Introduction
The decision to either rent or own a home is one that many people have to make at some point in life. Newlywed couples, middle-aged parents with young families, and senior people thinking of retirement are often confronted with this dilemma (Kirkpatrick). While it may seem obvious that owning a home costs less than paying monthly rent, there are merits and demerits on both sides of the divide (Hansen 220). This paper analyzes the benefits and challenges of home ownership vis-à-vis the implications of renting a home, as well as the repercussions for players in the home sale industry.
Merits and Demerits of Owning a Home
Owning a home is preferred for a number of reasons. To begin with, it gives one freedom and control (Kirkpatrick). In a world where people value the right to privacy, many prefer a residence that helps them to run their activities without having to worry about unnecessary intrusion. The owner also has a right to decide on the design and arrangement of the house. In addition, one can get more time and space to relax and enjoy their free time within a property they own and control than in rented space (Friedman and Harris 24).
Owning a home also comes with a sense of security for both life and property. While one is not guaranteed that thieves and burglars will not harm the owner and other residents of the house, homeowners can secure most of their valuables within their houses, behind locked doors and gates (Kirkpatrick). Unlike a rented premise where people share parking space and some social amenities, thus making personal property vulnerable to theft and malicious damage, personal homes help protect property because the owner is in total control and allocates space for persons and property while taking personal responsibility for any untoward outcomes.
Additionally, homeowners do not have to worry about whether they will afford the rent for the month or whether the lease will be renewed (Hansen 220). The money that would have been used to pay rent can be redirected to other important uses. Moreover, there is little risk of protracted legal battles to secure a new lease or to get compensation for a breached contract. In essence, owning a home averts embarrassing situations for both the home owner and his or her family as opposed to living in a rented house.
Friedman and Harris cite another important advantage of owning a home: one is eligible for tax deductions especially when paying a mortgage (25). Federal authorities use this strategy to encourage people (including public servants) to own homes. However, it is important to understand that some people do not pay for the mortgage for long durations because they find other ways to pay up, thus losing the opportunity to benefit from this tax break.
Despite these merits, home ownership also presents some demerits. Firstly, as Hansen observes the cost of maintenance in most homes is almost as high as (or even higher than) paying monthly rent (220). Home owners occasionally have to perform plumbing jobs, replace old or problematic locks, give the house a new coat of paint, repair or replace leaking roofs and driveways, mow the grass and so on. Some of these jobs may be done at regular intervals while others come up as emergences. Whatever the reason, the homeowner has the choice of engaging the services of a technician or taking the DIY (Do-It-Yourself) option, all of which cost time and money.
Owning a home also involves paying mandatory property taxes whose cost may drain the owner’s resources. While these taxes are set by state and local authorities and may vary depending on the location, they still involve monthly commitment of a sizeable amount of money just as it happens when one is renting a house. Moreover, the agency that calculates the tax to be paid for a property does not use the market value of the house, but what is called an assessed value, in most cases not related to the former. In essence, paying taxes for a property may be as economically draining as paying rent (Kirkpatrick).
It is also important to note that when a home owner wants to relocate, disposing off the house presents a formidable challenge (Ramsey, Kepple, and Buffum 29). While the owner may want to make a profit or recoup what he or she spent when buying the property, there is no guarantee that the prevailing market price for the property will be favorable. There might also be delays in selling off the property since a buyer may not necessarily be available when needed. This may in turn hamper the desire by the person selling the house to purchase another one at the place of relocation.
Merits and demerits of renting a home
Renting a property is an option that also bears pros and cons. One of the most important merits of renting is the ability to control one’s expenditure since the monthly rate is fixed. For people in regular employment, this is crucial because they can budget for rent and ensure they pay on time. The fact that the landlord bears the cost for repairs means that the tenant will not fret over unexpected overheads (Friedman and Harris 25). Contrastively, a homeowner cannot estimate the cost of occasional repairs and maintenance, which may at times involve huge amounts of money that was to be used for other activities or items.
A rental arrangement also implies that one can move out if and when they feel like as long as the tenant who wishes to leave informs pertinent parties of the intended action and the tenant has no rent arrears (Friedman and Harris 25). This is different from a homeowner who has to look for a buyer or someone else to occupy the house while the former relocates and makes arrangement to sell the house. Professionals who keep on relocating will find renting a better option than owning homes.
On the other hand, there are a number of disadvantages associated with renting a house. First, one lives in a restricted environment that may be shared with other people (Hansen 220). There are rules and regulations on how the property is to be used. Breaking those rules leads to penalties. Moreover, one has to mind the welfare of other tenants, where the property is shared. For example loud music and other disturbing noises, inappropriate disposal of waste, indecency and other social malpractices may be frowned upon by other users of the property.
In addition, since one does not own the property, one has no control over rent increments (Hansen, 220). When the owner of the house decides to change the terms of the conditions of the agreement, including the amount of rent, the tenant either has to pay the new rates or vacate. Generally, such a scenario becomes an inconvenience especially if the tenant has lived in the house for long and was conveniently accessing work and social amenities.
Sid observes that on the financial front people who rent homes do not benefit from tax breaks by federal or national governments (188). The rising cost of living demands that people save as much as possible yet renting a home will deny one this important tax deduction. This is unlike people who are paying a mortgage for property that they own.
Impacts and Opportunities for the Home Sales Industry
The decision to buy or rent a home is an individual or family issue. In most cases, the financial wellbeing of the person or people involved determines the option they will take. It is significant that by 2014, 67.35% of Americans owned homes despite the economic recession just over six years before (Statistics Brain). Moreover, as long as incomes continue to rise and people become richer, or when prices of houses reduce, there will always be an urge to own a home (Hall & Lieberman 105). In addition, there is an emerging market for tiny houses especially in the US, and this offers an opportunity for investment by real estate players. A tiny house is easy to build and costs much less than a normal house thus making it affordable to most people. Real estate developers can build and sell tiny houses, and also lease land for owners of these structures, most of who will leave with their houses when time comes to relocate (Rubel).
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