In the Buckeye State, people used to believe that home ownership is key to the American Dream. Many still do, but more and more Ohioans are waking up to the fact that this goal in life is not for everyone.
If truth be told, there is just one practical reason why you should choose buying a house over finding an apartment for rent in Athens, Ohio, or any other promising community: security. If you are yearning for peace of mind and want to live free from the fear of getting kicked out by a landlord, then take out a mortgage to own the roof above your head. However, any other motivation outside of security does not always justify a property purchase. Here are the reasons why you should not pursue homeownership:
It Can Make You Poorer
Renting will cause you to miss out on owning an asset that can increase in value over time through appreciation. If the rent is more affordable than the monthly mortgage payment, though, you will have more opportunity to grow your money in other ways.
Yes, being a homeowner can provide security and a sense of pride, but it comes with a price. If you look at the big picture, the overall cost of borrowing inflates the cost of owning a piece of real estate. Getting a mortgage comes with interest and possibly private mortgage insurance, a charge you must pay until you build enough equity on your house.
Along with the down payment, the closing costs will add up to your initial expenses. Regular maintenance will eat up your budget over the long term.
To sum everything up, owning a house is much more expensive than renting. When you rent, your landlord has to shoulder all of the housing-related expenses that you will otherwise have to worry about.
It Traps Your Wealth
A house is an asset that can increase your net worth. You can even consider it as a “forced savings” instrument because all of your principal payments automatically become a part of your wealth, which increase passively if local land values appreciate.
However, home equity is not liquid. You can’t spend it unless you turn it to cash first, which can only be done in two ways: borrow against it or sell your house and reap the gains from the sale. Either way, you can’t unlock the monetary value of your home quickly. You might be rich on paper, but your house can limit your liquidity.
On the other hand, the money you can save from renting allows you to pursue other investments like stocks, which are easier to convert to cash.
It Is Not an Excellent Investment
Real estate has always been thought of as a passive money maker, but research shows that it is not as good as it is often portrayed. A study reveals that home prices in America have grown at a compound annual rate of 0.3% over the last 100 years. This number is not impressive.
To beat inflation and to capitalize on your potential earning capacity with the current value of your money, you should consider other investment vehicles instead. Any asset that delivers higher returns than 0.3% per year is better than a house.
Renting is not without downsides, but its affordability provides more financial freedom. Weigh the pros and cons of buying and renting the house to see which option promises better long-term rewards for you.