If you’re back and forth on whether to rent or to buy — you’re not alone. Deciding whether to rent or buy is a huge decision, and there’s not one correct answer. Ultimately, it comes down to both financial and lifestyle factors, along with the state of the local housing market.

 

Let’s break down the pros and cons of both.

 

Buying a House

 

Buying a house comes with unique responsibilities and stresses, but also with substantial rewards. Is buying a house the best decision for you right now?

 

  • Con to Buying a House – The Upfront Money You Need

 

If you’re going to buy, you first need to have enough money for the down payment, closing costs, and home inspection. A tip about the down payment—contrary to popular belief, you don’t have to put down 20%! You can actually put down as little as 3.5% (and there are government programs that allow you to put down even less than that.) You’ll also be responsible for all home maintenance costs, as well as your monthly mortgage payment. As a rule of thumb, your mortgage should be less than 1/3 of your monthly income.

 

  • Pro to Buying a House – The Money You’ll Save

 

On the other hand, there are many financial positives of owning a house. According to Trulia, if you bought a home today and lived there for seven years, you’d save 38% compared to renting. This is because your costs are locked in and inflation works in your favor. Your home’s value increases as you pay off your mortgage. (This leaves you with a huge chunk of cash in your pocket down the road.) You’d also take advantage of substantial tax breaks, including taxes on your mortgage interest, property taxes, and interest on your loan.

 

And while your home’s investment value increases the longer you live in it, it can still be wise to buy if you’re only going to be there for a year or two. You could buy a property, lease it out to renters, then live halfway across the globe while rent checks pay for the mortgage and you build equity. Real estate agent Mike Zeller explains:

 

“If you’re open to owning a rental property that appreciates and builds a little bit of side wealth for you, it’s ok to buy and then move. I’ve done it myself: I lived in Argentina for months and almost moved to Boston permanently while I owned several real estate properties. You don’t have to be landlocked. That’s a myth. Just because you buy a home doesn’t mean you have to live in it forever.”

 

Renting

 

Renting comes with its share of perks, as well as its share of drawbacks. Is renting the best decision for you right now?

 

  • Pro to Renting a House – Less Responsibility

 

Renting is, unsurprisingly, essentially the opposite case of buying. You only need enough money for the initial payment and security deposit—and those are usually much less than a mortgage. Also, your landlord pays for all maintenance. So, when you wake up to rain pouring through a hole in the roof, you can breathe a sigh of relief, because that’s not coming out of your wallet!

 

  • Con to Renting a House – Your Money Goes Nowhere

 

However, keep in mind that renting isn’t an investment. You’re not building equity. You’re basically waking up and tossing $80 (or whatever 1/30th of your monthly rent is) out the window every morning. Mike Zeller shares this story:

 

“I have one client right now. They’re currently spending $5,000 a month in rent. Over two years, that will equal over $120K of guaranteed loss. They have no chance to make it back. When you rent, you are absolutely, unequivocally, flushing money down the drain. And you stay in that pattern of helping someone else’s real estate portfolio become more valuable while you don’t even start one of your own.”

 

Consider this:

 

Let’s say a thirty-five-year-old buys his first house. He easily could’ve spent 200-300K in rent from college until that moment. Now let’s say he’d bought his first house when he was twenty-five. By the time he turned thirty-five, he could’ve had half a million dollars in net worth instead of next to nothing.

 

Of course, renting can be the right choice, depending on where you are in life at that moment. Which brings us to…

 

There’s More To It Than Money

 

Lifestyle preferences play an equally important role in whether to buy or rent. How much do you value location, convenience, customization?

 

If the choice was between the city and the suburbs, which would you choose? Maybe the city has more diversity of nightlife and social activities, but the suburbs have increased safety, privacy, better schools. The types of housing options can vary widely by location as well. A city’s core may offer more high-rise condominiums, but the outer edges may offer houses with more square footage and larger lawns.

 

Then there’s the debate between flexibility and stability. If you rent, it’s much easier to get up and leave whenever you want. Yes, you’ll have to write a check if you break your lease, but you don’t have to go through the months-long process of selling your house. However, if you buy, you avoid having to deal with a landlord jacking up your rent from year to year.

 

You should also weigh whether you’d rather have more personalization or less stress. If you buy, you can control how everything in your home looks, from paint colors to materials to fixtures. When you rent, you give up that level of control, but you also don’t have to spend time and money dealing with repairs.

 

Be Future-Oriented, and Get Creative

 

Admittedly, there are some markets where it would be quite smart to rent. But Nashville’s growth is exploding so quickly that you’re likely to make significantly more return on your investment here than most other cities around the country.

 

And remember: you don’t have to live in it just because you buy it. You could always buy a property, lease it out to renters, then live halfway across the globe or focus on other professional goals while rent checks are paying for that property.

 

Ultimately, deciding to buy or rent is a hugely personal decision. If you ever want to mull over that decision with someone who knows the ins and outs of the housing market, reach out to one of our Dwell real estate specialists.

 

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