Renting vs. Buying a House: Pros, Cons & Costs

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

For many people, buying a house makes more sense than renting a house. But others choose to rent a house instead after weighing both the pros and cons of each.

Renting a House

Meet Sarah and Jim. They are a young couple looking to move into their first house. They are deciding between buying a house or renting a house. Let's see what they discover as they look at the pros and cons of each.

First, they look at renting a house. When you rent a house, it means that you are paying a monthly fee to stay at someone else's house. Sarah and Jim are talking to a realtor named Alex who has both rental properties and properties for sale. Sarah and Jim ask Alex what the pros and cons are of renting a house.

Alex begins with the pros of renting a house. He tells them that when you rent, you don't have to worry about maintaining any of the large appliances. Nor do you have to maintain the house itself. If anything happens, you can call the property manager or the owner directly and they will fix it. If the roof leaks, it is the home owner's responsibility to fix it and not yours. And because you are renting a house, you also get access to the yard. Another benefit is you don't need to worry about paying property taxes. If you end up not liking the area or the house, you can always move at the end of your lease or with sufficient notice, and you don't have to worry about what happens to the house after you leave.

Alex now moves on to the cons of renting a house. Alex explains that all his owners of his rental properties don't want pets in the house, so no renters are allowed to keep pets. So, Sarah and Jim can't get a dog nor a cat. Alex continues explaining that you can't paint the walls either. The owners want to keep the neutral colors that they have painted the house. You can't make any structural changes to the house either. If you wanted to add an extra room or take down a wall, you can't since you are renting. Also, when you are done renting, the house needs to be in relatively the same condition as when you moved in. Otherwise, you get charged for any fees required to clean the house again. Financially, when you rent a house, all the rent that you pay isn't doing you any good. It's not going towards something that belongs to you. It is helping the owner of the house, though.

Buying a House

Alex now moves on to the pros and cons of buying a house. When you buy a house, you purchase the house like you would purchase a car. You become the owner of the house.

The pros of buying a house, Alex explains, are that you can make whatever changes you want to the house. You can keep pets if you want. You can also paint, knock down walls, add rooms, add trees, remodel the kitchen, or do whatever you want to make the house your dream house. Financially, when you buy a house, all your mortgage payments go towards your house. With each mortgage payment that you make, your ownership in the house increases. This equates to more equity for you, meaning the house can serve as collateral for other purchases. The house adds value to you.

The cons of buying a house are that you have to maintain all the appliances as well as the structure. If something breaks, you have to fix it. If the roof leaks, you have to repair it. If your toilet gets clogged, you have to unclog it. If the oven stops working, you may just have to go out to purchase and install another one. And you have to pay property taxes on your house. If you don't like the house anymore or you don't like the area, you can't just decide to leave without a penalty. You have to take care of the house somehow by either selling it or renting it out. If you don't sell or find somebody to rent the house, you still need to pay the mortgage on the house when you leave. You also still need to maintain the house and its appliances even when you are gone.

Costs of Each

Alex is done explaining the pros and cons of renting a house versus buying a house. Sarah and Jim have quite a bit to think about. Alex adds something else for Sarah and Jim to think about. He explains that right now because the cost of homes is low enough, the monthly mortgage to buy a home is actually lower than the monthly fee to rent a home. Alex shows that the current rent for a 2 bedroom apartment is $1,800 while a mortgage for a 2 bedroom house is only $1,500.

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