Smart Money Debate: Why You Should Buy a Home Instead of Renting

Smart Money Debate RedWelcome to the 1st-ever Smart Money Debate at ReadyForZero! To see the other side of this debate, read Carrie’s post: Why You Should Rent Instead of Buying a Home. And then let us know which argument was more convincing!

This post was written by Michelle, author of the wonderful personal finance blog Making Sense of Cents, where she writes about money, traveling, fashion and her life. You can follow her on Twitter @SenseOfCents.

While some people downplay the benefits of homeownership, I believe that the positives of owning a house outweigh the negatives. Of course, my opinion is based on my own experience and my own city. So keep in mind that some factors can change depending on where you live.

With that said, I think it’s a better financial decision to buy than to continue renting indefinitely. Below are my top 5 reasons to buy a house:

Buying a House is More Cost-Effective than Renting

Buying a house cost effective

I live in a Midwestern city, where housing and the cost of living are very cheap. Where I live, it’s either the same price to rent a place as it is to own, or sometimes it’s even more costly. If you live in an area where housing is cheap, then buying is probably a better idea for you (and even if you don’t, it might still be your best option because of the reasons I’ll discuss below).

Yes, some will say that owning a house is more expensive because of the maintenance costs. However, in my case, I have only had one thing break in the 3 years since I bought it – and it ended up being a small repair. There are also a lot of members of my family who are handy and either flip houses or have construction businesses, and luckily they always offer to help.

With our house, we are able to rent out additional rooms (we currently rent to my sister), which makes the cost of having a house substantially lower for us than having an apartment. Perhaps we could just rent an apartment and sublet other rooms, but that did not seem financially feasible in our area.

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Buying a House Gives You Equity

One of my favorite things about my decision to buy a house is the fact that one day soon I will own my home completely. Right now, we’re on track to have it paid off in about 5 more years. In the meantime, we get to take advantage of tax advantages that save us money. For example, if you own your home and itemize your deductions, then you can deduct the amount of mortgage interest and real estate taxes you pay each tax year.

And while I don’t necessarily think of my house as an investment, building equity in a home is a much better use of your hard-earned money than paying it to a landlord. In my case, we bought our house when it was dirt cheap at the end of 2009. The value then fell slightly lower (due to the economy) but then rebounded and was recently appraised at nearly $30,000 more than what we bought it for. If we ever sell, there’s a good chance we will gain an amount similar to that – whereas renting wouldn’t have given us a chance to earn any equity and therefore no extra money when moving on.

There’s also the possibility that once we pay off our mortgage we will decide to continue living in the house. At that point, we would begin to save significantly (vs. renting) because we will have no housing costs – aside from property taxes and any maintenance that is necessary.

Buying a Home Allows You to Choose Your Neighborhood

Where I live, there aren’t many good apartments or rentals nearby. A lot of my friends live in apartments, and they’re either not safe (as in, multiple shootings nearby) or they’re dirty and rundown. Of course there are nicer apartments, but they cost way more per month than our what our mortgage payment costs us. I live in a decent-sized college town, and many of the best apartments cater to the college. Yes, the amenities of an apartment (spa, gym, pool, and so on) would be nice, but it’s not worth the money to me.

Good apartments close to where our house is located would cost well over $1,000 per month, whereas our house payment right now is $969 per month – and that’s including insurance and taxes. To find a reasonably priced apartment, I would have to live too far away and the commute would make it not worthwhile. We’d also need to be able to garage our cars, which would increase the cost of renting even more.

Buying a Home Means You Have a Place of Your Own

Buying a home means a place of your own

Growing up, I always lived in apartments. We were always traveling for my dad’s job. A home never seemed like a “home” because we were constantly moving and it was just too much work to settle in completely.

Now that I own a house, I’ve achieved a high degree of stability. My house is truly my home in every sense of the word, and I enjoy being able to get comfortable and make it my own. The peace of mind and happiness that gives me makes owning a home very valuable to me. I know that I can do whatever I want and decorate however I want in my own home.

