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Buying A House Is Always The Correct Answer….Right? Maybe Not!

As the blog is growing and my readers are connecting and asking more questions, I am going to start a new series on the blog and maybe carry it into the upcoming podcast.

Each week I will either have a guest blogger or a question from my readers that they can ask and I will try and answer to the best of my ability! Please keep the questions in line with the blog!

If you have a question you want to ask or an idea for a post you would like to read, head over to my facebook page and send me a message with your idea or question! I cannot wait to hear everyone’s ideas!

Is It Better To Rent Or Buy

I have struggled with this question for awhile as I thought I already had the answer, but as I grow older and my thoughts and financial maturity grow, I think my original opinion is changing! Maybe it’s just the lifestyle that my wife and I are currently living in.

I have also read and talked to a few bloggers- one being briefly to J. Money from Budgets Are Sexy- concerning the topic of renting vs buying a house!

I can tell you in the personal finance world I feel like every blog I read says to purchase a house so you are not throwing money away with rent….but are they right?

Renting A Home

Renting, at its core, is paying money for a place to live that isn’t your own and where you do not have to do the house’s maintenance. Generally speaking, renting has a higher price-per-month because you are virtually paying for someone else to do all your repairs, and you are paying for the rental’s owner to make a profit.

While this is by no means bad, it does bring into light that at the end of the day you can walk away from that property and have nothing to show for it. 

However, this can also be the biggest benefit of renting!

Many rentals are in a year contract and then, if you were a good tenant, often times the landlord will give you a month to month agreement. Sometimes this is not the case, but around here that seems to be the general agreement.

But you are free to leave at any point in time if you get bored with the place, change jobs, find something cheaper, or just plain want a change!

Another added benefit is that you do not have to repair major things that can really blow your budget to pieces.

Related: How To Follow A Budget Without Killing Your Spouse

Make A Plan: Save Thousands

Owning A Home

Let’s get the obvious out of the way. You took on a risk that this house would be a good financial asset down the road, and you are building equity in each of your monthly payments!

This is why everyone says you should buy because at the end of the day, when you sell your property, you will get your money back and hopefully a profit. If you choose not to sell, but continue making payments on your mortgage and finally pay it off, you no longer have to pay for the house you continue to live in! Because of this, you did not “waste” that money with renting.

Now you own some property that should sell for a value equal or greater than what you paid for the house as you should have been making improvements and upkeep happening. However, it also means you are stuck or locked into that house until you can sell it, and you never know what the market is going to do!

So Which Is Better

Here is the clique answer, and I promise I will expound on it since you read this far!

It really depends on where you are at in life!

ok, ok I know anyone could have answered the question that way, but I am learning that owning a house is not always the best option for you!

If you are willing to stay in one location for at least 5 years and can find a house that’s in your price range, then I truly think purchasing a house is the way to go! This way your house payments will be cheaper than the equivalent house payment for rent (at least it should be if you put a downpayment on it).

Another reason you should buy over renting is if you are in an area where the market has crazy low-interest rates, and houses are in an abundant. In this scenario, find one that you can envision yourself living in when it’s fixed and buy that one!

Side note: I am a prime example of this. Don’t buy for easability and because it’s already all fixed up! You and your spouse will reason that the extra money you’re paying is worth it. However, a year later your opinions will probably change! 

Instead, if possible, buy something that can be fixed into what you want! This way you have sweat equity in the house and the likelihood of getting a return on your investment, even if you have to sell under 5 years, is high!

And the one we have all been waiting for….

Renting has its pro’s

  • Not having to fix big issues
  • Fixed amount no surprises
  • Freedom to move when your wanting
  • If you have debt it will be easier to rent than buy a house!

So Seriously Which Is Better…

For me, while renting gets a bad rap from most of the finance community, I will be one of your few that stand out and say I am not sure buying a home is for everyone. Even for young married couples in general, if they are indecisive, struggle with doing their own repairs, and have a large amount of debt, renting maybe the best option!

