“Common sense” these days tells you it’s always better to buy than rent. But is buying always better than renting? Not necessarily. Here’s a few reasons why:

  1. Renting = Freedom; Owning = Commitment. Sure, it is a drag to hand a check over to the landlord every month and have nothing to show for it in the end. But you aren’t “throwing money away” – you’re exchanging it for a place to live. Not only that, your paying for the freedom from maintenance costs and headaches. Plumbing repairs can be pricey, especially when they’re unexpected. Renting also affords you the freedom to leave at the end of the lease if you’d like to upgrade, downgrade, or if you need a change of scenery. Once you decide to buy, you should be ready to commit to the place for a least five years to avoid losing money on the transactions.
  2. The tax deduction is not always worth it. The amount of interest you will likely pay on the house far outweighs the benefit of the tax deduction. Not only that, buying a home for a tax break is like buying something for $100, only to get $3o back. It’s a good deal if it is something you were going to buy anyway, but it makes no sense to buy only to get some money back.
  3. Buying isn’t necessarily the best investment. The market is rather unpredictable. In certain markets, housing prices have doubled in the last five years, but the past performance doesn’t guarantee future results. During the 90s, housing prices in the Los Angeles area dropped nearly 20%. Many analysts believe that certain markets are way overvalued and likely to collapse at some point.
  4. There are many hidden costs to buying. Mortgage lenders want you to buy the absolute most house you can afford. Many times they overestimate how much you can afford. You need to consider not only your mortgage payment, but also a down payment, closing costs, mortgage insurance, repairs, and maintenance costs. These can add up quick.
  5. Buying requires significant time and education. Potential buyers will likely spend countless hours searching for a reputable real estate agent and mortgage lender, looking at properties, making offers, reading A LOT of fineprint….This is the biggest purchase most people will make, and I, personally, would not want to enter into this transaction casually.

Bottom line: Only buy a home if you are fully prepared to be a homeowner and if it something you really want. Don’t buy just to buy.