rent or buy a place to live

A Shelter: Buying vs Renting

A shelter is a vitally essential part of life. The topic of whether to focus on purchasing or renting a house sparks heated debate. Because of the high costs associated with purchasing a house, many people begin their lives by renting an apartment. People want to buy a home after progressing in their professions and saving money. According to Buchanan, since the mid-twentieth century, American homeownership has fluctuated dramatically between 62 and 70 percent. According to the U.S. Department of Housing and Urban Development, homeownership peaked at 63.7 percent in the second quarter of 2017. (U.S. Department of Housing and Urban Development 5). The decline in homeownership years has been attributed to demographic and economic factors such as elevated housing costs, increased in as well as an increase in the costs of borrowing.

Arguments for Renting a Place to Live

Indeed, renting presents to be a good option for people who frequently move from one place to another while working. Certain occupations such as military are characterized by constant moves from one location to another. To many people, renting a house is usually a first step to buying a home. When one gets employed, he or she could not have enough money required to buy a home.

In addition, renting a place does not come with the responsibility of maintenance costs or taking care of the repairs. If for example, a toilet breaks down, the landlord takes care of eth expenses. Renting also makes it easier for one to arrive at working place faster. Many people normally rent close to their jobs. Perhaps, this is one of the key reasons that drive people to rent a house. There are also no expenses incurred to the real estate market. Arguably, people who buy a home are usually affected by the fluctuations in the market value which could make the property to be expensive at certain times (Tabner 6). The fluctuations happen in response to the changes in the economic conditions. However, a person who rents does not have to worry about market fluctuations in the housing prices as the rent remains constant.

More strikingly with renting a property, the credit requirements are typically less strict and at times not needed. In cases where the landlords require the tenant to undergo a credit check, it is normally a zero-sum proposition. The application of the potential home buyer could either be approved or declined depending on the credit history and score of the person. However, many landlords do not engage in the process of credit checks but will provide a house basing on the ability of the person to pay. On the contrary, mortgage lenders create high credit standards for anyone who wishes to buy a home. A small change in the credit score could significantly affect the person and deny an individual a chance to own a home.

However, it has to be noted that renting a place entails incurring costs that denote to be costly to the renter. Security deposits are required to be done in order to insure the property against damages arising from the tenant. There also non-refundable deposit which an individual is expected to make. In addition to the security deposit, the non-refundable deposit makes the cost of renting to be high. In some cases, the non-refundable deposit ranges from $100 to $500 or could be equal to the monthly rent of the house. In addition, there are moving costs that renters area renter is needed to pay when moving to the house and includes the hiring of a truck to carry the items. Perhaps, the monthly payments given to the landlord is a recurring cost that does not add value to the individual. 

There is no equity building in renting a house. No matter how long one could spend renting a house, the landlord will still own the property. Also, there are no federal tax benefits which are enjoyed by people who buy a home. One also has limited control over the house and cannot be able to make any changes to it even if he or she wishes for new looks. Tenants also face challenges arising from rent increase from their landlords. This could prove to be a big problem when considering the financial position of the person. Some tenants are normally forced to vacate the house. Besides, in many rental houses, there is limited housing security.

Arguments for Buying a Place to Live

A person who buys a house creates equity over time. Unlike renting, every dollar that is made towards the house creates an equity that leads to actual ownership of the housed on completion. Notably, buying a home also makes a person enjoy certain tax benefits. This includes homestead exemption and federal taxes deduction. This is exempted from a portion of the property tax and thus making the cost of buying to be cheaper. The overall tax burden reduces. However, these tax benefits are not available to people who rent a house.

A person with a home can also turn a home into a potential rental income when he or she wishes. A home can be used as an investment property. This can be used to totally or partially offset the tax, mortgage costs and insurance payments and the idea applies to people who buy large homes and thus rent part of the house. Simply put, owning a home gives one freedom to do what he or she wishes with the house (Team 4). One can carry out a home improvement choices without facing any restrictions that could arise from landlords. One is allowed to repaint the walls and fix the house in a way that is pleasing to the owner. One could do radical changes to the living room environment in attempts make it better.

There are huge costs that are involved in the process of buying a home. Arguably, buying a home entails a lot of upfront costs, and some of them are paid out of pocket. Earnest money is one of the costs that is incurred, and it is used to show a seller that one is serious about buying a given property (Rabinovitch et al. 5). This cost is customary, and it normally ranges between 1-3% of the value of the property. Besides, down payment is a cost that is made when buying a house and it is usually between 3.5% - 20% of the value of the house. Also, in attempt to ensure that the offered price matches the actual value on the house in the market, home appraisal needs to be done, and this culminates to appraisal costs that range $300 to $500 (Tabner 7). Furthermore, home inspection costs are paid to trained inspectors to determine if the house has got any problem or defects that require attention before buying. Certainly, all these costs including the cost of buying the house are a great discouragement to any person wishing to buy a home.

