Figuring out the exact differences between renting vs buying a house can be a huge task. Studies and statistics show a few pro and cons between the two. Some say you can get huge tax savings with purchasing a home, though is it true? On the other hand, they say renting can be better as there is usually no property taxes and maintenance expenses. That seems great, but is it? Lets take a look at this more in depth and whether is it better to rent or buy.
What is the Goal?
For most people, having a home to live and work from is an essential part of life. Others, a home is non-existent and travelling place to place reigns king. Depending on what floats your boat more, could determine whether it is better to buy or rent a home. Sometimes it can be better to rent if traveling for an extended amount of time. In the long run, however, buying may be a better choice.
First, it may be important to check to see the timeline of your goal. Do you want to move and stay for awhile, or maybe work for a small period of time and leave. By figuring out what the plan is, it will be easier to calculate whether or not buying or renting is better. Selling a home can take a few weeks to months. With renting, you can leave in about 2 months, which can be pretty quick compared to the average time it can take a property to get fully sold.
Tax Credits and Debits
Interest rates are at historic low, averaging 3.5%, many home buyers and investors are out searching. A common theory that comes with purchasing a home is the potential tax benefits. Everyone can have a different tax liability.
So, it is important to double check the tax deduction savings when calculating the expenses of purchasing real estate compared to renting. For example, even though mortgage interest is currently a tax write off, it only applies to those who do not take the standard deduction and itemize when filing taxes. And when it comes down to the numbers even with maximum tax benefits applied, it still is a slight benefit, just not as much as most would like to think. Sometimes choosing to write off the interest and property taxes can end up costing more. Therefore, consult a tax professional to help see maximum tax benefits from your real estate.
Which is Better – Renting or Buying a House
It first begins on the timeframe you would like to stay at the location. And then whether or not having the option to move place to place is better for you. The tax benefits received from owning real estate can be minimal if any, though can still be a great benefit. Along with appreciation if values go up after purchasing.
Home value is another thing, if the property value goes down, it can begin the list of reasons of why renting would have been better. Not only would there be no loss for you, but even if the property need sudden expensive maintenance, it is likely still up to the landlord to fix and take the deprecation hit. After all that can be the risks of owning residential real estate.
Now, what is interesting is that there can be ways to offset the depreciation if the property is an investment. Which can be another reason why buying may be better, even if the traveling life is still your choice. As you travel, you can own real estate and see potential tax benefits and offset some risks. Again, a lot of risks comes to investing in real estate. Even if its to buy a house to live in. Renting vs buying a house allows for detailed discussions. Renting may be the dream and allow better flexibility, while for others owning real estate is best.