Food for Thought when Considering Renting vs Owning a Home

Hi, this is real estate attorney and legal blogger, Roy Oppenheim. I want to talk a little bit today about whether or not one should rent or own a home. And of course, it’s a very personal decision and there are a lot of factors involved. But there’s been a lot written about the fact that millennials in particular who are more involved in a gig-style economy or a sharing economy are more reluctant to pull the trigger and buy a piece of real estate or a home as opposed to renting. And in fact, that may well not be true. It may just be that because costs of ownership are so high and coming up with a down payment is so difficult, particularly if you have student loan payments that you still have to make, that it’s more an inability to actually pull that trigger. But, one of the things we need to look at is what in fact are the factors in determining whether or not one should rent or own. And so, first of all, the first thing we need to look at is your income to see whether or not you even qualify for a mortgage so that you could, in fact, purchase a home. But assuming you did have enough for a down payment and you did qualify for a mortgage, the question then is, “Is it a good deal?” Obviously, there are some wonderful tax benefits still, unless the current presidential administration decides to remove those benefits, but we’re not sure where that’s going to go. And B, we have to decide whether or not you’re in an area that there’s going to be substantial appreciation. In fact, if you’re not going to have appreciation, you’re only going to have really depreciation, because real estate, technically, depreciates as an asset. Things break. Things have to be replaced. And there’s constant upkeep and maintenance versus rent, which is a fixed, known price that you’re going to pay month-to-month, and you’re not going to have surprises that pop up on you whether it’s an air conditioner that needs to be replaced, a water heater, or a roof, or a pool, or anything else that needs to be fixed at any point in time. And so, one needs to have the ability to have additional discretionary income to cover those expenses or otherwise you end up in foreclosure, which is what really happened almost 10 years ago now during the great recession, where many people got into real estate and then didn’t have the ability to pay for increased interest rate or other surprise expenses, increased real estate taxes or surprise deferred maintenance expenses, and ended up losing their home. So, it really has to do with where you are in your life, what kind of cash you have behind you because if you’re living month-to-month, you really are best to continue renting until you have some cash behind you. So, it’s a personal decision that if we can help you with that, we’d love to. Roy Oppenheim, from the trenches. Thank you.