Renting Vs. Homeownership: Which Is Better for YOU?

Hey! So is it better to rent, or is it better
to buy a home? That is the question that virtually everybody asks themselves at one point. Well,
guess what? We here at How To Adult have an answer for you, and that answer is…it depends.
It depends on you. It depends on things such as your desired lifestyle and your finances.
So here are a few things to consider to help you answer that question. Part 1: Lifestyle. So maybe you’ll see yourself
reflected in some of these things. Let’s talk renter’s lifestyle. Renters tend to move around
more. Renters are free to chase job opportunities in other cities or states. They don’t have
to spend their nights and weekends having to do maintenance work on their house or their
lawn, but they do tend to pay for that luxury in the form of, on average, higher monthly
housing payments. What about the homeowner’s lifestyle? Well,
homeowners tend to be more settled, like owning a house is typically thought of as putting
down roots. Transaction costs of buying and selling a home are high. So it’s not a good
idea to do it often. In fact, the average house needs five years of appreciation to
earn out the closing and selling costs. At the same time, that stability can be really
nice for people with kids or with pets or people who need that sense of consistency
in their lives. As long as they’re not breaking any rules or laws, homeowners are free to
renovate or upgrade their house, which is something that, in general, renters are not
able to do. So if you’re someone that really likes to make a place your own, then, like,
owning a home might be for you. (P.S. Let me know in the comments, does anybody
else watch Rehab Addict? I know it started in, like, 2009, but, guess what? I just started
watching Modern Family. I’m usually about five to six years behind the curve. I’m not
going to do an impression right now, but I could. You better believe I could.) On the other hand, if spending your weekends
painting a fence or whatever, if that sounds like torture to you, then you’ve got three
options. One, hire that work out. Two, just plan on continuing to rent. Or three, become
Tom Sawyer, which is what I’m doing. Part 2: Finances. Renters typically have higher
monthly housing payments, but they don’t usually have any other out-of-pocket maintenance costs.
And some of those costs can get really big, really fast. Really big, really fast. Once
a renter signs a lease, their monthly payments are locked in, so you don’t have to have,
like, big emergency maintenance funds if you are a renter. Homeowners, meanwhile, do enjoy that lower
monthly payment, but they still have to deal with getting a new roof every ten years and
a new water heater every seven years, and etc. Renters may enjoy a locked-in monthly
rent payment for the one or two years that their lease runs, but homeowners tend to have
a locked-in monthly mortgage payment that doesn’t change for thirty years. So, think about that for one second. Imagine
if you could freeze your rent so that it never goes up for the next thirty years, and then
after those thirty years of paying rent have passed, they go away forever, and you have
this thing that is worth a lot of money. That is the life of the homeowner. Now it is at this point in the conversation
that many renters will bring up property taxes, specifically how they don’t have to pay them.
That’s true, but the landlord isn’t just going to eat the cost. Renters do pay property tax,
maintenance, landscaping, it’s just that all of those costs are built in to your monthly
rent. Also, homeowners can think of their principal
payments going towards the mortgage every month as a kind of forced savings. While renters
only get shelter in return for their monthly payments, homeowners get shelter and build
equity. Down the line, this equity can be tapped in the form of a home equity loan or
line of credit, or can be returned to the homeowner when they sell the house to downsize
or move. This “forced savings” is what many people refer to when they say a home is a
great investment. So is being a homeowner always the right financial
decision? Not necessarily. They usually have to save up a large down payment and that is
money that is tied up in the house rather than working for them in, say, the stock market.
That’s arguably what’s called an opportunity cost, and it is something to consider. So again, is it better to rent or buy? That
is a question that can only be answered by you and your unique situation. I hope that some of the points in this video
will help you make your own housing choice. And if you do choose to buy, we’re going to
be doing a “How to Buy a House” video in the future. If you have any questions or tips,
please let us know in the comments section below. We would love to hear from you! And
I will see you guys soon! I love you, bye! Mwah!

