The Benefit of Renting Verses Home-Owning

Topics: Real estate, Property, Costs Pages: 3 (1052 words) Published: December 3, 2011
The Benefits of Renting Verses Home-Owning
A common belief is that it is better to own your own place to live as opposed to renting one from someone else. What has made this belief so common and is it accurate? While there can be a emotional gratitude to owning your own home, does that make it a better financial decision? There can be many advantages to renting a place to live as opposed to owning your own home.

One of the costs people do not take into account when thinking about buying a home are the hidden costs of owning a home verse renting. First, when you rent a place to live and something breaks or wears out you simply contact your property owner and they take care of arranging to have it fixed. Whereas if you own the home you will have to take care of these repairs, both in finding someone to repair or replace the broken or worn out item and pay the costs for the work and item. Basic maintenance of a home cost according to mortgage-data firm HSH Associates is about 1% of the home value per year. Which does not take into account the major repairs of assets such as an air conditioner, dishwasher, refrigerator, or furnace. It is suggested that an additional 1% of the home value should be set aside per year to cover these costs. If a home is bought for $100,000, that equates to $1,000 per year in annual maintenance. Add in a little leeway, and it is closer to $1,500, or $125 per month. Because of inflation the maintenance cost increases each year to stay 1% of the home value throughout the life of ownership. With the historically home value increase of approximately 4% a year and 1% of that representing the annual maintenance cost that leaves only a 3% increase which is the long-term inflation rate. Leaving a net home value increase of 0%.

If that same amount of money spent on annual maintenance was instead invested the amount of money, assuming a 7% annual return would be $21,502 after 10 years, $63,801 after 20 years, and $147,008 after 30 years....
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