Renting a home versus buying a home is a big decision, and there are pros and cons to both.
As a result of the COVID pandemic, a record number of people are thinking of moving, with many looking to move from larger cities to suburban areas or to change the desired features within their current homes.
A desire to capitalize on low mortgage rates and more time spent at home are both significant factors impacting homebuyers’ decision to move.
- 55% said the pandemic is causing them to move or move sooner said that low mortgage rates were a factor in their decision.
- 52% said spending more time at home was a factor in their decision
- 40% said working from home has impacted their desire to move.
While more people are looking to make a move, the number of homes available for sale has dropped to record lows. More people are looking into renting as an alternative to buying, giving would-be buyers an opportunity to get comfortable with a new area, new home features or to “settle in” before committing to a long-term purchase.
The other day, I met with a long-term renter who was thinking about buying. He identified that he preferred renting because he didn’t want to make a long-term commitment to a property, fearing that he would be stuck with a mortgage and a home that he couldn’t sell. “If I don’t like where I rent, I can always move,” was his reason for renting.
Renting is typically underestimated and thought of as the path of least resistance. “If nothing else, I can always rent,” I often hear many buyers say, but many renters, including my long-term renter, are feeling squeezed by increasing rents and underwhelming properties for rent.
What Should I Do? Buy or Rent?
While the best timeline to buy a home is different for everyone, the question remains: Should I continue renting, or is it time to buy? The answer depends on your current situation and your future plans, so here are some thoughts to help you decide if you’re ready to own a home of your own.
Can you afford to buy a home? Approximately one in three American households rent their homes, according to the most recent U.S. Census Report data. This is the highest it’s been since the early 1960s! For many years, one of the key advantages to renting was that renting was more affordable than purchasing a home.
With historically low-interest rates, that is no longer the case in many areas. The percentage of income needed to afford a median-priced home today is declining, while the percentage of income required to rent is increasing. This is making buying a home an increasingly attractive option for many people, especially with low mortgage rates driving purchasing power.
Having worked with many first-time homebuyers, there are several myths that many first-time home buyers believe. One is that you cannot buy a home if you don’t have 20% down payment. The second is that personal mortgage insurance, or PMI, which is required for borrowers that don’t have 20% to put down is prohibitively expensive. Both myths are false. Many lenders offer programs for buyers with 10%, 5%, or even 3% down payment; and while PMI is required, most borrowers find that PMI does not add a significant amount to their overall payment.
Home Maintenance & Upkeep
One of the major attractions to renting for many people is that you can move in and forget about home maintenance and repairs. Many renters say that they would rather spend their time and money doing other things than worrying about cleaning the gutters, raking the yard or mowing the lawn. I admit that after working all week, there is nothing more comforting than watching someone else raking the leaves or mowing the lawn on Saturday morning.
What if something breaks? If the sink leaks…call the landlord. The water heater stops working…call the landlord. There is three feet of snow overnight, you don’t need to shovel, the landlord will take care of it.
While this may be true, most rentals are not turnkey, and many don’t feature updated features. Many rentals are in desperate need of updates and fixes, including new flooring, paint, appliances, and bathroom and kitchen remodeling or at least substantial updates, not to mention structural fixes.
A few months ago, I worked with a couple that was moving into the area and was seeking a 12-month rental until they could determine where to live long-term. I viewed several single-family properties for them in a fairly affluent area outside of Raleigh. Many of the properties had dated fixtures, appliances, carpets, etc.
After one of the showings, I sent some critical feedback to one of the rental agents regarding the condition of the property that they were representing. Her response to me “it’s a rental!
Ability to Customize
Want to paint the walls red? Install seafoam green carpet? You can…in your own home. Unless the landlord has already painted the walls red and found some old, sea foam green carpet from the 1970s, you are out of luck. In most cases, landlords determine all of these selections and prefer you do not alter them as a renter. As a homeowner, you have the freedom to decorate and personalize your home to truly make it your own.
When renting, your landlord has access to your space in case of an emergency. If you own your home, however, you’re the one to decide who can come inside. Given today’s health concerns around the pandemic, this may be a growing priority for you.
Fido and Fluffy
No matter what kind of pet you have and have happily co-existed with over the years, what you don’t think is an issue might be a big deal to a landlord. Do not assume that every landlord will accept pets, and if they do, there are often restrictions on what they will agree to take.
As a renter, the landlord will often require a significant pet deposit for bringing in a furry friend. Some landlords are allergic to certain creatures, and some simply want to avoid the wear and tear caused by animals on their property.
Everyone says their pets are well-behaved, but unfortunately, many landlords end up spending far more than the pet deposit to restore a property to a rentable condition after tenants (and their pets) move out.
Scratched-up floors, windowsills and doors, pet hair, and unpleasant smells are typically what an owner has to deal with. Many landlords do not want the lasting remnants of the last tenant’s pet to detract from their ability to rent their property out again — which is why they often enforce strict pet policies.
When you pay your rent, your landlord earns the equity the property gains. If you own your home, the benefits of your investment go directly toward your net worth. This is savings you’ll be able to use in the future for things like sending children to college, starting a new business, buying a bigger home, or simply downsizing to save for retirement.
When you own your home, there are additional advantages that work in your favor as well. You can deduct things like your property taxes and mortgage interest. When you rent, however, the tax benefits are directed to your landlord.
Note: Always make sure you check with your accountant to see which tax-deductible benefits apply to your situation.
There is no easy answer. It’s up to you to decide if you’d prefer to rent or buy, and it’s different for every person. If you’d like to learn more about the pros and cons of each, as well as resources to help you along the way, contact a local real estate professional to discuss your options. This way, you can make a confident and informed decision with a trusted expert on your side.
Other Resources from Our Blog
Why This Isn’t Your Typical Summer: Link
Patience is the Key to Buying a Home This Year: Link
Things to Avoid When Applying for a Mortgage: Link
About Log Pond Realty
Home is where your story begins. Home is where hopes and dreams are born, memories are made, and lives are lived. We would love the opportunity to assist you in writing your new story.
We service the Triangle region of North Carolina including Raleigh, Cary, Apex, Holly Springs, Morrisville, Fuquay-Varina, Durham, Chapel Hill, Wake Forest, and Garner.
Contact us 919.589.3576 | firstname.lastname@example.org
Sources: Keeping Current Matters & Inman