Buying a house or renting a place to live is an important decision that everyone has to make. Everyone would love the opportunity to escape their current home and live in something new, but whether you choose to rent, buy, or stay put, there are financial benefits for everyone.
In the long run, buying a home is a better financial decision. The initial cost of purchasing a home may be higher than the initial cost of renting, but that is the only difference. You have most likely driven by the signs stating we buy houses in your area. Oftentimes, this encourages renters to begin the house hunt and start their search. Even if the initial financial investment seems like a burden, it has benefits that compound over time that you simply cannot get from renting.
1. Investing in the Future
Buying a home is an investment in your future. Over the years, buying a home will pay for itself. Many traditional home loans last between 20 – 30 years. You can pay off your house in as little as 30 years, and own it completely outright. Or, if you are more ambitious, you can pay it off even earlier.
Owning a home with 100% equity could be your retirement plan! Instead of paying monthly rent to a landlord, you can buy equity in an asset that you own each month. Home equity is the amount of money your home has gained in value. By investing that money in your home, you can either spend it as needed and use it as a down payment on a new home, or you can use it to purchase another property.
2. Passive Income
Even if you own a single-family home that you consider your primary residence, there is still potential for passive income. Homeowners are getting more creative now than ever by utilizing services like Airbnb to generate additional monthly rental income. Of course, you’ll need to research the local short-term rental laws in your area first before implementing this.
As a property owner, you can rent out your entire home, or even a single room in your house as a short-term rental space. If you live close to large cities, there’s a good chance that there is a demand for this in your area. For homeowners that enjoy their privacy, you can consider adding an ADU (accessory dwelling unit) to your backyard or property as a short-term rental unit.
3. Improve Your Credit
With buying a home comes lots of bills, including a mortgage, tax, insurance, and utilities. By paying these consistently, you can improve your credit over time for something that you are required to do anyway. You get a much larger boost paying for these items versus paying for rent as a tenant.
If you an unsure about being able to pay for all of these new bills after buying a house, consider renting out rooms to generate additional income. You can offset most, or sometimes all, of your monthly expenses if you find the right deal.
We hope this article has helped you make a decision on whether to buy or rent a home. Owning a home is always the better choice, and in the long run, it will prove to be more affordable than renting while building on your future financial security. Building your credit score through homeownership will open up many opportunities, such as loans with better terms.