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A Veteran’s Guide to Renting vs. Buying

Renting versus Buying, a battle for the ages? Let me first start off by saying that home ownership is not appropriate for everyone. I am not here to convince you to purchase a home if that is not your desire. There are many factors as to why it would not be a wise choice at the time. If you are looking to buy or are on the “fence” allow me to explain why homeownership is more advantageous than renting. (Home buyers should be confident in job security and not looking to relocate in the near future)

The biggest benefits to home ownership include capital appreciation of property, property tax write-offs, and mortgage interest deductions. As a renter, you will NEVER build up equity in the place you are renting. All you are doing is paying down your landlords’ mortgage while helping them build up equity.

A good way to further this argument is to address many of the concerns I hear point by point:

  • I can’t afford the down payment!
    • You can purchase a home with as little as 3% down for conventional loans and NO down payment for qualified veterans.
  • What if home prices drop again?
    • As we discovered in 2007, homes can lose value in the short term. However, over the long run (due to inflation alone) homes will almost always appreciate in value. The housing market (risk-wise) is much more regulated than a decade ago and we are not in the same position we were back then before the bubble burst.
  • Interest rates are so high right now!
    • Yes, interest rates are higher than a year or two ago when they were at record lows, but we are still significantly lower than historical prices.
  • As an owner, you just “rent from the bank”
    • Ok, so there is some truth to this, until you pay off the note the lender does own the property. Unless you are cash rich, this is most individuals’ only way to purchase a property and not all debt is created equal. In an ideal scenario, you are utilizing bank leverage to eventually have a property you own outright or have built up significant equity to which you can cash out when you sell or refinance.
  • Renting is cheaper than buying!
    • In some markets, due to all the increased building of rental units, we are starting to see rental prices drop.
      • Ok, let’s then look at an example where rent is slightly cheaper than owning. Let’s say that in your city it would cost $2,000 a month to own a condo downtown (principle, interest, insurance, and assessments) but only $1900 to rent… (Often owning is cheaper than renting)
  • Why would I rent then when I could save $1,200 a year!?
    • Upfront you would be saving $100 a month, but after you factor in the property tax and mortgage interest deductions that most people qualify for, you are significantly dropping your effective monthly payment, all while building up EQUITY in your property.
      • Historically, home appreciation keeps up with inflation (roughly 3% annually).
    • What does that mean? Well, let’s take the above property and say the purchase price is $250,000. If you have a 30-year mortgage.(yes, I know most people don’t stay in the same home for 30 years, but this is to demonstrate the compounding of money) After 30 years, your property would be paid off in full (sooner if you paid it down quicker) and you would own the property outright. That $250,000 home would be worth more than $600,000 if it simply kept up with inflation. Ultimately, it would likely be worth much more. Most importantly, that is equity to which you OWN. As you can see, this makes homeownership a highly effective tool for those preparing for retirement. After all, for the average American, their home is their greatest asset.

Overall, homeownership is a great way to help build wealth while benefiting from tax breaks. If you are in a position to purchase and have the desire, do not wait any longer! Home prices and interest rates will continue to go up. Isn’t it time to start making yourself wealthy, not your landlord?

Command Financial Group LLC is a licensed mortgage broker in IL and CO. We also do “investor loans” in 23 other states for individuals looking to purchase investment properties. CFG is a Veteran Owned and operated company that specializes in helping out fellow veterans. That said, we are not exclusive to vets and would love to help anyone looking to purchase, refinance, or take cash out of a home. We are 100% independent and can typically offer better rates, options, and services than the “big guys” out there.

Please email, call, or text today and we would be happy to answer any questions you have!

By Ryan Finn,
President, Command Financial Group LLC
1074 W. Taylor St., #315, Chicago, IL 60607