Buying or Renting… Which is Better?

July 8th, 2009

While browsing for any opportunities to earn extra income, my attention was caught by an embedded video about buying or renting a home. The video is in two parts and you can view it by clicking on the link below.

In the 2-part video, the person talking is actually proving his case that renting is better than buying a home. He argues that he’s almost 100% convinced that savings when renting far outweighs that of purchasing your own residence – be it a condominium, manufactured home, house and lot or an apartment. Actually, he has presented his analysis in a manner that can be better understood by the viewers.

I am also renting, so I also experienced listening to others’ opinion about the benefits of having a home.

“If you rent, you’re throwing away your money.”
“Owning your own home is a forced savings plan.”
“Home ownership is an excellent path to build wealth.”
“Having a home is a major milestone in anyone’s life”

There are other resources around that tackle the same issue in the video. Tim Ellis made a post in Get Rich Slowly blog, and again stated some proofs that renting is better.

What’s remarkable about this is that there’s a mixture of ideas from all those who made comments in the video and the blog post. Some of them are in favor of renting while others are in favor of buying. People have different point of view, and here are some that caught my attention:

In favor of renting:

As a late-blooming homebuyer (I waited until age 48 to buy my first home), I do find myself a bit nostalgic for the relatively carefree renter’s life. I went from renting a three-bedroom apartment for $550/month to a three-bedroom house (not much more room but we now have a basement) for which I’m paying $2600/month (15-year mortgage), so the biggest impact on me has been cash flow. There are also lots of expenses that I don’t think we’d be making if we moved to another apartment, like new (better) furniture, curtains, a lawnmower, yard tools, etc., none of which will add to the value of the house but do improve our quality of life. However, those may be offset by the headaches of having to deal with and pay for all the repairs ourselves…it was so nice when you could just call the landlord and say, “sorry, but the roof is leaking.” – Brad on Tim Ellis’ post

In favor or home-ownership:

I hate it when PF Blogs let someone post about how renting isn’t such a bad deal. Renting sucks. How much do the renters benefit when property values rise? They don’t.
If you own, you have a stake in a market that consistently rises.
I purchased a condo for 62K, and continued to pay mortgage and taxes consistent with what I would have paid to rent it. Sold that condo 5 years later for 148,500.
Even if the market had not gone up, I would have walked away with thousands in equity.
If I had just rented it, I would have had walked away with nothing (except maybe my damage deposit).
Yeah owning requires some investment, and anyone can put together a graph showing how renters pay less, but the market changes and when it does, owners have an opportunity to benefit, whereas renters never do.- Jeff on Tim Ellis’ post

In favor of both?

I know somebody who is a home-owner, but he rents a condo unit for his family. Why did he make the decision to rent? He travels daily from home to office and that costs him a lot because his house is tens of kilometers from where he works. On top of that, he wastes around three hours a day on commute because of the heavy traffic, causing him stress and fatigue.

His home now is being rented out, producing additional income that can provide extra money for the rent that he pays his landlord and the monthly amortization for his home. He saved on travel expense and parking costs because he lives just a block away from his workplace.

My two cents

I’ll use the safe answer – it depends. I am not against renting because I do so at present. Neither am I against buying a home, because I really plan to do that in the future. That has been my dream ever since I started to work.

As proven by the different cases stated above, everyone has different circumstances, and there are many factors that will help you decide which is better for you. The point is you have to assess and understand your financial condition very well. You can listen for advice, but in the end, it is you who should make the final decision based on the result of your own evaluation.

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Buying or Renting… Which is Better?

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