Hey!
So is it better to rent, or is it better to buy a home?
That is the question that virtually everybody asks themselves at one point.
Well, guess what?
We here at How To Adult have an answer for you, and that answer is...it depends.
It depends on you.
It depends on things such as your desired lifestyle and your finances.
So here are a few things to consider to help you answer that question.
Part 1: Lifestyle.
So maybe you'll see yourself reflected in some of these things.
Let's talk renter's lifestyle.
Renters tend to move around more.
Renters are free to chase job opportunities in other cities or states.
They don't have to spend their nights and weekends having to do maintenance work on
their house or their lawn, but they do tend to pay for that luxury in the form of, on
average, higher monthly housing payments.
What about the homeowner's lifestyle?
Well, homeowners tend to be more settled, like owning a house is typically thought of
as putting down roots.
Transaction costs of buying and selling a home are high.
So it's not a good idea to do it often.
In fact, the average house needs five years of appreciation to earn out the closing and
selling costs.
At the same time, that stability can be really nice for people with kids or with pets or
people who need that sense of consistency in their lives.
As long as they're not breaking any rules or laws, homeowners are free to renovate or
upgrade their house, which is something that, in general, renters are not able to do.
So if you're someone that really likes to make a place your own, then, like, owning
a home might be for you.
(P.S.
Let me know in the comments, does anybody else watch Rehab Addict?
I know it started in, like, 2009, but, guess what?
I just started watching Modern Family.
I'm usually about five to six years behind the curve.
I'm not going to do an impression right now, but I could.
You better believe I could.)
On the other hand, if spending your weekends painting a fence or whatever, if that sounds
like torture to you, then you've got three options.
One, hire that work out.
Two, just plan on continuing to rent.
Or three, become Tom Sawyer, which is what I'm doing.
Part 2: Finances.
Renters typically have higher monthly housing payments, but they don't usually have any
other out-of-pocket maintenance costs.
And some of those costs can get really big, really fast.
Really big, really fast.
Once a renter signs a lease, their monthly payments are locked in, so you don't have
to have, like, big emergency maintenance funds if you are a renter.
Homeowners, meanwhile, do enjoy that lower monthly payment, but they still have to deal
with getting a new roof every ten years and a new water heater every seven years, and
etc.
Renters may enjoy a locked-in monthly rent payment for the one or two years that their
lease runs, but homeowners tend to have a locked-in monthly mortgage payment that doesn't
change for thirty years.
So, think about that for one second.
Imagine if you could freeze your rent so that it never goes up for the next thirty years,
and then after those thirty years of paying rent have passed, they go away forever, and
you have this thing that is worth a lot of money.
That is the life of the homeowner.
Now it is at this point in the conversation that many renters will bring up property taxes,
specifically how they don't have to pay them.
That's true, but the landlord isn't just going to eat the cost.
Renters do pay property tax, maintenance, landscaping, it's just that all of those costs
are built in to your monthly rent.
Also, homeowners can think of their principal payments going towards the mortgage every
month as a kind of forced savings.
While renters only get shelter in return for their monthly payments, homeowners get shelter
and build equity.
Down the line, this equity can be tapped in the form of a home equity loan or line of
credit, or can be returned to the homeowner when they sell the house to downsize or move.
This "forced savings" is what many people refer to when they say a home is a great investment.
So is being a homeowner always the right financial decision?
Not necessarily.
They usually have to save up a large down payment and that is money that is tied up
in the house rather than working for them in, say, the stock market.
That's arguably what's called an opportunity cost, and it is something to consider.
So again, is it better to rent or buy?
That is a question that can only be answered by you and your unique situation.
I hope that some of the points in this video will help you make your own housing choice.
And if you do choose to buy, we're going to be doing a "How to Buy a House" video in the
future.
If you have any questions or tips, please let us know in the comments section below.
We would love to hear from you!
And I will see you guys soon!
I love you, bye!