By age 23 who seriously has come up with their life plan…

Related: How To Conquer Your Student Loan Debts After Graduation

How to Find Financial Independence: How Much Money is Enough?

Question:

Which is better for you Renting or Buying? Leave me a comment then head on over to my facebook page to see the discussion there!

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Barnabas Brown

Barnabas Brown

My name is Barnabas, and that's my better half, Marissa! I am an Entrepreneur and budget savvy Father to one adorable son, a three-legged puppy and one truly excellent wife! I have paid off $37k in student loan debt in just over a year and a half, while in college! I love to help others learn how to be financially responsible for themselves! My other passion is to help give to those that need it and train others to better themselves!
Barnabas Brown

Barnabas Brown

My name is Barnabas, and that's my better half, Marissa! I am an Entrepreneur and budget savvy Father to one adorable son, a three-legged puppy and one truly excellent wife! I have paid off $37k in student loan debt in just over a year and a half, while in college! I love to help others learn how to be financially responsible for themselves! My other passion is to help give to those that need it and train others to better themselves!

This Post Has 2 Comments
  1. It’s been quite in vogue recently for various media outlets to poo-poo home ownership in favor of renting, and I just don’t get it. The cynic in me wants to say that they’re just pandering to the Mass Millennial demographic that won’t be in a position to purchase a home for a very long time.

    The rent-vs-own analysis really needs to be done on a locale-by-locale basis, not using national data. It’s not right for a media outlet to headline, “Renting is a smarter financial decision than owning!” based on data from all 50 states and then proclaim it as gospel. People make major life decisions based on that kind of stuff without realizing that what may be true in the average is not necessarily true in their backyard.

    Sure, home ownership over the long haul may not be such a slam dunk in less desirable parts of the country, but let’s face it. I’m in the Los Angeles area, which is an extremely desirable place to live, and apart from some unprecedented catastrophe, it will continue to be. This desirability will cause both rental rates and home prices to increase substantially over the long run. In such a climate, would one rather be a renter or an owner? The answer is simple.

    And if your family is small (like ours), you can turn your house into a money-making asset by renting out space. We rent out a room to a young woman from church. She pays us $850/month, which comes out to over $10,000 a year. Over 10 years, that’s over $100,000 of easy money! You’d be hard-pressed to find a landlord/lady willing to let you rent out a room in the house you rent from him/her.

    Another beautiful thing about real estate is the ability to leverage. My first property was a 4-unit using FHA 3.5%-down financing in the burbs. I lived in one unit and rented out the other three.

    This was an incredible deal and has proved to be a major boost to my net worth. I’ll give you 4 reasons: 1) I was living for free while my friends were paying through the nose for L.A. rent, 2) I was building equity as my tenants paid down my mortgage, 3) I was cash flowing hundreds of dollars a month, and 4) I got 4 units an hour from Downtown L.A. for a mere $15,000 out of pocket, and the property has already substantially appreciated.

    And because I only put 3.5% down, I had a decent chunk of money left over (+ cash flow from the tenants) to put into “real” real estate in the form of two private placements — a beachside development deal along the California coast + a buy, rehab, retenant, refi apartment syndication in Arizona — the returns on which have blown the stock market out of the matter.

    The FHA fourplex strategy really is a no-brainer for single Millennials. If one does nothing else in real estate, they will have succeeded by getting into a fourplex as a young man or woman with only 3.5% down.

    Assuming the rents cover their expenses, in 30 years when they’re in their 50s and the mortgage is paid off, and they’ve done the smart thing by raising the rents over the years, they will be sitting on a million-dollar asset that cash flows thousands of dollars per month at the cost of a measly $15k or so out-of-pocket when they were 20-something.

    I can’t think of any better way for young people with limited resources to prepare for their future so early on in life with so little cash out-of-pocket.

    If I had listened to all the noise and rented all those years rather than owned, my net worth significantly less than it is today, and that’s not even including the appreciation on the property.

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