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Data To Inform Your Choice
If you’ve never rented a property before, you probably don’t want to buy one. Conversely, if you’ve owned a property, you may find rental more convenient. While property ownership does build equity, sometimes property values decline in ways you can’t control. As an example, consider the economy, and the 2008 financial crisis.
Fine properties in good areas that were trending upward suddenly bottomed out owing to financial moves on Wall Street over which homeowners had little to no control. While some communities weren’t even affected, in other communities, the equity built over years or decades was totally lost, and people were forced into foreclosure on properties.
Those living in apartments experienced no loss of equity during this time. However, those who owned those apartment complexes may have found themselves in a tight spot, so it’s not inconceivable that rent rates rose in certain communities. You may have experienced this directly yourself.
As you can see, there are pros and cons to owning, and the same is true with renting. In this brief guide, we’re going to go over both of these residential choices to help give you a clear idea of which ones will best serve you and your interests.
Home Ownership: Pros And Cons
You can build equity and reduce the monthly financial burden on your paycheck through buying the right property at a mortgage you can afford. However, you are the landlord of that property, and that means you’ll have legal exigencies which must be respected. For example, you’ll have to deal with a Home Owners Association (HOA) fee, and rules included with it.
This could mean you must maintain a certain level of landscaping on your property. It also may mean there are certain things you’re not allowed to do. For example, in some communities, it’s not legal to have a fire pit in your backyard. In others, you can’t plant any trees that aren’t already there. You might have to paint your house a certain colour.
Also, you’ll deal with property taxes. Additionally, if you want to make any architectural additions to your home, it becomes integral that you respect whatever building codes define your region.
Still, you can buy a property, landscape it, refurbish it, add on to it, maintain it, and find cumulative property value increase. Effectively managed properties can produce a profit in excess of fees from HOAs and taxes. This is especially true if you find a region that’s in expansion. Buy right, and you could naturally see property value rise just by sitting on it.
Rental: Pros And Cons
When it comes to rental, you don’t have any HOA responsibilities, you don’t have any tax liabilities for the space you rent. You can’t lose equity on an apartment unless you lose personal wealth. However, you can’t build equity through such a solution either.
You can expect rental rates to increase every year to every year and a half—inflation annually is 3%; that’s $3 per $100. If you’re paying $600, at the minimum you should expect $18 in additional monthly rent every year, and that compounds annually. Fixed-rent communities are available if you meet certain qualifications, but this has its own downsides.
Still, you won’t have the same management responsibility for the property you’re renting, and there will likely be some shared amenities. Laundry, pools, workout facilities, common areas, sometimes even shopping and dining may be available where you’re renting. Also, your landlord will likely be liable for repairs on your unit at no charge. These are pros.
To help you get your mind around what it means to rent a property, you might consider some of the rental apartments in Arlington, Texas as available through the urban avenue | dallas apartment locators | free service. These have varying features which could meet your needs.
Making The Right Choice
Owning property gives you the potential to build equity, but you can’t guarantee the neighbourhood you’re in will appreciate in terms of overall value, and you’ll likely have taxes or HOA expenses to consider. Plus, you’ll have to manage it yourself.
Renting an apartment allows you to avoid taxes, HOA fees, and management responsibilities while enjoying shared amenities; but your rent will likely increase unless you’re in a fixed-rate community (in which case amenities like a repair will lag), and you can’t build equity.
Either option is more or less appropriate for everyone; it depends where you’re at, and what you need. One thing is sure: before you commit yourself to either rental or homeownership, you should be confident that you understand what you’re getting into as much as you can.
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