To Rent or Buy Your Next Home

Not sure about renting vs. owning your next home? Take a closer look at the conveniences of renting compared to the financial benefits of owning.

When Shakespeare's Hamlet pondered the question "to be or not to be?" he was still living at home. Maybe you'd like to philosophize about life, love and emotion-a la Hamlet-but you have a more pressing issue to resolve: whether to buy or rent your next home.

Buying a home is part of the American dream, right? So why doesn't everyone do it? In truth, there are good reasons for renting, just as there are good reasons for buying.

Renting: Flexibility and convenience

Renters live without the stresses of property taxes, plumber bills, homeowners' insurance, mortgage payments, and fear of foreclosure. Non-leasing renters can wake up and decide they'd rather live by the beach, and then fulfill that whim in 60 days or less. They can live with outdated tile, oddly shaped living spaces, and insufficient storage without feeling compelled to tap into a home equity line of credit and remodel.

Renting is the preferred living solution for people who aren't established professionally, emotionally, or financially. College graduates, for example, usually don't have enough prescience into their futures to commit to living in one place for an extended period of time. The climb up the income ladder may take them almost anywhere, and they have to be ready to go when and where opportunity knocks. Even those who've been in the workforce for a while may shy away from home ownership, simply because they don't want the responsibility, or don't make enough money. Certainly, these are legitimate reasons. Anyone who's scared of commitment isn't ready for 30 years of mortgage payments. Plus, if the budget's too tight for home ownership, it isn't smart to force it.

Buying: Financial growth and stability

Even with the extra bills and taxes, home ownership is still a good deal financially. You buy the home at its present value-using your lender's money-and then you receive all of the benefit as the property appreciates. It's often quoted that real estate, on average, doubles in value every 10 years. This may seem rather optimistic in today's climate; but even from an ultra conservative viewpoint, a property that you buy today could potentially double in value during the next 20 years. That's still not a bad deal because, in the meantime, you have a roof over your head. What other asset appreciates in value, even while you're using it? A business, perhaps, but if you're scared of commitment, you shouldn't volunteer to be someone else's boss.

Appreciation is the big advantage of home ownership, but not the only one. You also benefit from increased borrowing power and tax-deductible mortgage interest.

When it's time to ask the question "to buy or not to buy?" consider your financial and emotional maturity first. The benefits of owning are there, but you have to be ready to accept the slings and arrows of outrageous responsibilities, too.