If you’re asking yourself the question, “Should I rent or buy a house?” you should know that there is no definitive yes or no answer as it depends on your own individual situation as well as the local real estate market.
When leaning toward renting a house, apartment, or any other type of living space over buying, you’ll want to have a good understanding of the downsides before signing a lease.
Rents Will Keep Rising
Once your original lease is up, if you want to continue living in the same place, your landlord is likely to raise the rent. They often do so to offset inflation or keep pace with current prices and demand. As CNBC recently reported, most renters in the U.S. are covered by rent regulation laws which means many tenants face unlimited increases year after year.
If you decide to move to another rental, you’ll probably have to pay higher rent anyway based on what the current market will bear.
If your landlord decides to sell or make your place unavailable to rent, you’ll be forced to find new living arrangements. If there are few rentals in your area, you might have to move to a different city or even another state. That’s one of the biggest risks of renting, especially in this current market with so much competition for affordably priced rentals.
Before signing any lease or rental agreement, look closely to find out how much notice your landlord must give you should they choose not to renew it.
When you’re renting, your landlord has control over much of what you can do with your space. You may not be able to have a pet, and most require approval for modifications like painting or even hanging artwork on the walls. Should you become disabled, you may have to find another place to live that can accommodate your disability.
Even if the landlord approves modifications or any type of upgrades, if it raises the value of the property, you won’t benefit financially from it. In fact, you may have to return everything back to the way it was when you move out.
No Tax Benefits
When you rent, there are no tax benefits, but if you own, you’ll typically be able to deduct the interest you pay on your mortgage as well as local and state property taxes. While you may not be able to deduct them all if you live in a state with especially high property taxes, it’s still a major benefit of being a homeowner.
You’re Helping To Build Someone Else’s Wealth
When you pay your rent every month, you aren’t investing in your future. Another one of the biggest drawbacks of renting is that all that money is going right into your landlord’s pocket. Even if they have to make a monthly mortgage payment on the home, they’re still earning equity as you pay down the loan principal while the property appreciates in value.
While that might not seem like a big deal, over just a one-year lease, assuming your rent is around the average of $2,000 a month, that’s $24,000 for which you’re receiving no benefits of ownership or equity.