Is It Better Financially to Rent or Buy?

Whether you’re looking to downsize or find cheaper housing in a new city, you’re probably considering various rental options. If you aren’t, you might want to add townhouses, condos, and multi-family units to your search. These are available to rent and come with a variety of lease lengths. But are these options a better option, financially speaking, or is it smarter to purchase a home?

The answer varies from person to person and will depend on the real estate market and your values, goals, plans, and current financial status. Before making a final decision, you should also consider the numerous costs associated with buying vs. renting. Only then will you be able to make the right choice for yourself and your finances.

Monthly Payments

The monthly cost of townhomes, condos, apartments, and houses varies depending on housing location, time of year, supply and demand, the economy, and the real estate industry as a whole.

However, you can typically expect rental payments to cost more than mortgage payments in the same location. More importantly, making those rental payments over a long period will cost you more than if you had simply bought a house.

In some cases, though, renting might provide a more predictable monthly payment. If you purchase a home with an adjustable-rate mortgage, your payments will rise and fall with fluctuating interest rates. This type of mortgage can make budgeting more difficult.

Meanwhile, in an apartment, you may only have to worry about a price increase every once in a while. Then, if your landlord does bump up the rent, you can always leave and find a cheaper place.

Building Equity

Another factor you must consider is whether you care about building wealth at the present moment.

In an apartment, you’ll pay a flat monthly rate and never see any of that money again — aside from a refundable security deposit. On the other hand, buying a home allows you to build wealth over the long term through equity instead of throwing away your money.

Mortgage payments reduce what you own while your home gains value. If you stay in that house long enough and make improvements, you may be able to sell it for a profit when you move.

Of course, most people will have to live in the same home for nearly a decade before they’re equity-rich. Plus, they must stay put until it’s a seller’s market. However, the payoff is more than worth the wait for patient homeowners who didn’t want to rent.

Maintenance and Utility Costs

Zero maintenance is one of the biggest perks that come with renting. Landscaping, updating HVAC systems, cleaning the gutters, and other maintenance costs are the landlord’s problem. Even repairs are their responsibility — as long as you weren’t the one that caused damage.

Of course, your landlord may factor these costs into your monthly rent payment and require you to change light bulbs and batteries. Additionally, they might make you pay for your own water, gas, and electricity. However, these costs are nowhere near as expensive as they are for homeowners.

When something goes wrong in their house, they foot the bill. Depending on the extent of the issue, this can cost thousands of dollars. Plus, utility costs tend to increase with square footage, which is why it is important to switch energy provider to find the best deals.


Many rental properties include amenities in the price of rent. These features may include parking, in-unit laundry, private outdoor space, elevators, a fitness center, and even door attendants. If you value these amenities and would probably pay for most of them regardless of whether you rent or buy, paying rent may be more financially savvy in the short term.

However, if you don’t think these features are worth your money but still choose to rent, you’re essentially throwing away cash. If you live in cities like Chicago or New York, an elevator, doorman, and in-unit laundry may even make up a substantial portion of your rent.

Therefore, it’s important to research the average cost of amenities depending on your location and determine whether they’re worth the extra cost in the long run.

A home gym with a stepper, treadmill and indoor bike

Size and Privacy

Rental units tend to be smaller than your average house. However, you’ll end up paying substantially more per square foot, especially if you’re in a large, heavily populated city.

Meanwhile, buying a house on the outskirts of town will give you plenty more room for a lower monthly rate. You might even score a home featuring outdoor space like a balcony, patio, or backyard.

Depending on what kind of rental unit you move into, you’ll also be paying more for less privacy. In most cases, you’ll have to share a fitness center, laundry machine, swimming pool, building, and parking lot with other tenants.

Meanwhile, homeowners will pay a lower monthly rate for as much privacy as they want. Since they own the property, they can put up fences, plant hedges, and install shutters to their heart’s content.


Other financial downsides to renting an apartment include living by the rules and paying all associated fees and fines if you don’t.

For instance, many apartments require you to pay a pet fee. However, if you lie about having a dog or cat and the landlord finds out, they may charge you a hefty fine. Likewise, if you rent out your unit or trash the place, you may face cleaning fees or even eviction, depending on lease specifications.

Unlike renters, some homeowners will have to cooperate with a homeowners association or simply abide by local property laws. However, aside from fines for making illegal additions or paying a monthly fee to be in the association, homeowners won’t face penalties in the same way renters do.

Therefore, if you’d rather live wild and free without the worry of breaking the rules and paying fines, purchasing a home might be a worthwhile choice.

Reflect and Self-Evaluate

When it comes to choosing between renting and buying, the most financially-savvy move ultimately depends on your personal preferences and financial situation.

Do you value amenities, or would you rather pay for a gym membership? How often do you plan to move? Can you afford a down payment on a home?

Consider your long- and short-term goals and whether right now is the best time to rent or buy based on the economy. If you take everything into consideration, you’ll eventually come to the right conclusion.

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