When it comes to finding a place to live, renting can sometimes be easier, more affordable, and quicker to attain. However, did you know that there are many downsides to renting that only homeownership can help you overcome? What if you could buy a home, but live rent-free? Is it even possible?
Don’t worry, we’ve got you covered. Here are 4 downsides to renting no one may have told you!
- You aren’t building equity
- You are probably paying a higher cost
- You need land-lord approval for everything
- You don’t gain any asset-building wealth
You aren’t building equity
One of the many downsides to renting is that you are throwing money away when you pay rent. When you don’t own a home, you are not building equity in that home. Essentially, a house that you purchase will likely grow in value over time. In addition, you will be paying off your home, which builds more equity over time.
Equity is good for a number of reasons. First, you can use that equity to purchase another home, sell your home, or make renovations. Second, having equity helps you build your credit and gives you a vast array of options for buying in the future. Third, in some cases, you can use your built-up equity as a retirement fund. While not the best option for retirement, for some people this can be a viable option for retirement.
If you are just renting, these options all disappear.
You are probably paying a higher cost
One of the key downsides to renting is that rent is often higher than paying a home mortgage
According to Money.com in 53% of U.S. counties, it would be cheaper to pay for a 3 bedroom home than to actually rent one. This ties back to the first point. You are going to be spending more money, and not building any sort of equity with the money.
Essentially, even when including items such as property taxes, you still end up saving money. The caveat to this, though, is finding a home at the right price. If you overspend on your home, only to pay a high mortgage spread over thirty years, you will dig yourself into a hole.
It may sound simple, but don’t shop for a home you can’t afford. More importantly, you want to find a property that will grow in value to get the max benefits of paying your mortgage. Even if you are tired of renting, don’t buy unless the housing market is going to benefit you.
You don’t need landlord approval for everything
Ever want to paint a room in the home that you were renting? Want to install a large outdoor patio that has always been your dream? What about being as loud as you can possibly be?
When you buy your own home you can do that and much more. No more having to wait for permission to add color to a wall or fix something. When you own your own home you can do whatever you want to it! Owning your own home means you can increase its value and make it feel personal to you and your family. Put in a home theater or try building a pool in the backyard!
On the other hand, this does mean you are responsible for all repairs that are not under warranty. Over the course of the life of the home, you will incur several maintenance costs that can drain your wallet. Knowing this, you must have an emergency fund set aside for any rainy day projects that come your way.
Consider this factor when deciding whether buying a home is right for you.
You don’t gain any asset-building wealth
There are many downsides to renting, the least of which may be the ability to create wealth from a home. Buying a home, even for personal use, can allow you to still build wealth through avenues such as house hacking, Airbnb, and renting out storage space. Not to mention, selling your home for a profit when it increases in value and you have built up equity.
A home is an asset much like other investments. While it should not be considered as your primary investment, in time it can turn a profit and even help you make money. When you do not own a home, there is no chance of that happening. You don’t have the authority to charge someone rent in a place that you are renting yourself.
However, this is a long term strategy and should not be taken lightly. You still need to find a home in a growing neighborhood and provide upkeep on the home. You may need to do renovations, or hire a property manager to run your real estate interest. Don’t go in blindly, research the market thoroughly and talk to experts in the area before buying.
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