Renters are often in a quandary as to whether it makes sense to continue renting or buying a home. Buying a home may make more sense, particularly when taking a long-term view. Yes, even in the current pandemic situation – provided you are in a sound financial capacity.
Renting – Advantages
Renting can have a few advantages. The primary advantage is your monthly rent payment may be less than an equivalent mortgage. A secondary advantage is the fact that maintenance and improvements to the property are the responsibility of the landlord. Still, these advantages pale in comparison to the disadvantages of renting.
Renting – Disadvantages
The disadvantages of renting are significant. If you have any opportunity to purchase a home or condominium, it almost always makes sense to do so.
The biggest disadvantage of renting is the loss of value. Assume you rent a residence for $2,000 a month and you live in the residence for two years. You will have paid a total of $48,000 in rent, a pure expenditure. The $48,000 is simply gone and you will have nothing to show for it other than the time you spent in the home. Compare this to what your landlord has gained.
Rent payments are closely aligned with a landlord’s mortgage payment. Using the above example, let’s assume your $2,000 rent exactly equals the mortgage payment. For two years, you have indirectly paid the landlord’s mortgage, helping them build equity in the house by paying down the loan. In addition, the landlord has benefited from the appreciation of the property. By appreciation, I simply mean the amount of increase in the value of the house over the years. As a renter, you have made this all possible. The landlord no doubt would like to thank you.
Now, what would have happened if you had purchased a similar home with similar financial figures? You would have seen an increase in YOUR wealth, not the landlord’s wealth.
If you are still renting, you should be out shopping for your own property. After all, isn’t it time to make your money work for you, not the landlord?