Question

Why is the home often a better investment than renting? Under what circumstances would renting be preferred?

Answer 1

There is always a most asked question by anyone moving into their first home or downsizing into the retirement. Should i buy a home or rent a home? well, most of the time the answer is buy. now, the question is why?

Why one should buy a home rather than renting a home?

here is the answer,

Homeownership brings intangible benefits, such as a sense of stability, belonging to a community, and pride of ownership. However, it is not good for restless or nomadic types. Real estate is the original illiquid asset. When you are likely to live in a particular city for long, it makes sense to buy a house so that you have a feeling of belonging and permanency. You get to identify with the city and its lifestyle. You feel that you have finally settled in life. Besides property prices usually appreciate over the long term. Buying a home means you are also enhancing your wealth over time. Delaying your property purchase will result in having to invest a higher amount (in addition to having paid rent over an extended period of time).

Home investment is like building your own asset. Instead of paying rent which is a pure expenditure, you may pay the home loan EMI thereby building your own asset over time. Effectively, with every EMI that you pay, your equity in your home goes up. With renting you often have to relocate which entails a lot of wasted time, money and energy, but that is not the case with owning. Real-estate investment is a safe investment backed by a real asset which has potential of capital appreciation and tax benefits.

Therefore, home often a better investment than renting.

Some Circumstances given below under which renting is preferred:

1.More Flexibility as to Where to Live : Renters can live practically anywhere, while homeowners are restricted to areas where they can afford to buy. Living in an expensive city such as New York might be out of reach for most home buyers, but it might be possible for renters. Although rents can be high in areas where home values are also high, renters can more readily find an affordable monthly payment than home buyers.

2.No Down Payment : Another area where renters have a better financial deal is the up-front cost. Renters generally have to pay a security deposit equal to one month’s rent, a deposit that that will theoretically be returned to them when they move out, provided they haven’t damaged the rental property. They don't have to make down payment or something, as they are not owning the house.

3.Few Concerns About Decreasing Property Value : Property values go up and down, and while this may affect homeowners in a big way, it affects renters substantially less. Your home value can impact the amount of property taxes you pay and the amount of your mortgage. renters may not be as adversely affected as homeowners.

4.Lower Utility Costs : Although homes can vary in size, they are typically larger than rental apartments. As a result, they are more costly to heat and also can have higher electric bills. Rental properties typically have a more compact and efficient floor plan, making them more affordable to heat and power than many houses.

5.No Maintenance Costs : One of the benefits of renting a home is that there are no maintenance costs or repair bills. When you rent a property, landlord is responsible for all maintenance, improvement, and repairs. If an appliance stops working or your roof starts to leak, you call the landlord, who is required to fix or replace it.

Therefore, these are few circumstances where renting is preferred.

Conclusion :

Owning a home can be beneficial for homeowners over the long run, due to the amount of equity they acquire in their home. Renters have nothing tangible to show for years of rental payments. However, for those who are looking to avoid the hassles of homeownership, the costs of upkeep, and property taxes, renting might be a better option. Of course, it depends on each person’s lifestyle, financial situation, and whether they’re working or in retirement.