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Should You Rent or Buy Your Home?
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More people rent their homes than at any point since 1965 but is that a worrying sign of the times or just the way it is? In 2016, 36.6 percent of households rented their home which is very close to the 37 percent who paid rent five decades before in 1965 based on data gathered by the Census Bureau. Their statistics show that the number of households grew by 7.6 million over the past decade but the number of homeowners didn't increase very much. Although there's a trend towards renting nowadays, should you rent or buy?
The Home As an Investment
A home is a great investment so for years the common practice was to buy a house as soon as possible but that's not so clear but now. If you look at the economics of owning a home, you'll understand why it's not such a straightforward decision. Since 1975, houses have appreciated by an average of 4.5 percent each year. That sounds pretty good but when compared with stocks that return an average of 9.8 percent including dividends, maybe there are better places to invest your cash.
Economics of Renting
If you rent, you don't pay the maintenance costs, taxes associated with the home and some utility costs. The landlord will pick up the tab for those. When you own a home, you pay for those things but you'll also have to pay for replacement items like a new water heater, replacing the back fence, or a new roof. All of these things come at a massive cost and none are replaced to a schedule so you might need to dig deep in your pockets at times of the year when there's very little extra money around such as Christmas.
From Renting to Buying
Let's say you're going to make the change and get out of a rented property and into a home you own, what are the economics of that? You'll begin by comparing the monthly cost of the new property with the amount of rent, which is a sensible but misguided way of looking at it. Although the money you're putting into the home is accumulating slowly as the house appreciates over time, that's only part of the monthly payments you'll need to make when you own a home.
True Cost of Home Ownership
The true monthly cost of home ownership has the mortgage at the core but don't make the mistake of thinking that every dollar you're spending on the mortgage goes back into the home. A big slice of the money, as much as two-thirds, can be interest with the smaller portion going to principal. If you've taken out a mortgage over many decades, the home will appreciate over that period of time but getting a mortgage is not the no-brainer it used to be.
Downside of Renting
Although it sounds like renting is the way to go in today's market, there are downsides to not owning your own property. You won't control your own destiny in quite the same way as the landlord could sell the property leaving you to look for a new home. The landlord can also increase the rent whenever the lease needs renewing, and ultimately they can decide not to rent to you anymore, which in reality only happens if the landlord needs to live there or if they have a close friend or relative they're trying to help out.
Source: https://www.life123.com/article/should-you-rent-or-buy-your-home?utm_content=params%3Ao%3D740009%26ad%3DdirN%26qo%3DserpIndex
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