You may have heard conflicting advice about renting an apartment vs. buying a house. Maybe you’ve heard that renting an apartment isn’t the smartest financial choice. After all, you’re giving up your money every month to live in a place you don’t own. But home ownership is a big undertaking, too. There are major fees associated with closing on a house, then paying for its subsequent upkeep and costs. For those who are financially prepared and ready to take that step, it can be a great choice. For others, renting an apartment may actually be a smarter decision. Here is a breakdown of the benefits and drawbacks of renting vs. buying.
The Costs of Renting vs. Buying
What kinds of costs are associated with renting vs. buying? There are a number of both initial and recurring costs that come with both options.
Common costs for renting an apartment include…
- Application fee
- First month’s rent up front
- Security deposit
- Monthly rent
- Renter’s insurance
Common costs for buying a house include…
- Down payment
- Mortgage payments
- Property taxes
- Maintenance costs
- Homeowner’s insurance
To Rent or Buy: How Do You Know?
After you have determined the cost of renting vs. buying, next you’ll need to evaluate your needs to determine which option is right for your lifestyle.
Renting an apartment may be a better choice for you if…
- You plan to move around a lot. Renting allows you the flexibility to choose a long-term lease, a short-term-lease, rent month-to-month, or even sublease.
- You want your maintenance taken care of for you. Most apartments will tend to apartment maintenance issues without charge to its renters (as long as the issue was not the direct fault of the renter). These issues might include problems with appliances, plumbing, heating, air conditioning, and lighting.
- You don’t need a lot of space. If you don’t need lots of room and don’t want to keep up with the upkeep costs of a big home, renting allows you to downsize efficiently.
Buying a home may be a better choice for you if…
- You plan to stay in the same location for a long time. Buying a home saves you the hassle of frequent moves and can build long-term equity.
- You want to renovate or remodel your home. Most apartments don’t allow for too many alterations to the interior and exterior, so it’s harder to personalize your space by redesigning or renovating.
- You want the tax deductions that come with home ownership. Keep in mind, however, that the deductions you receive depend largely on the tax bracket into which you fall, and whether or not you itemize your tax deductions.