This week, over at The Simple Dollar, Trent Hamm posted an interesting article on renting a place to live versus buying a home, “Renting Isn’t a Throwaway”. We thought it was an interesting take on the issue, and since we often hear the opinion that renting is just “throwing money away,” we thought we’d share some of Hamm’s ideas here.
It’s always been our opinion that the renting vs. buying question varies for every individual. Buying is not a financially sound decision for everyone, and the same goes for renting. Here are some of Hamm’s thoughts on why “renting isn’t a throwaway:”
- “Insurance Rental insurance is significantly less expensive than homeowners insurance. Both provide similar protections – they make sure that in the event of catastrophe, you retain the value of your possessions – but homeowners insurance also insures the value of the home and many other things.”
- “Property taxes Homeowners have to pay these. Renters do not.” – Depending on where you choose to buy, this can end up being a very major expense.
- “What is the recent history of property values in the area I’m looking at? Has the area been rising in value? Holding steady? Dropping? To make home ownership worth it, your home will need to at least retain its value.” – Not all areas are conducive to buying. If you are looking to live in an area with falling housing values, buying is not likely to be a good idea.
A point that we would make that Hamm doesn’t is that if you are moving somewhere new from out of the area, you shouldn’t jump right into buying a home. Even if buying is ultimately the right decision for you, renting for a period of time to get to know the area (what neighborhoods you like, what amenities you enjoy, etc) can go a long way in helping you decide where the right place to buy is.
You should never assume that buying is the always the right decision. Take time to analyze your situation before ultimately deciding what is right for you.
- Disclaimer: The information on this blog is not meant for specific financial advice. The ideas/opinions stated are not suited for everyone, and readers should use their own judgment in applying them in their financial lives.