Find a place you can call home

Renting Vs. Buying A Home

Buying a home has long been a tradition in America.  One primary reason has been to build equity or net worth, although the pride of ownership is a powerful factor in purchasing your home.  The housing crisis of 2008 had a sobering effect on many home-buyers, although the effects in South Carolina were not nearly as painful as those in other parts of the country.  Many home buyers purchased their homes at the peak of the market with little down payment.  When the market dropped, some buyers were forced to sell at a significant loss. 

We have seen an increase in rentals nationally as potential buyers are uncertain about making a long term commitment to purchasing a home.  Luckily in Charleston South Carolina, the market remained much more stable and we didn’t suffer the loss in equity of some markets, so the rental market has been steady here for many years.  In fact, South Carolina continues to have a positive net population growth as our jobs market soars and people from the Northeast are attracted to our climate and lifestyle.

While most people will find benefits in purchasing their own home, there are some valid reasons to rent a home in the Charleston SC Metro market.

Reasons to Rent A home

Flexibility – Renting allows you to explore and learn about an area before making a long-term financial commitment.  You may want to spend some time exploring the area before making a final commitment to purchase a home.

Career Uncertainty – Charleston has always been an economy dominated by tourism, transportation and our growing technology industry has prospered in jobs over the years.  If you are uncertain of your job and may be forced to move soon, then renting may be the best option for you.

Weak Credit – A lot of people go through tough times and end up with a blemish on their credit report. Don’t despair.  Renting allows you to create a history of on-time payments and repair your credit so that you can eventually purchase your OWN home.  I have referred many buyers with challenging credit to lending experts who have helped them get back on the right track to home ownership.

Income Uncertainty – If you expect an increase or decrease in pay soon, you may want to hold off on purchasing your own home until your income stabilizes.  Renting allows you to “buy time” until you are more certain of your income and can purchase a home that fits your new budget.

No Maintenance – If you travel extensively, move frequently, or are unable or unwilling to perform regular home maintenance such as mowing the lawn, repairing faucet leaks, or applying new paint and wallpaper, then renting might be the best option for you.  We find many elderly people choosing to rent so they can spend more time traveling and less time caring for their home.  Be aware that you can purchase a condominium or town home and have the same benefits of low maintenance costs.

There are downsides to renting.  You have no control over fluctuating rents, which can be a big budget item.  Rents in Charleston SC have increased over 5% a year in recent history.  You can also get stuck with a poor landlord who doesn’t provide proper maintenance.  You often cannot control parking, or the sale of the home, nor can you profit from upgrades and a possible future sale.

Reasons to purchase your home

Build Equity & Personal Net Worth – When you pay rent, you are handing over money to your landlord. They are paying their own mortgage or just increasing the size of their bank account.  When you own your home and pay a mortgage payment, you increase your ownership stake in your home with every payment.  As a general rule, if you plan to stay in your home at least 5 years, your increased equity offsets the cost of purchasing and maintaining your home.   This can be accelerated by an increase in the value of your home. As your equity builds, you will possess a major asset than you can then use to finance other purchases such as other rental homes.  The equity is yours to do as you see fit.  You can save for retirement, pay for your kid’s college education, take an around the world trip, or maybe buy the car or boat that you have always wanted. 

Tax Savings – There are significant federal and South Carolina tax savings available when you own your own home.  The federal government encourages people to own homes rather than rent by allowing citizens to deduct their mortgage interest and property taxes from income.  Renters are not afforded this significant tax break, which can add up to hundreds or thousands of dollars per year in tax savings.  It gets even better.  When you sell your home, most people won’t have to pay “capital gains” tax on the profits from their home.  Check with your accountant, but in most cases you get to keep the first $250,000 in profit from the sale of your home if you are single, and the first $500,000 if you are married.  But wait, there is more!  If you work from home, you can deduct the cost of a home office and a portion of your utilities.  Yes, Uncle Sam likes people to own homes rather than rent.

Decide you want to replace your bathroom tub?  If you own your own home, YOU get to make that choice- and do the work if you choose.

Freedom of Choice – One major benefit of owning your home is – wait for it – YOU OWN YOUR OWN HOME!  You get to decide how to maintain your home.  Don’t like a wall?  Tear it out.  Want to add a shop?  Go ahead, all you need are the proper permits.  Want to paint your walls red?  Go ahead, it is your home.  Of course, along with freedom of choice comes the choices in how to perform the required maintenance all homes need periodically.  You can choose to do it yourself or hire a contractor.  Or you can defer maintenance, although that is seldom a good idea.  But the choice becomes yours, not the landlords.

While a home is always a good investment – and you have to live somewhere anyway – you shouldn’t buy a home just as an investment.  It should be a place you raise your family, where you take pride in ownership, and something you want to improve over time. Historically, real estate market increases have been slow and steady.  Charleston South Carolina has been spared the meteoric rises and subsequent falls seen in other areas of the country, so an investment in a home in the Charleston Metro Region has been much more solid than in other parts of the country.  But we are not immune from the wild fluctuations that can happen in the housing market.  Some industry experts like to point out that while housing prices are cyclical, the stock market has been less so over the past few decades.  Yes, stock prices go up and down, but overall have steadily increased decade to decade and have proven better returns than many US housing markets.  But then again, you can’t live in a stock certificate.

Is renting cheaper than buying a home?

That is a very good question.  Generally yes it is cheaper but it generally depends on where you live, the overall marketplace, and whether you mind doing the inevitable maintenance that is required when owning your own home.  You can use our Rent versus Buy calculator to help determine if renting is cheaper than buying a home for you.

Face it.  Homes cost money.  Appliances break.  Roofs leak.  Paint deteriorates in the sun.  If you are a renter and have a problem, the landlord fixes it.  If you own your own home, YOU are the person who gets to foot the bill.   If you don’t mind doing some maintenance chores yourself you can save a lot of money, but some tasks such as electrical repairs you have to hire a professional.  The tax breaks afforded homeowners can help offset these costs, but in the end they come out of your pocketbook.  If you own a home it is a good idea to put money away for unplanned repairs and home maintenance.

Rent vs. Buy calculator

See my Rent Vs. Buy calculator to the right- it is one of the most comprehensive I have seen.  You can plug in the amount of monthly rent you expect to pay, then plug in the amount for a home mortgage that you can afford, and calculate how long it takes to start saving money buying your home versus renting your home.  Of course, don’t expect to rent a $400,000 home for $1,200 per month – try to be realistic in your pricing calculations.  But this gives a good starting point to understand when renting is better than buying or visa versa.

Ready to Search for Homes?  Click Here to get started!