Is it Better to Rent or Invest? Pros and Cons

Are you planning to buy a home, perhaps for the first time? Are you wondering if it’s better to continue renting? Are you finding it hard to decide if renting or investing is the better choice? Either of the two options comes with its advantages and disadvantages. It’s entirely up to you to weigh the options and make a decision!

The essential factor to consider before deciding whether to rent or invest is the house’s location; it affects the savings you’ll garner over the years, your lifestyle, and your disposable income. 

In most cases, people choose to invest when they’d do better renting due to financial reasons; they believe investing minimizes their tax deductions. Similarly, other people prefer renting because it requires minimum responsibilities and it’s flexible, though they’d gather a considerable net worth within some years if they chose to invest.

What’s better? Renting or investing?

Monthly Budget

Calculate the maximum you can spend comfortably in a month; deduct your expenditure from your total earnings, and emergency cash. What remains is what you can use for housing, whether investing or renting. Investing helps you to save more since you aren’t paying rent as compared to renting. 

Predictability & the financial impact

It’s challenging to know the exact housing costs if you invest; for instance, you might need to fix leaks or fix broken things, translating to extra costs. If you rent, the housing cost is constant, unless when the rent might be increased in rare instances.

Flexibility versus stability

Investing offers intangible advantages like ownership pride, a feeling of stability, and a sense of belonging. Renting is a better option if you change jobs a lot or move to different locations from time to time. If you aren’t planning on staying in one location for long, renting is a better option. Renting allows you to move without incurring too many costs when your lease expires. A renting disadvantage is that you may be forced to move suddenly if your landlady/lord asks you to move or decides to sell the house. 

Pets

If you own pets, renting might not be a great idea; some landlords/ladies won’t allow you to have pets on their property. If you invest, you can keep all the pets you want since you are in your own space.

Cost

Renting is mostly cheaper than investing, but this is determined by the rent you pay. Investing is a costly investment, and although the huge cost is spread out for years, it comes with a hefty price tag. Renting means that you only part with your rent at the end of the month, and you don’t incur any extra costs. 

Down payment

If you decide to rent, you’ll need to pay a down payment that equals a month’s rent. On the other hand, if you invest, your home’s down payment could run into millions of dollars, which is a considerable amount for average earners. 

Ideally, renting isn’t simpler than investing, and investing isn’t always better than renting. It’s an issue that needs decision making, after finding out which option will work in your favor, and analyzing the advantages and disadvantages of each option. 

About RJ Frometa

Head Honcho, Editor in Chief and writer here on VENTS. I don't like walking on the beach, but I love playing the guitar and geeking out about music. I am also a movie maniac and 6 hours sleeper.

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