Renting vs. buying
It’s been a long time since I rented, but here is a shot at comparing the costs associated with renting vs. the costs associated with owning a home.
Renting
Required items:
Rent
Renter’s insurance
Security deposit (presumably refundable)
Possibly required items:
Power (sometimes included in rent)
Water, sewer & garbage (usually included in rent here at least)
Appliances
Upkeep related:
N/A
Homeownership
Required items:
Down payment
House payment
Taxes
Homeowner’s insurance
Power
Water, sewer & garbage
Possibly required items:
Private mortgage insurance
HOA fees
HOA special assessments
City assessments
Upkeep-related:
Landscaping
Pest control
Paint (inside & out)
Flooring replacement
Appliances and appliance repair/replacement
Furnace, AC, water heater, heat pump maintenance, repairs & replacement
Roof repairs and eventual replacement
Miscellaneous things that need fixing from time to time
Improvements & updates
As you can see, the list for homeownership is much longer than the list for renting. That’s one of the reasons why deciding to buy a home based solely on monthly payment amounts isn’t a good idea. Renting a house for $1200 will cost you much less than buying a house for $1200. Of course, you may get mortgage deductions on your taxes if you buy a house, which may help to offset some of the expense. (But then again you may not, especially if you live in a low cost of living area.)
It’s a good idea to carefully consider all of the factors involved before making a decision to buy vs. rent.
Great points made here. I thought about buying a house about a year ago, and I’m glad I didn’t, as most of my decision was going to be based on that monthly payment, no every other little fee you can imagine.
I found you via Wisebread’s Top 100 Personal Finance Blogs. Congrats on making the list!
Dr Housing Bubble is a great site that does a lot of analysis on the myth that owning is better than renting. Some statistics are very interesting.
Trevor, thanks! Glad you found me :)
Dana, thanks for the link.
Bill, those are good points as well. There are a lot of factors to consider…
When comparing renting versus buying, most people tend to think of the short term difference. They do not factor in the stability of a mortgage payment versus an ever increasing rent payment in the long term. In my area rents have increased by $800 to $1000 per month in the last 20 years, an average monthly increase of $40 to $50 every year. A 30 year fixed rate mortgage will have the same monthly payment as 20 years ago. There will be no monthly payment in another 10 years when the mortgage is paid off. Rent payments will continue indefinitely and most likely will increase indefinitely. People renting homes will most likely face several forced moves because their landlords decide to sell at very inconvenient times.