The following post is from Melissa Batai
If you rent, you’ve likely heard the common argument that it’s better to own than rent, especially if you live in an area where monthly rent costs more than a modest house payment. When we moved to Arizona nearly four years ago from high-cost-of-living Chicago, we were finally in a position to buy a house. We happily did so, but we’ve found out that renting, even if the monthly rent is more expensive than a house payment, can be cheaper in the long run.
Benefits of Renting
If you rent, you do face yearly rent increases, and over the years, those can really add up. However, your only responsibility as a renter is to pay your rent, pay your utilities, and perhaps take out renter’s insurance (which I highly recommend). In addition, you can often negotiate rent increases with your landlord
Drawbacks to Home Ownership
If you own a home, you can build equity as (hopefully) the value of your home increases over the years. However, you cannot access that value until you sell the house. And, I’m beginning to think that the equity you earn over the years will just even out with the expenses you have to pay. (At least that has been our experience so far.) The longer you stay in your house, the more equity you can earn.
So, yes, equity may give you a good chunk of change when you sell the house, especially if you live in an area where housing values increase exponentially.
However, you also face many more expenses than renters. Here are just a few of the additional expenses you’ll face:
Taxes. Depending on the area of the country where you live and the size of your house, annual property taxes can run from $2,000 to well over $20,000. You’ll need to pay these every year that you’re in your home.
Insurance. Sure, renter’s insurance is highly recommended to protect your belongings inside your apartment in case of fire, theft, etc., so you’ll have that cost just as a homeowner will. The difference is that homeowner’s insurance is much more expensive because there is much more to insure. Our homeowner’s insurance is approximately $1,600 a year. When we rented, our renter’s insurance was $100 a year.
Repairs. Ah, the repairs. We’ve owned our home for 3.5 years, and in that time, we’ve had to replace our water heater and our central air conditioner/heater. We’ve had to have the garage door repaired, and some leaky faucets replaced. We’ve had to have two places in our home remediated for mold (I and one of our children are allergic to mold, so we had to pay more to make sure the mold was contained while the repairs occurred).
Maintenance. If you don’t want costly bills later, you need to maintain your home, which can also costs a fair amount of money. When money is tight, you can avoid this expense for a while, but if you don’t regularly maintain your home, it can end up costing you more in expensive repairs. In addition, your home can lose value when you get ready to sell if it has not been maintained.
Owning a home does give you more freedom than you have as a renter, but if you’re trying to decide if now is the right time to buy a home, don’t be swayed by the argument that you’re just throwing away your money if you rent. Owning a home comes with a great deal of expenses that many people just don’t consider. For some, especially those in tight financial positions, continuing to rent just makes more sense.
Are you a homeowner? Have you found that the cost of repairs and maintenance over the years negates much of the equity you’re building in your house?