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Is It Worth Buying a Home Instead of Renting?

April 16, 2024
Renting vs. Buying a Home in Houston

The cost of owning a home is on the rise, but is renting a home truly the best option?

Choosing to rent or buy a home is a big decision that shouldn’t be taken lightly. Like everything else in life, both options have pros and cons. And there are some personal things you should consider for renting vs. buying a home before making any final decisions.

Key Takeaways of Renting vs. Buying

  • Whether you choose to rent or buy a home depends on your financial situation, personal lifestyle, and long-term goals.
  • Both renting and buying a home provide you with somewhere to live and require regular income to make the payments.
  • Renting is less permanent, provides more predictable monthly expenses, and takes maintenance responsibility off of your hands.
  • Buying a home allows for more design freedom, creates equity, and provides tax benefits.
  • Renting doesn't necessarily mean you’re “throwing away money” every month, and buying doesn't always guarantee long-term wealth.

Factors to Consider for Renting vs Buying a Home:

  • Your current financial situation: Before making a decision to buy a house, you should make sure you’re financially stable and have your debt under control. Also, there are more upfront costs involved in the home-buying process than just the down payment… So, when reviewing your finances, you’ll want to ensure you have enough additional funds to pay for the home inspection, closing costs, and whatever else may arise.  
  • Your job security: Having a secure and stable job isn’t only essential to getting approved for a home loan, or even approved as a renter; it also plays into your financial stability and your ability to pay your mortgage or rent every month.
  • Your future or long-term plans: If you like to move around or travel a lot, you might find renting better suited for your lifestyle. But if you want to put down roots somewhere for a while, buying a home could be a smarter choice, especially financially.
  • Your investment goals: Buying a home helps to build equity and can create additional value with upgrades and maintenance. If you own a house for several years, you’ll typically make profit if you choose to sell it later on. It’s one of the most popular, passive ways to grow your wealth.
  • Your time commitments: How much extra time (and money) do you have for regular home maintenance or repairs? When you’re renting and something breaks or needs replacing, your landlord is responsible for fixing it asap. But when you own a home, the maintenance and upkeep of the entire property is solely your responsibility. If something breaks or needs cleaning, etc., you’ll have to spend your own time and money to fix it yourself or pay even more for someone else to.
  • Your design flexibility needs: One of the best things about owning a home is that you can do whatever you want to it! Want to paint the walls or change the structure of a room? Want to plant a garden or change your appliances? You’re free to just do it! Renting allows you very little freedom or flexibility to change anything about your home without approval first, and usually requires you reversing all the changes when you move out.

Benefits of Buying a Home

Why is buying better than renting? Of course, buying a home is not always better for everyone, but in general, here are the biggest benefits to buying a home vs. renting one.

  • Builds Equity: Owning a house can help build equity over time and help grow your overall wealth. Especially when you consider that long-term homeownership almost always turns a profit when it comes time to sell. Many consider buying a home a wise financial decision. 
  • Control: You’ll gain almost complete control over your living situation, from being free to paint your walls to having whatever pets you want—you won’t be subject to any more landlord rules!
  • Consistent Payments: Buying a house means having regular mortgage payments that aren’t subject to annual market fluctuations like rent payments. You can budget precisely what you’ll pay every month, every year, and not have to worry about how the market might increase your rate during your next lease. 
  • Tax Benefits: Buying and selling a home come with a lot of tax benefits, and provide a number of annual deductions! Check out these 8 big tax breaks for homeowners to learn more.
  • Stability: Because owning a home is more long-term, it can create more stability for yourself and your family within the community you live in, from your friend groups to your kids’ schools to the healthcare professionals you see.

Cons of Buying a Home

What are the cons of buying a home instead of renting? While the pros of buying a home may sound great—even possibly make your mind up—there are some important drawbacks to owning a home that could make renting the more appealing option to you.

  • Repairs & Maintenance: As previously mentioned, being a homeowner means you're entirely responsible for the maintenance and regular upkeep of your house. This can wind up being very costly. Not to mention renovations and remodels are also up to you.
  • Homeowners Associations (HOA): Buying a home in a neighborhood with a HOA usually comes with a monthly fee of a few hundred dollars (at minimum). While the HOA will handle a lot of the community upkeep, they can also come with a lot of headaches… like annoying rules about where you place your trash, what you keep in your yard, or even what color you paint your garage door! And if you don’t adhere to the community rules, you’ll be responsible for paying any fines they hand out.
  • Large Financial Investment: Typically, buying a home requires you to provide a large down payment upfront, as well as for the cost of purchasing the house (earnest and closing costs), inspections, etc. This money could be spent on other, more liquid or short-term investments that could potentially out-earn what investing in owning a home could provide.
  • Stability: Yes, the stability associated with buying a home is both a pro and a con! Owning a house makes it harder to get up and move cities for a new job, or to change your location to find better neighbors. While you can always sell your home, it’s usually advised to stay in place for at least two years before doing so.
  • Property Taxes: One of the biggest drawbacks to buying a home is having to pay property taxes on it. You’ll have to pay property taxes on your home every year, at a state and local level. The rate varies depending on where you live, but homeowners in Houston, Texas are known to pay higher-than-average property taxes, with an average tax rate of 2.43% (for comparison, the national average property tax rate is only 0.99%).

Cost of Owning vs Renting a Home

When you total the upfront costs based solely on monthly rent payments compared to monthly mortgage payments, buying a home is almost always the more affordable option. The average rent for a two-bedroom, 1,000 sq ft. apartment in the city of Houston is around $1,500 a month (as of April, 2024). Meanwhile, the average monthly mortgage cost of a similar sized home (priced around $200,000) is only around $1,300. Plus, you only have to pay this until the loan is paid back AND you’ll most likely get a profit if/when you sell later on. Rent is something you never “finish” paying. You can compare the long-term costs of buying a home vs. renting in the Houston area, based on your specific circumstances, with an online calculator

At the end of the day, the behind-the-scenes costs are too important to just toss aside in favor of the surface-level costs. There are too many factors to take into consideration that can vary by market, personal preferences, and future goals to provide an objective, hard answer for which is the more affordable option for you.

However, if you think you may be ready to buy a home soon, check out our 90 Days to Homeownership Challenge! This exclusive home-buying guide will help you learn everything you need to know about buying a home.

 

 

Alexis Feezel article byline headshot

Alexis Feezel is a results-oriented Marketing Coordinator responsible for developing, implementing, and overseeing all promotional strategies and activities to effectively market clients & listings and maximize sales.

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