A lot of people think that renting is simply a waste of money. Why bother paying someone else's mortgage when you can pay your own? This is a common theme, especially with real estate agents but, we don't want to push anybody into homeownership if they're really not ready and if it's not the right move for them at the time. There are a lot of benefits to homeownership but really when it comes to renting versus buying it either renting a space for renting the money.
Let me clarify that. Obviously, when you rent a home or an apartment you read the space. You pay someone a monthly fee to use a particular space. But, when you buy a house, you're technically renting back your own money. You are paying back the mortgage company because they are the ones that actually on the home. So you are paying to borrow their home until it is fully yours, essentially renting money.
Let's consider two scenarios. If someone has $25,000 and they plan to put that towards purchasing a house, all that money gets wrapped up into the property and if the property is worth exactly what they bought it for their net worth goes down to zero. If the same person with $25,000 rents a property, their net worth remains a $25,000. But that's only for the first year. What happens if this person owns a house for five years or even 10 years?
Homeowners need to put money into their house and it's usually anywhere from $20-$500 per month when it comes to maintenance costs. That's additional money going out each month. As a renter, the landlord or owner takes care of all of the maintenance, which allows the renter to put more money into an investment portfolio or safe. (That is if the renter is taking the additional money and putting it towards an investment portfolio).
But there are many variables when it comes to renting and buying. If a homeowner buys and sells multiple times there are additional costs and fees associated with the sale and purchase of new property. Those are funds that can usually never be recuperated. As a renter, most of the fees and costs involved with renting a property either go towards rent or torch damage repair.
Because there are so many variables involved, it really comes down to personal choice, net worth and where you'd like to be in 5, 10, or 25 years. Renting might be the best option for a while or buying might be a better solution in the long run. It depends on how much you want is your net worth, how much you want that wealth to grow, and where you plan to be within the next few years. So you see, renting or buying really depends on your plans for the future. Renting may not always be a waste of money but buying may not be either.
If you'd like us to run some numbers and figure out what would be the best option for you currently, give us a call. We don't immediately push everyone towards buying and renting might be the best option for you right now.