Should I Rent or Buy?

"You're throwing your money away by renting!" Have you heard that before? My husband and I rented for the last 6 years and heard this from numerous people. While some had great examples of how we were "throwing away money" we knew that the costs associated with home ownership were more than we paid for rent. There are several factors to consider when you choose to rent vs buy. For us, after our daughter was born and lack of space was an issue, it was time to buy! Here are some advantages to both renting and owning:

Advantages of Renting

1. Mobility. If you're unsure where life will take you in the next few years, renting has an advantage over owning. Maybe your still searching for your dream job and you're unsure where that may be, or maybe you're in a relationship with someone in another state- either way, the ability to pick up and leave is way easier if you're renting.

2. No unexpected maintenance costs. My motto as a renter was, "oh well, it's a rental!" While I said this in a joking manner, that fact was that it wasn't my responsibility to fix the broken oven door that my daughter loved to sit on, or to replace the carpet she spilled an entire carton of cottage cheese on! Just call the maintenance guy- he'll repair it. Simple as that. Experts say that homeowners should set aside 1% of the purchase price of their home each year for maintenance costs.

3. No real estate taxes and no big down payment. Depending on the value of the home you buy, or are considering buying- your real estate tax bill could be nearly as much as your yearly rent. This also depends on the about your pay in rent. While it's true that real estate taxes are a deductible expense if you itemize your deductions, it's still an upfront cost. And, of course, renting doesn't require a large down payment. In most cases your biggest expense in the first month's rent plus a security deposit which is usually equal to one month's rent. When buying a home, be prepared to put at least 20% down if you want to avoid purchasing private mortgage insurance.

4. Lower utility costs. Generally speaking, your overall utility bill is cheaper if you are renting. Partly due to the smaller livable space, and also that the landlord most likely pays the costs to heat/cool the common areas (hallways). As a renter, you also don't have the added cost of water/garage/sewer, which can add up to approximately $50/month.

Advantages of Owning

1. Your house is an investment. According the National Association of Realtors, median home prices rose 6.4% annually from 1968-2004. The longer you plan on staying in your home, the more likely it is that your home will appreciate in value. Bismarck/Mandan saw a much higher appreciation rate in 2013-2015. Rates are still favorable, but have slowed some. And of course, once you pay off your mortgage, your home is truly an asset that you can either sell or stay put and enjoy not paying a monthly mortgage payment.

2. More space. This was the tipping for my husband and I. We were bursting at the seams of our apartment. Not to mention the 3 flights of stairs with groceries in one arm and a toddler in the other! We could have moved into a larger apartment, but by doing so, the cost of renting would have been similar to what we are paying in a monthly mortgage payment. Figure out what your paying to rent vs buying by square feet. This is a good comparison tool.

3. Freedom. Do you want red walls, or an NDSU bison painted on your living room wall? When you own your home, you can! Maybe you want to have a fenced in back yard for your puppy, or want to plant a garden. Having your own home allows you the freedom to have those things.

4. Tax deductions. Real estate taxes and mortgage interest is a deductible expense. This is a huge advantage for homeowner's. Talk this over with your accountant for further guidance.

Thanks for taking the time to read my blog! Please send questions to: stacyjohoffman@gmail.com