Are you looking to get your first home? Trying to decide between buying or renting it can be a difficult choice.
Depending on your circumstances, renting a home may seem more financially reasonable. However, it’s important to remember that owning a home comes with its own set of potential long-term gains.
In this article, OmniKey Realty goes over the advantages and disadvantages of renting vs buying your first home. We hope that by the end of this article you’ll have the practical knowledge to make a more informed and sound decision.
Advantages of Buying Your First Home
#1: Tax Benefits
Did you know that buying a home could give you considerable tax benefits? For instance, there is great potential for federal tax deductions. This means you could save money after itemizing your federal income taxes.
#2: Investment Potential
When you buy a home, there’s potential for you to become an investor. Over the years, you may want to explore the option of renting a part of your property to others.
Depending on your home’s location, you could even open an Airbnb-style holiday rental. In an area with high seasonal demand, this works exceptionally well. If this interests you, you can even consider renting out a single bed with a common kitchen. This could earn you a substantial income.
Disadvantages of Buying Your First Home
#1: Responsibilities
Homeowners have many obligations. When you own a home, there are no landlords who can take over the routine maintenance or handle property repairs. Dealing with emergencies and monthly upkeep would become entirely your responsibility. Not to mention, these repairs and maintenance tasks cost money!
#2: Financial Risk
Every home purchase comes with an implicit financial risk. Even if the market conditions are great on the day you buy your home, you won’t be protected from the effects of a drop in property value.
When your home loses its appraised value, you are stuck with two choices:
- Sell your property: this would mean you lose money.
- Don’t sell your property: this would mean that you are the owner of an actively depreciating asset.
As you can see, neither option is great!
Advantage of Renting Your First Home
#1: Stress-Free Solution
When you rent your home, you have fewer responsibilities as the landlord takes care of most home-related tasks. Whenever you see that something needs urgent upkeep or repairs, you can promptly let your landlord know about the issue and it will be sorted out.
However, this doesn’t imply zero obligations. You are still responsible for damages due to negligence or accidents. As a tenant, you would need to pay for property damages and excessive wear and tear.
#2: Relocation
With renting, it’s fairly easy to relocate. If you must frequently relocate for work or enjoy moving around, renting is probably your best option. It’s more difficult to move when you own a home as you have to go through an entire process to try and sell it.
Although you might have to break a lease and incur the penalties, you still don’t have to face the challenges of relocating after buying your first home.
Disadvantages of Renting Your First Home
#1: Less Freedom
Most landlords have comprehensive rental agreements that include restrictive clauses. This means that you won’t have the freedom to set up your home as you please.
Here are some examples of common rental property restrictions:
- There are no pets allowed.
- There’s a limited number of people that can occupy the unit.
- You can’t have a home business.
- There is a limit on the number of overnight guests.
- You are not allowed to sublet.
If any of these examples concern you, you may not enjoy renting a home.
#2: Lack of Long-Term Financial Benefits
When you own a home, you can get numerous payoffs such as equity, investment prospects, and tax benefits. However, as a tenant, you won’t enjoy any of these kinds of financial benefits.
In a nutshell: Renting Vs. Buying Your First Home
So, the question that remains is: should I rent or buy my first home?
As we’ve discussed, both options have their own advantages and disadvantages to consider.
As a renter, you will benefit as you will have fewer responsibilities and relative flexibility of a rental agreement. However, when it comes to investing and long-term gains, there’s no potential. Also, as a tenant, you don’t have much control as the property owner can make all the decisions.
If you choose to buy your home, you have much more freedom in being able to make it suit your needs. You also have a lot of potential to gain from the investment. That said, homeownership comes with a myriad of responsibilities and financial risks.
Now, it’s up to you to weight out the pros and cons and choose what is best for you!