100 thoughts on “Renting Vs. Homeownership: Which Is Better for YOU?

  1. You could also buy a house, rent that house and rent another house, still "owning" a house, but having the freedom of a rentor

  2. we have just found a happy medium in the uk! we are buying a house boat our payments over all should be the same as (or less) renting a room in london, we don't like the neighbors or fancy a change or need one for work, we can just move! I think the most similar in the usa is tiny house living?

  3. I've rented in Canada, which was great, but now I'm in the UK and renting is HORRIBLE. Basically, with UK renting regulations, you end up having to renew your lease each year, and you can pretty much been thrown out by the landlord whenever they feel like it. It only happened to me once, when the landlord decided to sell the house, but I know people who have had to move seven times in three years. I can't afford to buy anything, though, because I'm in London where the cheapest places are £300k (that's about half a million US dollars, I think) so will always be stuck in this stressful system where you always have to be prepared to pack everything up and move at short notice.

  4. Mike is mistaken when he says all the expenses, including property taxes, go into the price of rent.

    The price of rent, like most things in America, is the highest price that the market will bear. If the highest price rent the market will bear is below the cost of the landlord's expenses, the landlord will rent the unit out at that lower price, rather than leave the unit empty, because 50% of something is alway more than 100% of nothing.

  5. Another thing you need to consider is opportunity cost. To buy a house, you're putting down a ton of money as a down payment. If you instead put that money in a stock index fund, which is lower risk and higher return than an investment in real estate, you could potentially end up with a portfolio worth more than the house would be. Say you buy a $500 house with a thirty year mortgage, and put twenty percent down. Adjusting for inflation, at the end of the the thirty years the house will still, on average, be worth about 500k. However, if you invested the 100k down payment into stocks, after thirty years you'd end up with an inflation-adjusted $800k. (This is, of course, assuming that both the stock market and real estate market continue to behave as they have for the last hundred years).

    Also worth mentioning, it's almost certainly worth it to hire a financial planner if you're seriously considering buying a house. The cost is pretty tiny compared to what you stand to gain or lose by your decision.

  6. Another thing to consider is condominium ownership.  I'm a homeowner who doesn't have to replace the roof, buy a new water heater or paint the fence, although I do pay association fees (a monthly assessment) to have all of that done for me.

  7. I cannot wait until I can buy a home! Sometimes it's not even about the money, but I've had so many bad experiences in renting that I am ready to settle down and be my own landlord. Sadly, my salary does not lend itself to the taxes+insurance+maintenance part yet, but I look forward to the video about how to buy!

  8. Other down sides of renting. Useless landlords who do everything on the cheap, to the point of when things go wrong, you fix them yourself.

    I'll be fair, downside of bought, moneypits.

  9. Rent a room for cheap, save up and buy a cheap house in a neighborhood where the mortgage is half the rent, make the place look nice, get a twice a month yardwork guy, rent the place out for average price of area. If done right you will make money, keep renters happy, and refill the down payment on the house quickly. Do not spend the money you get back, save that for repairs and such on the house. Offer longer contracts at slightly cheaper rates to what is considered a good and stable renter. Use the excess money granted after refilling that house's emergency fund to put a down payment on another, rinse and repeat. The more houses you get, all with emergency funds untouched, the quicker you can get another house, and repeat the process. Continue working a job, and renting a cheap room for awhile, and then move into a house that you buy if you are fond of it. Retire after a few years from your job, and instead manage your new business. Treat customers fairly and they will stick around. Example, after fees you make $100 a month from the property, put that, $1200 a year, and your money from your job into the emergency fund again. Assume down payment was $20,000. Once refilled, use the $1200 a year, and your savings to start saving for the next house. Assuming same thing, now $2400 a yr to the fund from houses alone. Repeat, $3600, then $4800, etc. All the while renter is paying mortgage and utilities, and even lawn maintenance. You pay $20,000 and the house is paid for by others, and so are the others. The emergency fund per house is in case of repairs, or if you can't find a renter for some time. Tell me what you think.

