Lessees are often in a quandary as to whether it makes sense to continue renting or perhaps acheter louer a home. Buying a home makes more sense, particularly if taking a long-term view. Yes, even in the current hot market.
Renting – Advantages
Renting can have a few advantages according to the part of the country you live in. The primary advantage is your month to month rent payment may be less than an equivalent mortgage. A secondary benefits is the fact that maintenance and improvements to the property are the accountability of the landlord. Still, these advantages pale in comparison to the down sides of renting.
Renting – Disadvantages
The disadvantages regarding renting are significant. If you have any opportunity to purchase a residence or condominium, it almost always makes sense to do so.
The biggest problem with renting is the loss of value. Assume you rent any residence for $1, 000 a month and you live in the particular residence for two years. You will have paid a total of $24, 000 in rent, a pure expenditure. The $24, 000 is simply gone and you will have nothing to show because of it other than the time you spent in the home. Compare this to what your landlord has gained.
Rent payments are closely aligned using a landlord’s mortgage payment. Using the above example, lets assume your current $1, 000 rent exactly equals the mortgage payment. For just two years, you have indirectly paid the landlord’s mortgage, supporting them build equity in the house by paying down the personal loan. In addition , the landlord has benefited from the appreciation of the home.
By appreciation, I simply mean the amount of increase in the value of your house. If the rental appreciated $20, 000 in two years, the landlord has received a windfall. They may have seen a gain of $24, 000 in appreciation and payments lowering the mortgage loan. As a renter, you have made this all possible. The landlord without doubt would like to thank you.
Now, what would have happened if you had obtained a similar home with similar financial figures? You would have witnessed an increase in YOUR wealth of $24, 000, not the landlord’s wealth. If you renting, these figures should make your pearly whites grind.