10 Steps to Financial Independence: Step 5

Oh, the American dream: owning a house with a white picket fence. But buying a house may not be for everyone. Renting and buying houses both come with their pros and cons, and while buying a house does appear to be the popular choice, many millennials prefer to rent for various reasons. These reasons include being able to travel more, exploring different areas to live, and being able to move quickly to take advantage of a job opportunity.

STEP 5: DECIDE WHETHER TO RENT OR OWN

Understand the pros and cons of renting

Pros

• Being able to move quickly. If you have to, say, move for a job and your lease is almost up, great! Just move at the end of your lease. But even if it isn’t, you can still give notice, and after a short period you can leave anyway.
• You may be able to afford living in an area you wouldn’t if you were buying a house.
• If you encounter problems, such a pipes bursting, the roof leaking, or many of the other things that happen to houses, your landlord is responsible for it, which means that you won’t have unexpected expenses.

Cons

• You may not be able to style your home the way you really want it. You won’t have the freedom to paint or renovate the way you would if you owned the home.
• There is the risk that at the end of your lease you may not be able to renew it or your rent may go up.
• When you’re renting, you generally deal with a rental agent rather than the owner of the property, which means that issues can take longer to resolve since there is a third party involved.

Understand the pros and cons of ownership

Pros

• When you own a house, you can decorate it, remodel it, and renovate it however you see fit.
• Ownership gives people a sense of pride. And many want a permanent place they can start a family. It gives them a place where they feel they are a permanent part of the neighborhood, which they may not feel if they rent.
• Being a homeowner can increase your credit score as long as you make your payments on time.

Cons

• If something bad happens, you have to take care of it. The roof leaks? You have to fix it. A pipe bursts? You’re the one calling the plumber and paying for it.
• You may get stuck in a neighborhood you find out you don’t actually like.
• Besides fixing problems, you also have to do general maintenance like mowing the lawn, painting a fence, pruning the hedges and maintaining expensive appliances.

There are many options to weigh when it comes to owning or renting a home. Do you want to move at a moment’s notice or stay in one place for years to come? Are you looking forward to keeping up the house or would you rather use your free time to lounge around and watch TV? Are you able to pay for any repairs that need to be made or would it be better if they were taken care of by a landlord?

Owning a home is something that many people think of as a rite of passage; in a sense, the next part of life. But you don’t have to own a home. It’s not for everyone. Sometimes renting is the better option. The best thing to do is to take a look at your situation and determine whether renting or buying is best for you.