In some cities, it is absurd to even think about owning your own home. Property values in places like San Francisco or New York City are sky high, and only going up. In San Francisco, the median price of a home is just over $1.1 million, and in New York it’s $1.2 million. Unless you pick the winning lottery numbers in an upcoming drawing, it’s likely you won’t be putting a down payment on a condo in either of these cities anytime soon. Buffalo, however, is a totally different story. Historically, we’ve had a pretty good reputation as having a relatively low cost of living. Included in cost of living is monthly rent or mortgage. In 2012, Buffalo made CNN’s list of most affordable cities to buy a home. In our city, it is actually realistic to buy a house at some point in your life. In fact, a lot of young 20-somethings already have properties of their own here. So in a situation like in Buffalo where one month’s rent can realistically be equal to one month’s mortgage payment, is it better to rent or to own?
In Buffalo, buying a home typically means buying a standalone structure and the land it’s on, not a condo or townhouse like is common elsewhere. Although these are always options to buy, they are not as popularly sought out as single and two-family homes. The average listing price for a home is $113,000, or about $70 per square foot. Of course, there are significantly more and less expensive places available. The majority of properties in this area were built over 50 years ago, and many have been in existence for over a century. There are some new builds popping up around the city, but typically Buffalo is known for its historical buildings and homes, and residents take pride in preserving that history and original handiwork.
Average rent in Buffalo is about $1000 per month. Again, you will find much more affordable places, some as low as $500, and more more expensive, luxury apartments, closer to $2000 per month - depending on several factors: neighborhood, number of bedrooms, amenities, etc. But for $1000 a month, you could also be making a mortgage payment on a property of your own, not making your landlord rich one month at a time. Is the headache of owning your own place worth the investment?
Renting an apartment, or even a single-family home, can have its perks. Financially and legally, you are not responsible for any repairs or maintenance to the property. These costs can really add up, especially when you start talking about major alterations. For example, a new roof will cost you close to $20,000, renovating a bathroom will cost $10,000, a new furnace runs about $3,000, and all of these things are absolutely necessary fixes, generally not things you can put off for several years if they are broken or damaged. You are also not responsible for things like yard maintenance, overhanging tree limbs, rodent and pest infestations, and weather related damages. On the other hand, you are eligible for more tax deductions as a property owner, whereas you are eligible for none as a renter.
As a renter, you are not committed to any long-term contract with your landlord. When your lease ends, which is typically twelve months after you sign, you are free to move to any other apartment or neighborhood you desire. Of course, you are usually given the option to renew your lease as well. In cities like Buffalo, this is an especially appealing feature of renting because the neighborhoods are constantly changing for better or for worse, rental prices are different throughout different parts of the city, and there is such a vast array of different scenes in different areas for you to explore. As a homeowner, the neighborhood your house is located in could fluctuate, good or bad, and you are essentially stuck there until your mortgage is paid off.
Renting can absolutely have its downsides, however. You have no personal ownership of the space, which means you are very limited with the design and physical layout. You can’t just knock down walls wherever or whenever you want, or paint the walls as you please. That is all the decision of the property owner, and depending on the situation he or she may not allow you to make even the slightest changes to their building. If you don’t like certain features of the apartment, like the bathroom for example, you are not able to just change the fixtures to your liking. You either choose to live with it or choose to live elsewhere.
Another negative aspect of renting an apartment or home is being at the mercy of the landlord. Even if you are completely happy with the space and location, or if it is the only place you can afford to live in at the time, you never know if your landlord will allow you to renew your lease or not. Or, if you are month to month, they typically only need to give you 30 or 60 days notice to vacate the unit depending on what you agreed to in your lease. The owner has the power to essentially control whether or not you stay there and for how long, and how much rent to charge (which may or may not be reasonable). As a homeowner, you have stability and security; you know you will not be forced from the space (barring some unforeseen circumstance).
One of the most significant downsides of renting is the lack of equity. You pay month after month to rent the space, but in the end you have nothing to show for the thousands of dollars you’ve paid the landlord. At least if you own your home, you pay your mortgage monthly instead of paying rent, and your house becomes a part of your assets. You have something to show for the money you’ve been forking over. You are building equity, and typically the value of your home will increase over time. Building equity serves as a savings account you can access using a HELOC, a home equity line of credit.
In the end, the decision is obviously a personal one. Owning a home is undoubtedly a big financial commitment, but a very rewarding one at the same time. You might not have a high enough credit score to qualify for a mortgage, in which case renting may be your only option. Making monthly rental payments on time for a few years will increase your credit score if you are looking to buy a home in the future. There is a Rent vs Buy Calculator available to help with weighing the financial aspects of your decision, but the rest is a more subjective matter.