Buying a home is one of the largest investments ever for most people. After all, there are significant advantages to owning a home, most notably building equity, investing for the future, part of the American dream, etc. However, when it comes to purchasing a home for the first time, there are many factors to consider. Especially for first-time home buyers who have to make the transition from renting to owning and make a decision whether to continue renting or buy a home. Watch my video here on my YouTube Channel where I discuss the pros and cons of buying a house vs renting an apartment. You can also watch my video here where I discuss how to budget and save for a down payment for buying a house. Both renting and owning have their own set of advantages and disadvantages, and what's right for you will depend on your unique circumstances and priorities. In this blog, we'll explore the pros and cons of renting vs. owning a home as a first-time home buyer, to help you make an informed decision.
Pros of Renting
1. Flexibility- Renting is often the go-to choice for most people due to several factors such as flexibility, convenience, and affordability. As a renter, you have the freedom to move more easily and quickly, whether you're relocating for work or simply want to try out a new neighborhood. According to rentcafe.com, Baltimore City has 51% of renter-occupied households whereas 49% are owner-occupied. Overall, in Maryland, approximately 33% of households are renter-occupied.
2. Low upfront costs- You don't need to save for a down payment, closing costs, and other expenses associated with homeownership.
3. Less responsibility- One of the benefits of renting is that your landlord is typically responsible for repairs and maintenance of the property. This can save you time, money, and hassle compared to owning a home where you would be responsible for repairs and maintenance.
Cons of Renting
Lack of long-term investment: This is more about a change in mindset that first-time home buyers need to make. When you rent, you are paying money to your landlord (aka someone else) every month rather than paying yourself. You don't have the opportunity to build long-term wealth through the appreciation of a property that you own. Someone else is getting wealthy through your money.
Limited control: As a renter, you have limited control over the property. You may not be able to make certain changes to the property, such as painting the walls, without the landlord's permission.
Rent increases: After years of renting, a landlord may choose to raise the rent when your lease is up for renewal, and you may not be able to negotiate the price. This can make it difficult to budget for your housing expenses in the long term. Not to mention, you might even lose your security deposit.
Now let's take a look at some Pros of Homeownership-:
Building equity: As a homeowner, you build equity in your property over time as you pay down your mortgage and the value of the property appreciates. This can provide long-term financial benefits. Below is a statistic from the National Association of Realtors for the Baltimore DMV area. As you can see in the picture below, an average homeowner gained approximately 3% of equity through home appreciation in 1 year of homeownership whereas the 9-year housing equity gain is approximately $120,000 for the Baltimore DMV area. Also, all this while your loan balance decreased assuming you made consistent and timely monthly mortgage payments. Compare this to someone renting for almost 10 years and having nothing to show for all the hard work over the past decade, instead having potential rent increases year-over-year. The only person making money would be the landlord who not only gained equity through appreciation but also had a mortgage loan paid off by someone else (you).
2. Control: As a homeowner, you have greater control over your living space. You can make changes to the property, such as renovations or landscaping, without needing permission from a landlord.
3. Potential for rental income: If you have extra space in your home, you may be able to rent it out and generate additional income. You can rent out an extra bedroom or a basement in your home to potentially live for free or for some change while someone else is paying off your mortgage. This strategy is called house hacking. There are multiple ways to rent out extra space in your home such as short-term lease, long-term lease, Airbnb, etc.
4. Tax benefits: Homeowners can usually deduct mortgage interest and property taxes on their tax returns, which can lead to significant tax savings.
5. Stable housing costs: As a homeowner, you have more stability and predictability in your housing costs over the long term. Your mortgage payments may stay the same over the life of your loan, while rent costs can be subject to increases over time.
Having said that, there are some Cons of Homeownership as well. Let's find out:
High upfront costs: Buying a home often requires a significant amount of money upfront, including a down payment, closing costs, and other fees. This can be a barrier to entry for some potential buyers. However, homeownership is promoted by the state and federal governments through numerous housing programs and grants for first-time homeowners in the form of down-payment assistance, closing cost help, etc.
Responsibility for maintenance and repairs: As a homeowner, you are responsible for maintaining your property and making any necessary repairs. This can be time-consuming and expensive, especially for major repairs or renovations.
Less flexibility: Owning a home can be less flexible than renting, as it can be harder to move quickly if you need to relocate for work or personal reasons. Selling a home can also be a lengthy and complicated process.
In conclusion, the decision to rent or buy a home as a first-time home buyer is a personal one that requires careful consideration of your individual circumstances. By weighing the pros and cons of renting vs. owning and considering other important factors such as your long-term goals, you can make an informed decision that aligns with your financial goals and lifestyle. Talking to a skilled and knowledgeable Real Estate professional like myself and my team who is an expert in your local market is the best way to make an informed decision for your and your family's well-being.
As a local expert in the Baltimore DMV area and a licensed Realtor in the state of MD, I can help you weigh the pros and cons of renting versus homeownership and assist you in making an informed decision. I have the resources, skills, and technology to assist you every step of the way. I work with the Blue Key Team team which has decades of experience and specializes in first-time home buyers. We firmly believe knowledge is power and believe in empowering our clients through educational seminars, sharing as much knowledge and information as possible, and working with them to create customized plan that meets their unique needs.
To schedule your FREE home consultation, comment below, follow, and DM on Instagram @shashank_realtor, or email at shanept15@gmail.com.
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