Rent vs. Buy Debate

The Great Debate

The jury is still out on whether it is better to buy a house or rent a house or apartment. Although the familiar argument that buying will ultimately save you more money than renting still abounds, this contention is not always correct. Besides mortgage and interests fees that must be paid off in order to own a home, ownership entails many other types of costs as well. On the other hand, while renting requires no down payments or mortgage bills and entails fewer maintenance costs than ownership, the renter receives no tax advantages and any money invested into the interior of the apartment stays there when the renter moves.

Buying Considerations (Pros and Cons)

•- Large initial outlay of cash

•- Is your job secure? Do you have good credit? Do you qualify for a loan or for low down payment sub-prime loans? Are current real estate and interest values conducive to buying?

•- Are your savings sufficient to pay for utilities (air conditioning and heating), repairs and emergency maintenance services?

•- Can you afford upkeep of your outside property?

•- Do a comparison between real estate appreciation/depreciation rates and annual increase/decrease rental rates.

•- Interest payments on your mortgage can be deducted on income tax

•- Mortgage payments will not increase with a fixed interest rate mortgage

•- Equity is built over time

•- Possibility of real estate appreciation

•- Pride of home ownership and freedom to make changes to your own property

Rental Considerations (Pros and Cons)

•- Landlord is responsible for all maintenance and repair fees, care of the building and the surrounding property

•- No need to sell your property upon moving

•- Suitable for a more portable lifestyle, i.e. for someone whose career entails frequent relocation or for whom career opportunities may open up elsewhere

•- Initial costs cheaper than buying (no ownership costs such as property taxes, insurance, mortgage, and interest fees)

•- Many apartments or condominiums come with bonuses such as a health club or fitness center, swimming pool, weight room, Internet access, children's playground, beautiful grounds, and more

•- Short-term rental allows time to save money in order to buy a house in the long term

•- Any renovations, improvements, or money invested into fixing up the apartment are no longer yours once you move

•- Landlord receives all tax benefits

•- No equity building

•- Monthly rental fees often equal the amount of mortgage payments so that your money is 'lost' rather than put into something you can own forever

A Compromise

There is a third alternative which may offer the best of both worlds in the short term. A lease option, also known as a rent-to-own arrangement, offers would-be buyers the opportunity to rent a property at a fee slightly higher than the market value with the added option of the right to purchase the property at any time within the rental contract (at a predetermined purchase price). For the undecided, renting to own might very well be a temporary solution to the great rent vs. buy debate.