental property, it is stressful to find a contractor that you trust as well as come up with the costs of maintaining the property. And of course finding a tenant is also stressful sometimes!
As a renter, you don’t have a specific attachment to the property. It is easier to move around, or if you’re bad, you can actually opt not to clean and let the owner handle it when you move out (really bad, don’t do that!).
You don’t have to buy a single family house, you can get a townhouse
We wanted a single family house before. You know, the fence, the yard that needed to be mowed, the whole nine yards.
Only we like to travel a lot and we (well, Peter) don’t want to spend much on hiring someone to maintain our lawn every week, nor can we be bothered to do it always. You know, we are millennials, might as well spend the weekend either exploring (by kayaking, traveling or walking aka hiking) or playing video games. Or going shopping this Christmas because like Thanksgiving, it is the best time of the year to buy something if you need (or want really really badly!) something. Sales! Hello?
So, Peter managed to convince me to the art of townhouse living.
Townhouses are smaller than single family homes, so less space = less cleaning. Also, our HOA takes care of everything outside the house, like painting, windows, doors, lawn maintenance, gutters, trash, even the roof!
Oh wait, there’s more! In our community, there’s a swimming pool (yay, that gets utilized a lot especially during summer), a small gym (our guests like that), and plenty of poopy stations which we loved when Rosie still lived with us or if she comes and visits.
Of course, you have to know if the HOA is properly running the complex. You don’t want to be in a crappy neighborhood where nobody pays the HOAs or people are always late.
HOAs can be a pain and very restrictive sometimes, so you have to find the right one to live in. Also, one reason why we didn’t want to live in a condo: more restrictive HOAs and you don’t own the land underneath your property, just air rights.
Related Post: Why We Bought A House
To each their own
Again, in our case, owning something makes a lot of sense. As I mentioned above, it is all a case by case basis and depends on your personal circumstances.