In buying a house, there is also payment of taxes upfront, and this is normally done in six increments. The tax costs are paid in order to compensate the seller the taxes he or she paid on the property at the time between the closing and current tax period. Again, the first year’s homeowners insurance expenses is an obstacle attached to home buying. Every lender requires proof of homeowners insurance before the closing date. These costs vary based on the location, style, value, and contents of the house (Kathirvel 19). Notably, taxes and homeowners insurance make the process of buying a house difficult and expensive. Buying a house also involves recurring costs of loan repayment. A person needs to make monthly contributions including the principal and the interest rates on the mortgages.

Maintenance of a house can also prove to be a great problem for many people. A person who buys a house is responsible for paying for all the home upkeep expenses like replacement of worn outer appliances as well as mechanical maintenance. Again, the potential for financial loss is a detrimental factor associated with buying a house (Buchanan 19). Despite the fact that one builds up equity after some time, it does not translate to automatic profit. The person takes care of the responsibility for the maintenance cost and repairs.

Buying a House in Denver

Basing on the above argument, it is important to note that buying a house denotes to be better compared to renting. When one buys a house, the person remains with the property at the end and thus creates equity. There is also potential rental income from the house, and the person is exempted from certain taxes including homestead tax. One has complete control over the house and can make changes on the house that are pleasing to him or her. One does not face challenges arising from rent increases and also, one is able to avoid challenges arising from insecurity associated with rental (Young 2). In renting a house, there are additional costs including security deposits and refundable deposits. Huge costs are also incurred when moving from one house to another.

In Denver, financially speaking, buying a house is the better option. According to Hendee, Denver is the strongest market for buying rather than renting, and she goes further to elucidates that the total cost of buying a house is less than that incurred in renting a house in Denver (Hendee). The economic conditions in Denver are also conducive for one to own a home. The mortgage rates are lower compared to other cities in the United States. The mortgage rates are between 3.04% and 3.70% (Colorado Department of Local Affairs 11). Also, the rental market in Denver is quite expensive, and U.S. Department of Housing and Urban Development reports that housing market conditions in the Denver County submarket are tight.

Conclusion

Indeed, buying a home can be an exciting experience while at the same time prove to be challenging. Many advantages come with buying a home including freedom, equity, and potential for income. However, some challenges such as the high initial costs incurred could make a person continue renting a house. The advantages of rent are that the person does not need to carry out maintenance of the house and it is suitable for people who are newly employed. While this could prove to be appropriate reasons that can make one opt to rent, it is important to note that it does not result in equity ownership. For this reason, it is vividly portrayed that buying a home is better than renting a house.

Works Cited

Buchanan, Neil H. “Owning Versus Renting: Thoughts on Housing Policy, Tax Incentives and Middle Class Dreams.” SSRN Electronic Journal, 2012, Elsevier BV, doi:10.2139/ssrn.2157077.

Colorado Department of Local Affairs. Colorado Housing Coalition. February 17, 2016. https://coamp.wildapricot.org/resources/Documents/2016%20CHC%20meeting.pdf. Accessed 21 December, 2017.

Hendee Catlin. Buy or rent? These 10 Colorado counties are best for owning. Denver Business Journal. Feb 27, 2017. https://www.bizjournals.com/denver/news/2017/02/27/buy-or-rent-these-10-colorado-counties-are-best.html. Accessed 21 December, 2017.

Kathirvel, Dr. N. Kathirvel. ”Factors Affecting the Buying Behaviour and Buying Preferences of Individual House Owners.” Indian Journal of Applied Research, vol 4, no. 5, 2011, pp. 88-90. The Global Journals, doi:10.15373/2249555x/may2014/28.

Ellerman, David. ”On The Renting Of Persons.” SSRN Electronic Journal, 2013, Elsevier BV, doi:10.2139/ssrn.2344920.

Rabinovitch, Hannah et al. ”Assessing Emergency Shelter Patterns to Inform Community Solutions to Homelessness.” Housing Studies, vol 31, no. 8, 2016, pp. 984-997. Informa UK Limited, doi:10.1080/02673037.2016.1165801.

Tabner, Isaac T. ”Buying Versus Renting – Determinants of the Net Present Value of Home Ownership for Individual Households.” International Review of Financial Analysis, vol 48, 2016, pp. 233-246. Elsevier BV, doi:10.1016/j.irfa.2016.10.004.

Team, the Hyperink. How to Save Money Buying a House. [Place Of Publication Not Identified], Hyperink, 2012.

U.S. Department of Housing and Urban Development. Comprehensive Housing Market Analysis: Denver-Aurora-Lakewood, Colorado. March 1, 2015. https://www.huduser.gov/publications/pdf/DenverCO_comp_15.pdf. Accessed 21 December, 2017.

Young Sam. Housing Market Profiles Denver-Aurora-Lakewood, Colorado. https://www.huduser.gov/periodicals/USHMC/reg/DenverCO_HMP_Jan2015.pdf. January 1, 2015. Accessed 21 December, 2017.