Still reeling from the 2008 financial crisis, property rates are at an all-time low. Almost a decade after the fact, the real estate market is only starting to recover and buyers are enjoying the lowest mortgage rates we have seen in decades.
Rental rates on the other hand, especially in densely populated cities are on a steady climb. These factors have led many to buy instead of rent. The trend doesn’t apply to everybody though. Experts are observing that millennials, those who were born from the early 1980’s to the early 2000’s, have become extremely conservative about home ownership and are taking their sweet time with regards to settling down. Opting to rent and often with roommates to split the cost.
The market seems ripe for buying so are renters really wasting money paying for something they will never own? Or are homeowners digging their own graves once again by purchasing properties that will continue to cost money through maintenance and property tax costs? Before you decide here are the pros and cons of both buying and renting.
The Pros and Cons of Renting
The real draw of renting is the freedom and flexibility it offers. Maintaining your home is as easy as calling the landlord to get the plumbing fixed. Those whose jobs require them to travel and move a lot have no other choice really than to rent. Which is just as good because moving out is infinitely easier if you don’t own the place. Owning a house used to be dubbed as one of the safest investments there is. Not these days. People have become so conservative about homeownership that despite the fact that the market has become relatively stable, people are still pessimistic about the gradual increase in property values.
One of the most obvious disadvantages of renting is the fact that your landlord, the guy you bothered about getting your plumbing fixed at 3am, can increase your rent every time you renew your contract. You don’t build equity living in somebody else’s building. This can make it harder to purchase property over time. Homeowners have certain tax benefits that may make homeownership so much cheaper than renting in the long run.
Pros and cons buying
Aside from building equity and huge tax-breaks, one of the best things about buying your own house is that your monthly payments will remain stable. Also, if you play your cards right, you can turn your home into an earning rental property once you decide to move out or if you suddenly have extra room for when the kids move out to college.
Property is as illiquid as an asset can get. It is one of the most difficult assets to dispose of when you need to be liquid. Aside from having to pay your own maintenance, which can rack up quite a bill overtime, property taxes can be quite a doozy. As we’ve learned from the financial crisis, properties can lose value in an instant and your property now becomes more of a liability than an asset.