The shelter is one of the basic requirements in everyone’s life. When undertaking some budget calculations, it is noteworthy to determine the possibilities that a person has. Nevertheless, the house that an individual can live in could be leased or owned. Before renting or buying property, someone should do some assessment of the options they have. It is critical to analyze the different benefits and disadvantages of possessing and letting a house. Therefore, one should ensure that the choice they make is the best for them. This essay will demonstrate why renting is better and more economical than buying a home.
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When it comes to the choice of renting or buying a place to live, people need to understand the advantages and disadvantages of both perspectives. Even with tax benefits regarding homeownership, renting is better than buying a home since it can take six years or more for the former option to be affected (Mnasri, 2015). There are plenty of other aspects which make renting a better option as compared to buying. For instance, location can be a significant factor that one needs to consider in deciding which choice to take critically. Renting allows moving easier as an individual can relocate anytime their lease is up. The renter is not forced to stay, which permits to follow jobs when needed.
When leasing a house, the tenant is also free from all costs that are directly linked to the property, thus avoiding some maintenance costs, which could save a considerable amount of money. Letting could also protect one against credit foreclosure if one can no longer manage to pay for rent. If the occupant has to break their lease, the only thing they would lose is their deposit, although the tenant may be forced to pay a break the lease fee in some circumstances. Still bearing the charges and losing the warranty is a small amount matched to the total price the land-owner would lose in a foreclosure. In the end, breaking the lease does not affect the renter’s credit, as a foreclosure does to a landlord.
Leaseholders do not have to pay for breakages in their apartments, but homeowners have to cover their repairs. When renting an apartment, one is never concerned about fixing the toilet, sink, or plumbing because everything is paid for by the landlord. Avoiding these fees leaves extra money in the pocket or bank, thus expanding one’s spending on other essential issues. Rae (2020) claims that deciding between renting now and buying later could also give an individual sufficient time to wait on the economy to improve, which could render purchasing a home a much easier process. Even so, the new house is often further away from work, and since one cannot move, other marginal costs are realized.
For instance, when accumulated, the expense of gas and mileage on the car spent while travelling to work amounts to a significant price, which adds to other costs associated with homeownership. The advantages of staying closer to where one is occupied could be considered more pay for work from extra hours that one would otherwise spend traveling from home further away.
As previously specified, asset owners are obligated to pay property taxes. In regards to economics, the value of any object or place depends on various aspects. There are times when the land value goes up high fast; however, during other periods, it goes down. In this scenario, the owner could easily get the losses if the price of the property depreciates. Some opponents claim that homeowners can use some tax breaks to help reduce their home’s annual cost, with the most significant tax break being the mortgage interest. This sum is deducted annually as long as the mortgage is less than one million dollars. Therefore, property tax is the principal deduction which the landowner could gain.
According to Maldonado (2020), when making a purchase of a home, one need to do some calculations. The property taxes of the current year should be divided between the one buying and the one selling, whereby the percentage is fully deducted (Mnasri, 2015). When the homeowner sells, they have to use the sale proceeds to buy a new home. However, the law was changed, and now the house owner has to have possessed the property for two years and has stayed in the house for at least two of the last five years before the sale. This is an expense that the proprietor is still going to pay in full. Insurance, property risk insurance premiums, home association dues, deprecation of the house, and closing charges are also other charges the landlord cannot avoid in their income taxes (Maldonado, 2020).
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Even with the loss of right offs on taxes; there still exist many leasing benefits instead of buying a house. After the preliminary cost, the subsequent maintenance costs could be high for the homeowner. Furthermore, some additional repairs may amount to thousands of dollars more a year (Maldonado, 2020). These expenses may be a factor that the proprietor may never have thought about. The homeowner may not be able to use some of the tax benefits if their home’s cost is over a certain amount. Nonetheless, the ever-rising initial price of buying a home still makes it difficult for many people to afford the property.
Any person who is still contemplating whether to buy or rent, should use the rent ratio. Take the buying price of a house and divide it by the annual cost of leasing a home. According to Maldonado (2020.), “the number 20 provides a useful rule of thumb”. After doing the calculations, one will realize that a ratio which is above 20 means that the potential buyer should at least consider renting, especially if the person has a possibility of moving again in the next few years. After looking at everything that entails owning a home, one would find it advisable to rent an apartment because that is the best option.
The above information has demonstrated that trying to obtain a home may turn to thirty years’ struggle and stress. Incidentally, one spent many years paying for the mortgage, unless they are fortunate to get a decent job or succeed in establishing their own business. Moreover, paying a loan for an extended period could become an intolerable burden by making one live under constant pressure, especially when they cannot make the next mortgage payment. Many have fallen into this dilemma because they did not analyze properly all the advantages and disadvantages involved.
Maldonado, C. (2020). 3 Reasons why renting a home may beat buying. Forbes. Web.
Mnasri, A. (2015). Renting vs. buying a home: A matter of wealth accumulation or geographic stability? Journal of Economic Dynamics and Control, 60, 42-72. Web.
Rae, D. (2020). Should retirees rent or own? What is your best housing choice? Forbes. Web.