Renting vs. Buying a Home (A Detailed Analysis)

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So you’re ready to buy your first home – congratulations!  I listed my first home that I purchased six years ago to sell on the market earlier this year, so I wanted to share the perspective that I’ve gained on renting vs. buying.

This decision is not an obvious decision at any phase in life. Financially speaking, buying a home could make a lot of sense. However, as I’ll discuss in detail, this decision is much more than just finances.  It impacts your lifestyle, friendships, and career opportunities. In fact, it’s one of the most important decisions in life especially in America.

It’s hard to say a decision is “wrong” especially when the future is uncertain, but I do know that there are decisions that do not align with goals. The first thing is to envision your future because it’s hard to make any good decision without knowing the direction you want to go. However, it’s important to understand that even if your goal is to live in the city, your next move might have to be the suburbs albeit the right suburbs.

Let’s review this decision’s areas of impact and discuss

  1. Finances
  2. Transaction costs (non-financial)
  3. Time commitment
  4. Investment opportunities
  5. Overall

Financially, there are many benefits to owning a home. The first three are huge pros that can set you up for the rest of your life.

  1. Asset appreciation
  2. Equity
  3. Mortgage interest deduction
  4. Itemized taxes
  5. Utility costs, generally lower

Financial cons. These are often unstated things that could really impact your lifestyle without consideration.

  1. Maintenance
  2. Lawn care
  3. Time
  4. Location (impacts career & lifestyle).
  5. HOA fees
  6. Condo fees
  7. Real estate taxes
  8. Home insurance

There are also many transactional costs.

  1. Closing costs for buyer
  2. Costs to fix to bring home up to speed for buyer
  3. Realtor fees 4.5% – 6%
  4. Selling time
  5. Closing costs for seller
  6. Costs to fix to bring home up to speed for seller

We also don’t talk much about the time commitment.

  1. Location
  2. Fixing home, lawn care (outsource)
  3. Cleaning home
  4. Inability to move (less liquid)
  5. 2 year commitment
  6. Finding tenants
  7. Tenants is like hiring employees, costs involved in marketing & interviewing &
  8. Contracts
  9. Finding maintenance

There are also investment opportunities (opportunity cost) that we miss out on.

  1. locking in cash to a non-current asset, 5 year



We often hear about the financial benefits of owning a home and how it seems to outweigh all other decisions. While this happens with higher probability than lottery ticket winnings, the other aspects are worthy of consideration. I think the key is to find a home that fits your current and future needs. Otherwise, renting is a great option.

My wife and I fell in love with the first home we purchased. It was near my work, it had a community, and it allowed us to live our life. I’m glad I was able to experience buying and selling a property and share my thoughts here.

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