Section 10.2 Owning vs. Renting
In American culture, we seem to prioritize owning a home over renting. Part of this is the cultural influence of media, as described above. Another component is simply based on our roots. Full first-class citizenship was originally only for male, white, adult land-owners. Not being any of these made you a second-class citizen. These days, land ownership is no longer required to participate in governance, but that residual idea of owning land being better still remains. However, if you can get past this society bias, then we can compared the practical components of owning your housing vs. renting. It turns out that there can be a number of different benefits to renting your housing.
Subsection 10.2.1 The Pros of Owning
One major advantage of owning your housing is equity. Equity represents how much of your housing you actually own. Most Americans cannot afford housing with cash they have saved up and instead need to borrow money to purchase the home. However, when you do this, you don’t really truly “own” the housing. If you are unable to make the payments or need to sell the place for any reason, you have to pay back what you owe before you get the sale proceeds. For example, if you could sell your housing for $200,000 today (after realtor fees), but you still owe a bank $150,000 for it, you only have $50,000 in practical equity. As make your payments on your housing, your equity will increase, which increases your overall wealth.
Housing ownership usually comes with appreciation as well. Generally, housing values go up over time. If you buy housing and its value increases, your equity will increase even without you making payments. For example, let’s suppose that your house is worth $200,000 and you owe $150,000 on it. You have $50,000 in equity. If one month later the value goes up to $220,000, your equity is now $70,000.
Inheritance potential is another benefit of owning. If you own your housing, that can be passed on to future generations after you pass, potentially easing the burden of your children or grandchildren.
Beyond finances, there are other benefits of owning your housing. You generally have more flexibility in customizing your housing. For example, you generally cannot install the plumbing needed in a rented apartment, but you can in your owned single-family home. Flexibility depends on the actual housing. Multi-family homes or places with HOA’s may restrict what you can do.
Privacy may be another benefit. Generally, owned housing are not in large multi-unit buildings, meaning there are fewer other families in your immediate vicinity, which many people prefer.
Subsection 10.2.2 The Pros of Renting
One of the biggest benefits of renting is monthly costs. Generally, it is cheaper to rent a space than it is to own that space, at least in terms of monthly payments. If you would like more of your budget to be used in other areas, renting may be a way to make that happen.
Flexibility is a big benefit of renting as well. If you need to sell housing that you own, it can take time and money. For example, if you sell a house that you own, there are some costs to that that you will be expected to pay (realtor fees, for example). With renting, it is generally much easier to move from one place to the next. For families with jobs that require frequent geographic shifts or who simply like changing locations, renting may be the best way to go.
Renters are generally not responsible for most maintenance and repairs. While they are responsible for cleanliness, renters usually don’t need to finance new appliances, broken windows (unless it’s their fault), or housing updates. Owners should be prepared to spent about 2%of a home’s value on repairs/updates each year (on average). Renters do not need to worry about most of these expenses.
