There are as many reasons for buying a house as people looking for a house to buy.
Homeownership is how most people build up equity for later life because you are taking something you need (a place to live) and turning it into an asset.
The 12 Benefits of Owning a Home
The most significant barrier to purchasing a house is the need for an upfront capital investment. Still, many people find innovative ways to achieve homeownership because of the many benefits.
You can summarize the benefits as financial gain, security, and freedom from restrictions.
1. Investment Potential
Investing your money in a house to sell on at a profit helps you increase your wealth or trade up to a bigger home.
You don’t have to be a property developer to make money out of buying and selling houses on a personal scale – plus, you get somewhere to live that you can decorate as you want with minimal restrictions.
2. Capital Assets
Even with a mortgage, owning a home gives you access to the secured loan market that may come in handy if you want to start your own business somewhere down the line.
Your home can provide you with the financial backing you need to get started.
3. Reducing Your Outgoings
Buying a house also means living rent and mortgage-free in the future – perhaps when you retire. The reduction in your monthly outgoings benefits when it coincides with a decrease in your monthly income.
Full ownership of your house gives you the security of a place to live for life.
4. Rental Income
Owning your own house gives you the option of renting it out if you want to travel the world or buy another house.
The rental income from one house can cover the mortgage on another house and increase your wealth.
Owning your house means you don’t need to worry about a landlord selling your home or raising your rent. Although you are responsible for the repairs and maintenance, you get the security of having an affordable place to live.
When the time comes to raise a family, a secure home base makes life easier for schools and building community links.
6. Freedom to Remodel and Expand
Do you prefer an open plan or a subdivided area?
You can change the internal layout, upgrade your bathroom, and add an extension when you buy a house instead of renting.
Owning the house gives you options to expand and modify your living space in a way that is not possible or affordable with rented property.
7. Pet Ownership
Most rented properties have restrictions about pet ownership. When you buy a house, you can choose to share it with a dog, cat, or pet lizard without needing permission.
Many people find living with a companion animal improves their lifestyle and reduces their stress.
8. Leaving a Legacy
A house provides you with living accommodation for life, and when you are gone, it provides a nest egg for the next generation or your grandchildren. Because you need somewhere to live a house benefits you and your family.
When you no longer need the house, you can either use the wealth for yourself to fund your retirement or to give your descendants a bit of a boost.
9. Putting Down Roots
Investing in property shows an intention to settle into a community – you put down roots, get to know your neighbors, and potentially raise a family.
Homeownership covers basic human needs for shelter, but it also provides a share in society and an aspiration to a settled life.
10. Home Business
Buying a house means you are free to run a business from home – you can convert a room into a studio, office, or whatever you need, and paint it with the ideal colors to boost your creativity and productivity.
Most rental agreements have restrictions over the activities you can carry out from home, restricting your business options.
11. Quality Décor and Appliances
If you rent unfurnished, you can choose your appliances, but you are often stuck with your landlords’ choices of décor and appliances with rented properties.
You can paint the internal and external walls to suit your taste and buy appliances to your standard in your own home.
12. Parking Space and Charging an Electric Car
Most houses come with dedicated parking and possibly a garage.
You now have the options of investing in a trailer for camping equipment, an RV for holidays, and if you want an electric car, you can set up a charging station.
The Cons of Renting a House
Most people will rent a house at some stage, despite the many disadvantages:
- No investment potential – everything you spend on a rented property, from the monthly rent to cleaning the carpets, does not build benefit for you in the long term. The property belongs to your landlord as a monthly income generator and capital asset.
- No security – your landlord (with limited exceptions) can raise your rent and evict you from your home. Plus, your landlord may keep or reduce your deposit to clean and refurbish the home when your tenancy ends.
- No design input – you don’t get to pick the paint colors, finishes, appliances, or window styles. Your landlord chooses the quality and is not bothered by your desire for energy efficiency or style.
- Minimal control over repairs – repairs are not on your timescale, and that can leave you with several days of problems if the electricity or plumbing goes wrong. Plus, you may need to book time off work at short notice to accommodate the repair process.
- Restrictions – a lease agreement always has limitations, from not having pets to not burning candles. The terms vary, but there is a degree of control over your life by someone else.
- Lack of equity – living in a rented property means you don’t have a capital asset for loan finance. Unless you have other capital assets, loan finance is unsecured and more expensive for you.
- Potential for conflict – you may never see your landlord or face numerous inspection visits and tinkering. Your relationship with your landlord may break down, leaving you in an uncomfortable living situation.
- No tax benefits – the property owner gets all the tax breaks, not the tenant.
- No voice at the table – the owner of an apartment or condo gets to speak at the Housing Association meetings, not the tenant. It does not matter if your neighbors are anti-social; you don’t have a voice to raise or a vote to cast.
- Damage to your credit rating – part of your credit rating relates to your living arrangements, and a previous tenant can cast a shadow on your credit rating. Plus, you may have the nuisance value of dealing with utility companies and others chasing the past tenant for money owed.
- Restrictions to subletting – you may have a spare bedroom but cannot bring in a lodger without paying your landlord more money. In your house, you can bring in lodgers for the cash flow benefits.
When Is Buying a House Better Than Renting?
Buying a home instead of renting is a commitment and relatively expensive in the short term. But no one makes a profit from their rental property except the landlord.
In the past thirty years, despite a recession, homeownership in the US remains consistently above 64%, and most people aspire to it (source).
Despite the aspirations for homeownership, there are sections of the community that remain in the rental market due to the benefits of renting.
When is buying a house better than renting?
Buying a home is better than renting when:
- You have the capital to invest.
- You need a stable place to live.
- You are ready to put down roots.
- You want to set up a business.
- You want to start a family.
- You want to share your life with pets.
- You love to garden.
- You are going to be in this area for at least five years.
- You want to generate a rental income.
- You want to make a profit and increase your personal wealth.
- You want security for a future business idea.
- You want to run a home business.
- You are ready to unleash your interior designer.
- You love entertaining.
- You want to live rent-free in your retirement.
Buying a house increases your wealth by giving you a capital asset and freeing future income. A capital asset provides security and choices for you and your family that renting does not provide.
When is the best time to buy a home?
When you can afford it and are ready to settle down.