I recently wrote a post here that highlighted things that are better to rent than buy. Now it’s time to flip it and reverse, a la Missy Elliot. Here are a few items for which you should always shell out full price — even if you don’t want to:
Your own home
There are plenty of arguments out there that make a case for renting a home, and in some cases those arguments are valid. But if you’ve got money in the bank for a down payment and can handle the monthly mortgage plus expenses, buying can make more sense. It’s the frickin’ American dream, after all.
“In today’s market it makes more sense to buy rather than rent your home,” says Randall Yates, founder and CEO of The Lenders Network. “In the past that was debatable because of low rents, but now they’re often higher than if you had a mortgage on that same property.”
“Mortgage rates are near historic lows.” Yates continues. “Still, even a higher rate around 4% equates to a mortgage payment of just under $1200 a month on a $200,000 home with 10% down, including taxes and insurance. If you were to rent that same home, you could expect the rent to be around $1400 a month in most parts of the country.”
Realty broker Desare Kohn Laski provides a few more reasons why buying is better:
- Equity. “Buying a house builds equity over time,” she says. “In most cases, when the equity reaches 20%, it can be tapped for a home equity loan. This allows the homeowner to take advantage of lower interest rates or longer repayment terms.”
- Tax exemptions. Federal tax exemptions are available as well as the homestead exemption, which excludes a certain amount of the total purchase value from increasing property taxes.
- Income. What if I decide I don’t like my house anymore, and want to move? “We hear that question often. The good news is you can relocate,” Laski quips. “As a homeowner, you have the choice to either resell or rent. Either way, you’re generating income.”
- Freedom. “Plant those flowers, build that fence, and make the cabinet under the stairs your perfect Harry Potter reading sanctuary,” she advises.
- Plant your roots. Unlike renters who typically move every year, homeowners stay longer in a community. A family can establish their roots and have a true origin of place to call home.
Water Heaters
It’s become increasingly common for homeowners to rent or lease water heaters rather than buy them outright now that some energy companies have started to offer this option. Weird but true. Still, you’re much better off buying the heater outright rather than renting it as often the rental contracts have details that homeowners overlook.
For example, you may be liable for the water heater’s maintenance and repair bills, which on top of a monthly rental fee can make it far more expensive than it might first seem.
Televisions
It may seem tempting to rent out a big screen for game night, or if you have a short term-lease on your home– but rent-to-own stores will charge you more in the long run.
According to personal finance expert Sarah Hollenbeck, “Not only will you rack up credit card interest, but studies have shown that the overall cost of rent-to-own TVs end up costing almost three times more than if you paid with cash up front.”
Furniture
I can give you one major reason to steer clear of rented furniture: bed bugs. I’m not saying that it’s common with rental furniture, but the risk is there.
“Much like TV rentals, renting furniture can seem like a quick fix,” Hollenbeck explains. “But with websites and apps like Craigslist, OfferUp, and LetGo, you can purchase gently-used furniture for less. And if you still want to buy new, then consider places like Overstock.com. When you buy furniture, you don’t have to worry about preventing stains from food or pets, and general wear and tear that might cost you a large cleaning fee when you return your items.”
Of course, if you’re buying used furniture, you also need to be very careful about bringing bed bugs into your home.
Major Appliances
A quick calculation reveals that, compared to renting, buying almost any major appliance starts paying off during the second year. And while most rental companies offer free repairs, it’s a moot incentive since you’ll get at least a two-year guarantee from the manufacturer for any large appliance you buy outright. Most major name-brand appliances hold up very well over time anyway.
Breast Pump
Yes, it’s true! Women can rent breast pumps from hospitals — but a writer named Melissa warns against it. “Renting one costs $20 per month, and buying one cost $250,” she informs us. “Considering that I breastfed my son for 12 months and had to pump at work, this purchase (appears) to be a wash. However, I used the pump for my two other children. When I was finished, I sold the pump for $60.”
Apparently, there’s a market for everything.
Photo Credit: bfahlman
Tools are a biggie, especially large or specialty tools. The local tool rental place is a DIY’er dream place.
Say you want to remodel your bath, and need a tile saw. A GOOD tile saw is fairly expensive, and unless you have plans to use one quite a bit down the road, it makes more sense to rent one for a one time use.
Scafolding, walk behind trenchers, large garden tillers, heck, you name it, they probably have one….and a lot cheaper than buying it.
Re.: owning your home: Money magazine used to say that if today’s rental price over 15 years was more than today’s sale price, then you are better off buying.
But where we live (outside the 50 states) 15 years of rent is about $100K less than the advertised sale price of high-end older homes… and there are no fixed-rate mortgages, only variables. So, thanks-but-no-thanks, I’ll stay renting.
I paid off my first house by age 38, moved to a new area and bought a newer house….but still modest. My father in law told me to pay it off as soon as possible and it will be the same as a $1000/month pay raise. This was in the late ’70s. He was right, and having no housing expenses beyond maintenance (which I do myself anyway) allowed me to retire in my mid fifties. A paid for house these days is worth 2-3K per month. No brainer. The money I saved was then used to buy property which has also only appreciated in value. An added bonus is the appreciation itself, easily worth an additional $2-3K per month these days. Plus the more a house is worth, the more rent will be then be charged. As for taxes, that is also paid by the renter. Home owners do not subsidise their tenants at a loss, that much is a given. And as interest rates rise, and they will, yes house prices will drop, but rents will not as they still have to cover the higher mortgage carrying costs.
My 37 year old son has two houses. One is rented out to a friend of mine and his rent pays the entire mortgage. The other has the upstairs rented out and that pays 2/3 of that mortgage while son lives in the basement suite. This is a view home, and the value increased by $250K in less than a year.
My two cents for buying a house. I am a woman, I owned my home where I raised my children for 38 years. The mortgage was paid of years ago. being retired and tired of shoveling snow, I sold the house and bought a condo outright. The condo fee is $300/ mo and covers gas, water and sewer, trash, unlimited use of the the 80′ swimming pool and outside maintenance. I live completely on my Social Security Check and have money left over after living expenses at the end of the month. Rents in my area are higher than the gross on my SS check ! For years apartment -living ‘ friends’ taunted me and claimed apartment living was more stress free. Now they are wondering how to live with rent taking a big bite out of their fixed income. No, they can’t move in with me. Unsolicited advice form me – PLAN AHEAD.
As a former housing counselor, I would agree that depending on your financial situation buying a house would make sense. However many home buyers are forced to rent because of high home prices caused by prior owners with existing equity/savings making better offers and venture capitalist companies that swoop into an area and buy up homes (for top dollar) specifically to rent for a profit. They may or may not be overrunning the market, but they are making it harder for first time buyers to purchase affordable homes. The story below is one example.
https://slate.com/business/2021/06/blackrock-invitation-houses-investment-firms-real-estate.html.