To Rent Or To Buy?
There are three primary reasons that we feel that it makes more sense for us to purchase (the first applies to anyone considering buying, the second applies only to people who currently own a home and are considering purchasing a new one, and third applies only to people who operate a business out of their home):
1) You get significant tax breaks as a homeowner (a 4000/month mortgage, for example, could yield about 700 a month in tax breaks, making the “actual” monthly payment more like 3300) – you can choose to increase the number of deductions and reap the benefits immediately (e.g. with a higher paycheck every month), or have the benefits accrue and create a situation where you’ll get a tax return at the end of the year;
2) If you make money on the sale of a property, you have two years to reinvest that money without paying taxes on it. Edit: I was wrong about this; what I cited above is an old law. Single homeowners can avoid paying tax on profits up to $250k, and couples can make up to $500k on the sale of their primary residence without paying capital gains tax, even if they do not subsequently purchase. Click here for more info.
3) If you operate a business out of your home (whether you’re a writer, an artist, a therapist who sees patients in her own home, whatever), life is easier in some ways if you’re in a single-family home (as opposed to a rental apartment, but this also applies to co-ops, HOAs, or any living spaces where a landlord or board may have instituted rules preventing using the home for business-related purposes).
In our case, the area we’re looking at is so expensive to rent in (largely because the housing market is so insane, which drives up rental prices as well) that the tax break on mortgage payments makes the monthly cost of ownership much more comfortable for us than the monthly cost of renting. And we did end up making money on the sale of our house, so we have two years to reinvest that…but all other things considered, we prefer reinvesting right away to moving twice over the next year or year and a half and blowing through a portion of our savings on inflated rental prices. (Again, we’re open to the idea of living in a month-to-month rental for the first couple of months so that we don’t feel rushed into a purchase.)
And finally, I do a lot of work with home decor and home improvement clients, and it’s important to me to have a space both that I can physically work on and alter (which you can to some extent with a rental, but not to the extent that I’d need), and one that I can shoot in without potentially being in breach of contract with a landlord. I sometimes have crews and vans and tons of equipment in my home, and that’s not necessarily something you can swing if you’re renting.
