A lot of people say that it's better to buy your home instead of renting and they have their reasons. But other people have reasons to choose renting over buying. If you were in their shoes, what would you choose?

So, let's look at the pros and cons of renting versus buying. 

Pros of Buying

• You can fix your monthly payment for a long time. If you choose a fixed interest for your loan the payments to the bank will be fixed. The only thing that would change would be insurance and taxes

• You can say you own your home to your friends and family. I wanted to add this because a lot of people are influenced by what their family and friends think. I don't mean this in a bad or a good way but it's just what a lot of people do.

• You have pride of ownership. A lot of people feel more inclined to take care of their home because they own the house. Whereas some people don't really pay attention to this if they are just renting.

• You can make your home your own (remodeling). A lot of people can plant their own plants on flowers and trees and may even build a pool because this is their property.

Cons of Buying

• You have to pay for the maintenance and other capital expenditures. A lot of people forget that even if they own the house they still have to pay for all the things. For example if the dishwasher brakes it is you that has to call a service company to get it fixed or in the worst case have it replaced. And this is true not only for a dishwasher but for plumbing and electrical issues, AC problems, leaks or roof issues.

• You are trapping the equity you have in your home. This means that your down payment becomes part of the equity in the home and you cannot easily access it.

• Not easy to move. If you are transferred by your employer to another city or your family is getting bigger and you need a different house, the process to leave your current home and getting to a new one may not be very easy as you would have to find a realtor to put your house on the market, probably fix whatever is wrong with the house in order for you to sell it, have a bunch of possible buyers visit your house, choosing a qualified buyer and wait until the closing date to receive your money and be able to move.

Pros of Renting

• You are more mobile. You can move as soon as you give notice to the property manager. That means that you can move in about a month compared to several months if you own your home.

• You can call your landlord if there is a problem with the property. If you have a problem with an appliance or you have a leak you can call the property manager to fix that for you and if you are living in a good apartment complex the issue should be taken care of rather quickly.

• You can invest the down payment you would have used. One of the best advantages of renting versus buying is that you can use the down payment that you would have used to buy a property and instead of trapping it as equity in the home you can actually use it to invest in an apartment complex and create an income stream.

Cons of Renting

• You may have to wait longer for a service call. Since service calls have to go through their property manager it may take a while for a professional to come and fix the issue in your apartment.

• You can't or shouldn't make upgrades to the home. Scenes this is not your home it is not recommended to change the appearance or the structure of the apartment. It is OK however, to ameliorate the aesthetics by having plants or flowers outside and normal decorations inside.

• Your rent could potentially increase every year. In this regard you depend on market conditions. We suggest you negotiate better rent terms if you plan to stay longer in that apartment complex.

If you're looking at renting or buying your home, make sure that you consider your options and your situation before you take this step. A lot of people choose one or the other based on what is a norm in their circle but that does not necessarily mean but it's the best financial decision.

Many people in South America for example tend to think that it is better to own rather than rent your home. They believe that renting means this money that you're paying monthly it's “thrown away”. They believe that at least you have something to show for your monthly payment if you bought the property, you have something that it's yours.

However, I believe that you should keep saving for a down payment but instead of using that money to buy a home for you to live in, you should make an investment in real estate that pays you every month. That way the equity you have works for you and it is not trapped in your home.

For example in Houston (Texas), if you had $100,000 and you wanted to buy a $500,000 home, your mortgage payment would be around $3000 per month including taxes and insurance. If you wanted to rent a $500,000 house your monthly rent could be around $3000. At first it would seem that there is no difference between buying and renting, but we are forgetting that you had $100,000 in equity. Investing this money in real estate you could get 8% on your money per year. That means around $670 per month. So, you are offsetting your monthly payment by almost $700 per month if you rent instead of buying your home.

This is just a basic example of renting versus buying your home of that particular value in Houston but it serves to show my point.

You could choose a smaller or bigger house and the numbers would change but I think the principle would remain the same.

I hope that this gives you a better perspective when choosing your home.

Luis Salavarria is a multifamily real estate investor. If you have any comments or if you have a multifamily property you would like him to help you with, please contact him through this link https://linktr.ee/luissalavarria247