Real Estate Tips: Renting vs. Buying, Which is Better for my Lifestyle?

Renting vs. buying… what are the pros and cons of each? San diego was rated the 5th most expensive city to rent in. How crazy is that? There still may be a few reasons why you’ll want to rent over buying, or vise versa.

Buying:

A home provides a place to live, which can equate to stability for you and your family.

When you own a home, you are no longer at the mercy of a landlord who changes terms or, even worse, sells the property. With each mortgage payment, you also inch closer to owning the property outright.

Some other benefits of buying include:

1. No surprises. While a leaky roof or broken water heater might catch you off guard, your monthly payment won’t change or fluctuate much at all over the years. This helps with budgeting, cash flow, and other aspects of a comprehensive financial plan.

2. Tax benefits. As a homeowner, you can deduct many related expenses from your taxable income. And unless you owe more than $750,000 ($1 million if you’re grandfathered into the old limit), all the interest in your mortgage payment is deductible. In addition to lowering your tax bill, deducting expenses like mortgage interest can help you avoid IRMAA surcharges.

3. Diversification. Just as you commonly invest in stocks, bonds, cash, certificates of deposit and the like through brokerage and retirement accounts, you can use real estate as another asset class that can help diversify your portfolio. Plus, as a tangible asset, real estate appeals to many other potential buyers and investors.

4. Equity building and retirement planning. Along with a rise in real estate prices, you can also build equity by paying down your mortgage over the years. If successful, you will likely enjoy a lower cost of living in retirement.

Renting:

Renting may not feel like progress, but that doesn’t mean it’s not the right move at this point in your life.

The fact is, there are a ton of huge benefits that come with renting – including the fact you’re not tied down to a property or how your local real estate market performs.

Here are some of the underrated benefits of renting that most people sweep under the rug:

1. Flexibility. Maybe you prefer to move around, seeing new neighborhoods and cities. It’s hard to put a dollar value on that experience and enjoyment. Or if you anticipate a career or job change, renting might suit you better. Buying a home in San Diego (or any location) can hinder your flexibility to pick up and move in the near future.

2. Avoiding homeownership costs. Homeowners are painfully familiar with unforeseen (and often hefty!) costs in addition to paying the mortgage. For example, HOA fees can hover between $400 and $800 per month in San Diego. The median San Diego property tax bill is roughly $6,000 per year or $500/month. And don’t forget about furnishing costs, decorating, leaky pipes, landscaping, and general maintenance. As a renter, you enjoy the perks of your home without the financial burden of maintaining it.

3. Liquidity. Generally, you can’t turn a house into cash overnight. Many people invest a lifetime’s savings into a home, putting the bulk of their net worth into an illiquid asset. There’s a risk in tying up a large portion of your wealth in such an asset. Renting allows you flexibility and other investment options.

4. Building credit. Everyone needs a healthy credit score for pretty much all we do, from getting a new cell phone plan to buying a car. While renting doesn’t boost your credit rating the same as owning a home, creating a history of on-time rental payments can, in some cases, help build your credit to qualify for a mortgage down the road. This history begins when (and if) your landlord reports your payment data to credit agencies. Third-party services can help you report this information on your behalf, too.

Source: You Stay Wealthy