Every month while you’re writing out the check to the landlord, do you ask yourself if you should buy instead of continuing to rent? If you’ve owned for years and are moving to Vermont, should you buy or rent for awhile? What about part time use; rent or buy? Here are some considerations.
Renting
Renting Advantages
- Cost – under certain circumstances it is cheaper to rent
- Convenience – renting eliminates dealing with maintenance, everything from mowing the lawn to dealing with the water heater that just died
- Smaller Investment – other than your security deposit and maybe last month’s rent, there is usually no other money that is tied up
- Ease of Change – if you don’t like your rental, at the expiration of the lease you can move somewhere else
- Temporary Living – if you only come to Vermont, let’s say for the month of August every year, it might be wise to rent rather than have to cost of ownership
Renting Disadvantages
- Ownership – it’s an obvious one, the apartment isn’t yours. Improvements and repairs you make, add value to someone else’s real estate
- No Equity – sometimes owning can help you save as you pay down a mortgage
- Potential Change – if a landlord decides to sell or not renew your lease, you may have to move
- Privacy – owning a home often gives you a lot more privacy
Owning
Owning isn’t for everyone. It takes a commitment and likely more money management. It is often a better investment over the long rather than short term.
Owning Advantages
- Pride – owning your own home gives a sense of pride
- Building Equity – if you invest wisely, improve judicially and maintain your home, over the long run it gives you equity
- Stability – neighborhoods where most buildings are owned rather than leased tend to be more stable with fewer new faces all the time
- Privacy – even on as little as a half-acre, it’s not hard to find a home that is completely private from its neighbors
- Neighborhood Bonds – as turnover of homes is less likely than changing tenants in apartments, it’s not unusual to develop long lasting relationships with your neighbors
- Use of the Land – whether it’s cutting trees for heat, growing a garden, swimming in your own brook or landscaping for privacy, ownership allows you to freely use your land without asking permission
- Income – instead of paying rent, finding a home with an additional living unit, is a great way to offset expenses associated with owning
- Tax Deductions – mortgage interest and real estate taxes can be deducted yielding lower income tax
- Loan Potential – having equity in a home can allow an owner to borrow against it for emergencies, improvements, college tuition and retirement
Owning Disadvantages
- Liquidity – as an investment, real estate isn’t as liquid as some. You can’t pick up the phone and quickly cash in your home’s value as with stocks
- Portability – you can’t pick your house up and move. With an apartment you can move at the end of a lease, no strings attached.
- Maintenance – unlike an apartment, you have to maintain your structure and systems.
- Time – as mentioned, owning for a short period or using a home for a small part of the year might not make the most financial sense
These are some of the major considerations in choosing what’s right for you. You may have a perspective that differs with these economic reasons and we often hear it’s not all about money. We can help your decision by also discussing larger issues like current market trends, interest rate trends, potential appreciation of value or the economics of putting an addition on your home versus buying a bigger one and the costs associated with that.