  10. When you brought up property taxes, you didn't mention how they can affect the mortgage going up. So, no. Homeowners do not get a locked monthly payment for thirty years as rising property taxes typically cause the house payment to rise every year.

  11. Thank you for making this video! I am tired of paying rent, but homebuying seems financially too far away. If you're doing a video on home buying, could you cover 15yr v 30yr mortgages? I've heard that a 30 year plan can be cheaper if you only plan on living in the house for a few years, but my math skills aren't on par to test that x_x

  12. Whether renting or owning, take pictures when you move in. For renters, this allows you to fight charges post-lease. For home-owners, this can show long-term changes in the home.

  13. My husband & I purchased our home almost 3 years ago. Honestly, the maintenance is not nearly as bad as people say! We have spent maybe 2.5 weekends painting (basically the whole house), 2 days worth of time installing some backslash, half a day of dealing with baseboard…compared to how much time I spent calling and waiting on maintenance to come fix things while renting, it's nothing. The most time consuming thing is mowing grass…but we purchased our home WANTING a big yard so we suck it up. It really depends on the type of home you buy and what you are willing to spend money on, but overall it's been so much simpler than renting (although the buying process made me literally break down in tears and want to punch several people).

  14. basically the important info was at 5 years there are more or less the same cost longer it is cheaper though not neccesarily better to buy.
    firstly: did i get this right?
    secondly: is that info US specific?
    because here in Germany we have, if i am not mistaken more permanent houses that are more expensive to build and cheaper to keep standing and heated and shit. but maybe that is just a misconception.

  15. Actually some (if not most) of the property tax is paid by the landlord because land is fixed in supply so the only amount they can generally pass on to the tenant is the tax on the actual building.

  16. research shows people who own tend to earn less, for many reasons. I would say dont buy if your house is going to be your most valuable asset.

  17. In addition to local or state property tax, there is also the cost of home owners insurance over renters insurance. I am not an expert in the field, but I can tell you the former will always be larger than the latter. Homeowners insurance is often mandatory for a mortgage and would need to be added to the monthly cost when comparing to renting. Many people do not feel the need to get renters insurance because it covers personal belongings inside the structure and the risk of loss is hard to quantify in case of flooding, theft, fire, etc. However, homeowners insurance is necessarily more expensive because it also covers the structure itself and is related to the valuation of the home plus the owners credit score and previous claims. I have often heard friends say that they expect to pay nothing once their house is paid off, so renting is just throwing money away, but even once you own your home, insurance+local property tax+utilities (like heating) for the extra space of a home+maintenance can still cost you more per month than renting a (probably smaller) apartment. There are however federal tax subsidies we give to homeowners, but with the money spent on the loan+interest, I would only consider buy the extra space if I were starting a family personally.

  18. I'd love to see a video about owner-occupied duplexes. I'm wanting to do that next year and from every angle it looks like a great deal. Would love to know if there are downsides I'm not aware of. Thanks for the great videos!

  19. Huge tip!!! Always check the stormwater drainage of a new house. Are you in the flood plain? Does the city have to pump sewage to a higher point under your property? Does the city have to pump storm sewers under your property? Are you the low point in the neighborhood?

  20. I am all about watching TV shows about decorating and renovating homes while gazing intermittently into the distance and thinking about how I have no hope of getting / can't afford a mortgage.

  21. It would be cool if you could talk about the (perhaps very limited?) mobility of a homeowner and how that works. Also, the idea of "tenancy in common" and in general buying a home with others by pooling funds sounds really interesting to me and I'd be curious to hear your thoughts on that.

  22. If you have kids, LOOK AT THE SCHOOLS IN THE AREAS YOU ARE LOOKING TO MOVE IN. My parents learned this lesson very quickly when moving to Virginia. While the neighborhood was very nice, the schools weren't. They were pretty run down and dangerous. A kid broke his neck at my school while playing basketball when I was there, and there were kids in my grade with knives (I was 11 at the time).

