To rent or to buy

Everyone needs a place to live. But there are several different ways that a person can meet their need of shelter. A person can rent an apartment, rent a home, rent a condo, purchase a single-family home, buy a condo, or buy a cooperative. Sometimes the choice between renting a certain place and buying shelter will be based on the size of the family or where a person would like to live. But most of the time the choice to rent or buy is based on many other things such as personal finance. This article discusses renting or buying.

Risks to renting and buying

One thing that a person needs to consider when they are deciding to rent or buy a place to live is the risks that are involved. Of course both choices have some risk(s) involved but thinking about them and deciding what risks a person is willing to take on is a good idea.

The main risk that comes with renting is a person losing their belongings in the rental place. But a great way for someone to offset this risk is to have renter's insurance. Renter's can help cover any loses of personal property that a person has while renting a house or an apartment.

Buying a house brings on more financial risks than renting a property. Of course a person should insure the property they have purchased so they will reduce the financial risk against different financial disasters, thieves, etc.But if a person were to lose their job or would not be able to pay their mortgage payment they may have to sell their house at a lower price resulting in a huge loss.

A good rule

For a person deciding whether they should rent or buy it is a good idea for them to consider this rule: the cost of a person's housing should not be more than 25% of their after-tax income. Of course this rule is not a perfect guideline but it can help a person not spend too much on housing. Banks, credit unions, and other lending institutions can help a person better figure out how much they should spend on their housing, especially if they are going to purchase a place.

Renting pros and cons

There are many positive financial aspects that come along with renting. For example, if a person were to lose their job or are not able to pay their rent they may only have to give a 30 day warning before they leave their apartment. A person is not always obligated to stay for a certain amount of time, especially if they do not have a lease. And if they have signed a lease they can usually get someone to take over the lease if they have to leave.

Renting can also help save a person money because they are not usually responsible for repairs and maintenance of the rental place. This also lessens the burden of having the responsibility of upkeep for the apartment or house.

Of course renting does have its share of cons. A person can waste a lot of money renting a place to live when if they had purchased the place then they could be making money since many times purchasing a house is an investment.

Buying pros and cons

If a person is in the position to purchase a house or condo and they are willing to take on the risks that come along with owning property, then doing so can be of great advantage to them. There are many tax advantages that come along with buying a home. For example, on first and second homes the interest on the mortgage is fully deductible-of course certain rules apply.

And of course a person could purchase a house, spend money fixing it up, and sell it for more than they bought it for and more than they spent fixing it up and make a decent amount of money.

But purchasing property is a big responsibility. A person should not jump into something too quickly. It is a good idea to go through all of the numbers. There are many more costs to buying a house than just the cost of the house alone.