Owning a home is a lifelong goal for many Americans. To many, it is the definition of the American Dream. Recently though, people have started to question whether it is really economically rational to buy a home. The discussion around renting vs buying in Chicago is complex. Here we will break down 5 reasons to continue renting vs buying in Chicago and some considerations you should make before deciding one way or the other.
5 Benefits of Renting vs Buying in Chicago
There are arguments for both buying and renting, depending on each person’s lifestyle, financial situation, and other factors. However, renting has important advantages. Being a homeowner isn’t for everyone. If you are looking for flexibility, low maintenance costs, and amenities, it is better to rent than buy.
No Maintenance Costs or Repair Bills
When you are a renter, your landlord is responsible for all maintenance, improvements, and repairs. These services are factored into the average Chicago rent cost. For example, if an appliance suddenly stops working or your roof begins to leak, you can call the landlord. They are required to fix or replace it. Depending on your lease agreement, you may have to contribute to the cost of repairs only if they were caused as a direct result of your actions.
Meanwhile, a homeowner is responsible for all repairs, maintenance, and renovation costs.That will come out of the homeowner’s pocket and the projects can quickly add up. It is much easier to call your landlord to repair something than call a repair company – and pay for it – yourself.
No Real Estate Taxes
Owning a home comes with a lot of expenses that can surprise new homeowners. One of the biggest financial reasons it is better to rent than buy is that renters don’t have to pay property taxes. Chicago property taxes can be as much as thousands of dollars annually. Especially as newly built houses are getting bigger, property taxes can become a significant financial burden. On the other hand, there are no real estate taxes for renters to worry about.
No Down Payment
Renting is still cheaper, especially up front. Renters will usually have to pay a security deposit, which is equal to one month’s rent. This deposit is theoretically returned to them when they move out if they haven’t damaged the property. Meanwhile, purchasing a home requires a sizable down payment. This is typically around 20% of the property’s value. Even if you qualify for a loan, you will still have to come up with this payment on your own. Those who don’t have the money to pay for a down payment are better off renting.
Access to Amenities
Another reason to rent vs buy is that you have access to expensive amenities for a fraction of the cost. Luxuries like a pool or fitness center are standard at many apartment complexes at a minimal or no additional charge to tenants. For a homeowner to have access to the same amenities on site, it would likely cost thousands for installation and maintenance.
Buying a home ties you to one place for years, if not decades. Selling is always an option, but there are associated costs. Plus, if you are forced to sell in a down market, you could lose a lot of money. Renting gives you much more freedom to relocate when needed. Of course you have a lease to consider, but there are month-to-month options. And most leases last only 12 months. Plus, you can negotiate the option to sublet if you’re able to find a new tenant. This flexibility makes it much easier to jump at a career opportunity in a different location or even just try a different neighborhood out.
That could also relieve you if your financial situation changes. You might end up being stretched thinner than you expected. With a leasing situation, you can pick up and move when your lease is up. Most homeowners agree on a monthly mortgage payment, assuming that their financial situation won’t change. However, job losses, serious illnesses, and other unexpected events can happen to anyone at any time. Renters are more likely to be able to adjust to financial hardships than homeowners.
Considerations to Make
Here are three questions you will want to consider when you’re making the decision between renting vs buying in Chicago.
How Long Will You Stay There?
The intended length of your stay in one location is extremely important in your decision to buy or rent. The process of buying a home is time consuming and expensive. But, the longer you are in a house, the more time you have to spread out those expenses. The general rule is that if you plan to stay in that home for less than 3 years, it is better to rent than buy.
Do House Prices Always Go Up?
Before the financial crisis in 2009, a lot of people thought house prices went up every year. However, that is not the case. Before you buy a house, you want to consider how your financial situation would be if your house’s value increased slowly or even went down. In addition, if you are putting a large portion of your savings into one investment (your house), that is more risky. If you are buying a house solely for that reason, you need to know it will be very risky.
Are You Comparing Apples to Apples?
The only way to make an accurate comparison for renting vs buying in Chicago is by comparing apples to apples. You need to factor in the complete costs of owning or renting, not just your mortgage and rent payments. Chicago property taxes, utilities, HOA fees, etc. need to all be factored into the equation. After adding all of the expenses of homeownership together, it is likely that renting is still cheaper.
You will also want to weigh the differences between the properties. A 3 bedroom apartment is much different than a 3 bedroom single-family home with a big yard. What are the non-monetary benefits that each option has? How important is outdoor space to you? How important is being close to downtown?
If you are looking to rent a new property, get in touch with SRE Holdings to find the perfect place for you! We can help you find a property that is in line with the average Chicago rent cost and fulfills all of your needs.