November 2, 2020 3 minute read

Renting vs. Buying: Finding the right real estate move for your lifestyle

Should I rent or should I buy? In short, there’s no single answer to that question. Outside market factors play a role in that decision, but primarily each person’s personal circumstances is what matters most. Making an informed real estate decision requires a number of steps and considerations, some of which are explained below. 

Why you may want to buy 

Some of the best reasons to buy a home are the intangible ones, such as pride of ownership, freedom to renovate, and stability. There are various financial incentives as well. Almost any house bought 30 years ago is an investment that has made impressive gains.

If you’re looking to make a long-term investment, buying a home could be the way to go, as it’s a great hedge against inflation. A mortgage can almost function as a forced savings plan. By making your house payments every month you begin to build up equity. The largest asset most people own once they reach retirement age is their home. 

Additionally, there are tax benefits to owning a home. You can receive a qualified Mortgage Credit Certificate from a state or local government under a qualified program to directly reduce your tax liability. The MCC program is designed to help first-time homebuyers offset a portion of their mortgage interest on a new mortgage as a way to help homebuyers qualify for a loan. Because it is a tax credit and not a tax deduction, mortgage lenders will often use the estimated amount of the credit on a monthly basis as additional income to help the potential borrower qualify for the loan.

Why you may want to rent

While you may not be directly building equity, there are a number of reasons why renting may make more sense for your lifestyle. Primarily, renting offers flexibility. This option makes sense if you aren’t sure you want to live in one city for the foreseeable future, or perhaps you are in a period of change in your life where your family may be growing or downsizing. Renting could be a better option during these life changes.

Renting also puts the responsibility of maintenance and repairs on your landlord. For example, if you have a job that requires a lot of traveling, renting is less complicated. You do not have to deal with emergency repairs, necessary renovations and ongoing maintenance required as a homeowner. Renting also requires less of an upfront cost than putting a large downpayment on a home purchase. 

Other factors to consider

Even after deciding which benefits appeal most to you, deciding between renting and buying can still be a complex decision. 

The housing market that you’re in could present a new perspective on which is right for you. Cities with astronomical housing prices could potentially price a majority of people out of buying a home. For example, in the Boston area, the highest-priced areas remain closest to downtown, along with Brookline and Cambridge.

Opportunity cost is another important consideration. On a month-to-month basis renting is often cheaper than buying. But with those savings you accumulate, will you be investing that elsewhere or will it sit in a standard savings account and not accrue much interest? It’s important to think long-term about the best solution for your finances. 

Luckily, there are tools that can help you with this. One of the best tools you can use is the New York Times’ calculator that determines at what rent price does it make more sense to buy. It asks you to input a series of associated costs with renting or buying a home in your area to determine what makes most financial sense. 

The best way to determine what’s right for you isn’t with an algorithm. Sitting down with a real estate professional and talking out your plans, goals, and any of your concerns is the best way to get advice that’s tailored to your life and finances. At Senné, our experts devote themselves to sourcing real estate solutions that are the right fit for our clients.


Colleen Sleeper

Author

Colleen Sleeper is a Senior Associate on the Residential team at Senné, specializing in buyer, seller, and investor representation in Greater Boston, Cambridge, Somerville, and Arlington. With over 20 years of experience in the industry, Colleen has made it her mission to use her depth of real estate knowledge to assist her clients in achieving their real estate goals.

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