Rent vs. Buy…. What to do?

Let me paint the picture for you. We are traveling across the countryside of Tuscany Italy, and a young fella says to the wise old owl; I just got married, had our first kid, should we buy a house or continue to rent?

Let’s start with some basic data and some facts, looking back over the last 50 years. 1975 vs. 2025.

It is generational: In 1975 the Baby Boomers were entering their 20s and early 30’s and buying homes rapidly, back then it only took about 4-5 years to save the 20% down that was required to avoid the PMI (premium mortgage interest).   The tables above show home ownership jumped in the early 2000’s and has returned today back to the 1975 percentage.  The return today is driven by the fact housing cost have skyrocketed, and it takes nearly 15 years to save the 20 percent for the down payment.  I know, I know, get to the point, all the data is great, but should I buy or rent?  Of course I will not give you the answers, because there are Pros and Cons to both, so see them below:

RENTING:

Pros - Renting:

·       It’s a good short-term solution if you are not planning on staying in your location long term, with less cost, more flexibility.

·       No additional hidden cost outside, of rent, utilities, and your own personal day-to-day living expenses.

Cons-Renting:

·       No chance for equity appreciation.

·       No ability to make significant changes to your living environment, what you see is what you get, so if you don’t like it, don’t rent it.

·       The landlord controls how long you stay, once your lease is up, they can choose to rent to you again, or rent or have a family move in, and you are “out of luck.”

BUYING

Buying – Pros:

·       Building equity, the equity you build in your first home can provide additional cash for your next home.

·       A conventional mortgage locks a portion of your cost in for 30 years.  This could be great if you are living in an area where the cost to rent and buy are rising.

·       There are potential tax benefits to home ownership… “the chance” to deduct mortgage interest and property taxes, can potentially lower your tax bill, however the tax law is constantly changing, so this is not a reason to buy, just a potential benefit.

Buying – Cons:

·       The funds for the downpayment could be better invested somewhere else to achieve other financial goals.

·       No guarantee that housing costs will continue to rise.

·       There are significant upfront costs associated with home ownership (down payment, closing cost, inspection fees,)

·       Maintenance is now your responsibility if it breaks or needs to be repaired, it’s on you.

So, the questions still exist… Buy vs. Rent, find yourself a GIC (Good Idea Coach) and have them think through it with you, each situation is unique and different, and there is no, right or wrong answer.

Definition of a GIC (Good Idea Coach) somone who knows you well, has your best interest at heart, and is not emotionally attached to the outcome.