  23. PLEASE do a "how to buy a house" video! I am working towards that and it has me wondering how ANYONE buys their first house EVER.

  24. Also, the Location is an extremely important factor! For instance, I live in Chicago and the property prices are higher, but the taxes are way lower than the subarbs. I've done the math, and it is 1/3rd the price to buy than to rent, and you have much better options. I would love to know more about mortgages: PMI, How to buy if you don't want to put 20% down right out of the gate, etc.

  25. IMHO BUY! Its the best thing you can do. Do it when youre young too. Then you have atleast 1-2 hundred thousand quid later on paid off.

  26. HOLY GOD you freaking failed your audience with this video… You FIALED to go over such things as TAXES!
    , vital to the rent/buy decision. As well as alternatives like Condos, building your own home, school locations… The list of VITAL Factors goes on and on…. You have a duty to disclaim the limitation of your video or REDO/ADD to this existing film… Because MAN… I hope you're not just making these films for the ad revenue … and see that your fans rely on your expertise. .

  27. One of the arguments I hear the most against renting is the "dead money" argument, but if your mortgage is large enough for you to only be able to pay the interest, that is also dead money. And in Australia, especially near cities like Sydney (not even just IN the city but the surrounding suburbs up to an hour away), the house prices are so artificially inflated that it is really difficult to buy, even with dual incomes, because the average AND median wage is so low by comparison 🙁

    I would love to buy a house, but nothing about it is feasible for me right now. Plus, I want the freedom to potentially move for work. I'm scared of being stuck in one place for 10+ years, especially if it turns out to be worse than originally thought.

  28. The one point you said several times was that rent is usually higher than a mortgage… It has been my experience that is almost never the case. Having lived in 6 states in the US I have never paid what my mortgage would be on a similar property. The rent was fixed and about 70% of what a mortgage payment would be.

  29. I rent and have been forever, I had my cooler motor burn out and an $800 repair was taken my management! And since when do you own a home? Don't pay property taxes and ill be giving you change on the street!

  30. I LOVE your channel!! Im only a 13 year old girl in Sweden, but i wanna move back to America- maybe Virginia where i lived for 10 years or California- and i have seen the struggles of renting a house because of my parents struggling a lot with it. When i was like 8 or 9 i was like "Just buy a house! Its cheaper and you can fix things yourself! And no annoying landlord!" But i suppose i understand sorta why now, even though they Always answered "Naw."  Anyway, i really wanna buy an apartment in the USA. Is it even possible to buy an apartment? I really wanna understand all this adulty stuff- such as mortgage, down payment, lease, its like a whole nother language!!- beacuse DAMN adulthood is coming up fast! And i really need to understand it so i am ready! 🙂 <3

  31. owning is always smarter and better only stupid people would rent because they can't afford a house their own, buying is an investment with renting you are just throwing your money away

  32. Rented for so long, I just bought myself a house. Seems saving because i have a cottage too that i rented out. 🙂 Buy a home, if you wanna move you can always rent it out, you still keep value. Thanks for the video.

  33. also there are those of us who buy everything outright, I own a house that is pretty new in a suburb where I live so I don't have a mortgage, also I own a sustainable farm in New Hampshire that was bought outright too, land is really useful and on my farm I have one of those tiny houses on wheels, those are low maintenance home owning options, also when you own you can go totally off grid and be self sufficient which is what I do for my tiny house in new Hampshire, they are small and on wheels and in a good state so I don't need insurance, I bought my property outright so I don't have a mortgage and it is totally off grid so I don't have to pay utilities, the only thing I do have to pay is property tax, you can't do that with renting.

  34. as someone who has done both I feel like both are traps. both have equal amounts of pros and cons. it really depends on if you want to stay somewhere long term or like the idea of a place being temporary to suit immediate needs.