Buying a Home Gives You More Space and Privacy

This may apply more to houses than to condominiums, but if you own a house you typically have more space and in most cases you also have a yard. You do not have to share your living area, parking spot, or yard with anyone else.

In my case, we also have dogs, so we need a house with a large enough yard to allow them to run around and get exercise. Some of you are probably asking why we couldn’t just rent a house that has a yard, but the fact is that having two dogs in a rental would often be frowned upon and would almost certainly lead to an increase in the security deposit. To be honest, most places wouldn’t even allow me to have my dog because she looks like a Pit bull (although she’s really a mutt).

And that’s why it’s better to buy a home instead of renting!

So… do you agree or disagree?

Image 2 by Images_of_Money
Image 3 by nyul
Image 4 by ishane

Update: We’re going to link to blog posts responding to this debate (if you post one, let us know). Today we saw this great one from Greg at Club Thrifty:

Club Thrifty: Buying a House vs. Renting: What’s the Right Call?

Tackling Our Debt: Owning or Renting? Why Renting Is The Right Choice For Us

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  • Greg@ClubThrifty

    Nice post Michelle! Funny enough, I posted many of these reasons in response to Carrie’s contrasting view before I read your article. Good job…and enjoy Vegas!

    • You should post a link to your article here, Greg. It would be interesting to see another perspective on this debate. And yeah, I hope Michelle is having fun in Vegas right now – I’m replying to comments for her since she’s MIA, haha.

  • Cassie

    I absolutely 100% agree. You’ve hit on every major point that gets glossed over in the pro-renting arguments. Great post 🙂

    • Glad you enjoyed this post, Cassie! What did you think of Carrie’s arguments? Did they sway you at all?

    • Thanks!

  • RichUncle EL

    In the area I live in buying usually comes with an additional 10 thousand dollars in taxes being handed over to the state. The area I am speaking of is the Northeast area. If you have a great income and do not mind giving up that much money towards taxes then buying is fine, but for me as of this point in my life renting is more afforable and I am able to reach my goals for now with renting.

    • Yeah, taxes are an important part of the cost calculation. Ten thousand is a lot! Though in some cases, I suppose deductions could make up for part of that.

    • holly

      I think the majority of landlords build property tax costs into the rent. We own two rental properties and the mortgages (including taxes and insurance) are fully covered by tenants. I technically pay no property taxes on those homes.

      • RichUncle EL

        That’s good to know and I figured some landlords do this tactic to get more out of their tenants, but I’ll give yout the numbers so you can see the difference in housing costs. Typical rental of a 2 bedroom in my neighborhood is $1400-1600, typical mortgage including taxes being escrowed with the current rates for a median priced home is about $2200-2500+. So renting is definitely more economical in this area for individuals who are making average income.

        • holly

          It probably just depends on the area. Housing is very inexpensive where I live (the midwest) and despite the fact that I wrap homeowners insurance and property taxes into my tenant’s rent, we still keep our rents lower than average. Keeping rents low seems to make people stay longer.

    • I agree, in some areas it is much more affordable to just rent. Taxes for my house are around $2K per year.

  • Greg@ClubThrifty

    Thanks for the link back!

    • No problem! We’re going to do that every time in the future when someone responds to the debate posts. Thanks again, Greg.

  • William_Drop_Dead_Money

    The tax benefits only help if you earn a lot of money or have other deductions. The hidden costs that come with personalizing your home also make it a lot more expensive.

    If you take the total cash outlay on a house and use it to rent and save the difference, you might end up with as much equity renting as buying. You might even be able to have enough saved to buy a house cash when you retire, so even with renting you could end up with no payments in future.

    But a rented place wouldn’t be your own. You know, that’s just something that’s hard to put a price on. And if owning costs more, it’s worth it in my book.

  • Being a landlord can make you money in two ways – if the rent is more than the mortgage someone is paying that off – and you’re building equity for when you sell.