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Should I Rent Or Buy A Home?

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Forge Your Wealth is meant for education and entertainment and should not be used for financial advice.

Rent Or Buy, Which Is Better?

Whether you want to rent or buy, you need a home in your life. The question is which is better? The debate is very long and full of abhorrence. I have heard people say they regret wasting their lives renting out a place that is not theirs or putting a ball and chain on them and their family with a house. Like practically every financial decision I do not believe there is a right decision, but instead a right decision, at the right time, for the right person, in the the right conditions. These conditions are numerous. For the conditions to rent or buy real estate, I will ignore financial reasons including money for down payments, as I will bring that up in another post.

Reasons To Rent

  1. If you are staying in the area for around 5 years or less. Some even argue for longer, sometimes even up to 10 years. This not only helps you save money, but it adds potential to your career. Buying a house can prevent you from moving readily.
  2. If you have little to no experience in house maintenance. Guess what folks, renting requires the landlord to make the repairs or at least most of them. You will be surprised at how much time and money is spent on these. If you own a house you no longer have the luxury of calling the landlord to take care of any issues.

Myths About Renting

  1. You are paying the landlord’s mortgage. Not always. Have you ever heard of negative cash flow? That is when the landlord’s expenses for a rental property are higher than the money from renting. This is fairly common because their are always risks when buying real estate. Rent is merely a low risk way of staying invested in real estate property.
  2. Rental Prices Are Steady. Not at all. Landlords can raise rent regularly. I started renting my place for $670/month, now it is $720/month four years later.
  3. Your Landlord Can Evict You Whenever They Want. Oh, how many people go through their lives without knowing their rights. It would be cute if it wasn’t so disappointing. As a renter you have rights which can be summed up as follows: “as long as you paid the rent, agreed to and adhered to the lease, you cannot be evicted by your landlord without going to court.” I have heard of situations including asbestos forcing people out of their homes, but you would be surprised at how little control the landlord had in that decision, it is almost entirely the government’s. There are specific rights to being a renter too, depending on the area. For example, in the state of Pennsylvania, you nor your support animal can be evicted nor denied housing because of said animal.

Reasons To Buy

  1. Long-term Commitment. Buying a house is a long-term way to build wealth. Every time you pay your mortgage you increase your net worth. Which makes it ideal for living in an area for a long-term job or a business.
  2. More Control. You can do more with a home you buy instead of rent. One of the most obvious is owning a pet. You can also make some renovations to your home.

Myths About Buying

  1. You own the place fully. Sorry but this is not true. Owning a house depends on what your definition of owning is. Is it that you have 100% full control over it no matter what? If that’s the definition of owning, then no. Especially at first, while you “own” you home with a mortgage, the lender has a legal interest in the home. Until it is paid off they can foreclose on it. However, even if you paid off your home if you do not pay for the property taxes and even water, your home could be taken.
  2. You have full control. Nope. There are many limits to owning a home. You cannot run some businesses in your home, ever watched The Office? Remember when Michael tried to start his own business in his home and then he was informed he could not legally do this? And it was a service based business, it’s not like he wanted to start mining for uranium. These occur because of zoning laws, these are powerful laws which strongly restrict the use of land. To all the Republicans, don’t blame Obama for this, to all the Democrats, don’t blame Trump. This is all by local governments, the federal government is not constitutionally allowed to do this. While I see some benefits to these laws including nature preservation, I see little to no point on developed land being restricted by these laws.

You Will Be Restricted If You Buy You Home

Unfortunately, owning a home no longer provides the freedom that it used to. I know of two people who raise chickens to produce eggs. They live is rural areas, if you live in the suburb or city in the US, you can all but forget about raising chickens. Depending on the zoning laws you may be restricted in the businesses you can perform. For example, I may need some specialized space to start cleaning pipettes. Depending on the zoning laws that space may not be allowed.

If you have heard of home owners association, then you probably know that there can be even more restrictions on what you can do with your home. The paint of your house and sometimes even the lawn will be dictated by the home owners association rules.

Final Thoughts

Frankly, owning a home has turned from a financial freedom to a liability. Now, they are just considered places to live. With the taxes and hidden fees owning a home may be too much to deal with especially early in your life.

If you were to ask me which is better, to rent or buy your home, assuming there are no other strings attached, I would say buying your home is better hands down. Unfortunately strings do exist, and many of them. I personally recommend that if you are just getting started with life, start off by renting. While there are benefits to owning your home, it is not like the benefits from earlier days. But these benefits come at a price, usually literal prices including fees and taxes. I do not believe that is what you should worry about buying a home in the first few years when you are out on your own. The opportunity for owning you own home is not going anywhere.

Be honest with your own needs to determine whether renting or buying your home would be best. This decision will be a great step to forging your wealth.

Author: Papa Foxtrot

Most of my life I was careful with money and learned where I should invest it. I was very lucky to have parents who taught me financial literacy when I was young. Unfortunately, I am very lucky because many people lack the financial literacy I know. The purpose of Forge Your Wealth is to teach people who are just starting out in life how to obtain their wealth or anyone who just realized they may need to learn more to handle their finances. I currently have a PhD in biochemistry, just started a job in industry (will not disclose where exactly for personal and professional reasons) and am currently married to the love of my life. I am one of the lucky few people in America who graduated with no student debts, my wife was not. Over the series of a little over 3 years we paid for our wedding with no debt and paid off her federal student loans.

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