  35. My husband and I have learned that in our area, saving up to buy a home is going to be much less expensive for us in the long run. The townhome (which we did our research on and was the best option for 2 bedroom townhome/apartment in our area that allowed cats) where we live now has $1055 a month rent, and doesn't cover water, electric, or trash, so also have to pay for our utilities anyway. We both have worked our butts off to have amazing credit, and if we go in on a nice little starter home that's between 50-100 grand, we'll be paying less monthly even including saving for the approximately 1k property taxes in our area and the mortgage than we are monthly on the townhome. We'll be able to save more per month, and have something that's actually OURS to show for it. 🙂

  36. Thanks for this video, I always wondered which was better. I'd rather buy a house in another state, but having family, and work in this state means it would probably be better just to rent around.

  37. I'm glad to finally see someone not trying to insist that rent is cheaper. After unexpected costs like repairs, maybe, but in my experience rent is always significantly more expensive if you compare it to a similar size of home.

  38. My boyfriend and I (both 19) are planning on renting an apartment. a lot of them in my areacover a chunk of bills (water is a big one). We're still saving up the funds as I am a part time worker and I'm currently attending university. My biggest worry is covering the cost of 200$ ish a month, which is two paychecks, plus any other bills. Hopefully I will get a better job soon and not have to worry too much.

  39. my thought is to buy a house and if you need to move keep it and rent it out for atleast monthly payment of mortgage

  40. Owning your property doesn't tie you down. I own 3 properties in 3 countries and I absolutely, unequivocally, don't have any obligation to live in any of those places.

  41. This needs to be updated with a townhome/condo option. There is an association fee but the landscaping and the roof is done for you. OTOH there are limits about what you can do for remodeling.

  42. Im ok Renting. In some places you can get lucky and have all the utilities included in the rent. Downside is these types of apartments are usually big houses that you share with the landlord. So dont expect to throw any late night weekend ragers in these apartments.

    But with rent and utilities included you can save quite a bit of cash.

  43. Thank you for addressing both the personality and financial issues. Too many "advisers" only talk about one or the other. I am an accountant and I hate when my colleges just suggest buying because "it is building for retirement" or "it is a great investment in a growing area" but they never consider who the person is they are talking to.

  44. Owning is better.the money people put in renting is a waste due to the fact that they will never own it. There are other options other than a mortgage. Lease to own is one. At least people can own it eventually unlike renting an can rent for 3 years and after putting 60 grand on renting, you lose your job and is out in the cold because the thousands you put on month to month renting would have been better used if put on a house even if it was a fixer upper.

  45. my family bought a house and ended paying a little more than double the amount its actually worth because of insurance, property taxes, interest, and repairs. honestly, i dont think buying is actually worth it unless you make a lot of money

  46. Its quite simple.More liberal people would travel and have fun renting and more conservative people would buy property for themselves or as investment re selling it more expensive or renting to those who can not afford to buy.Frankly all good things come to those who wait.This is translation to lifestyle and reaching goals.Buying=patience and making savings ( earning money afterwards and paying less later).Renting=free of credits but dependant on high prices and mercy of property owners.Also in most cases not enable to customize own home.

  47. Not true– although my mortgage never goes up my Taxes increase ever year, there for increasing my mortgage because it's part of my mortgage! My home pymnt has increased well over 100 bucks– ggrrrr

  48. I like living in apartments but the only thing i dont like about living in apartments is the noisy people around me

  49. I rented for decades because I wasn't sure when or how my life was going to change, I hated yard work, moved around a few times, and after moving to the Los Angeles area split an apartment with a roommate in order to make it more affordable. A couple of years ago I bought my own home in another state because I realized I prefer not having noisy neighbors, hate crowds and L.A. traffic, and was financially secure enough to do it. And I was fortunate enough to find a property that doesn't require much yard work. 😉 In both cases is was what I needed at that time in my life.

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