I've owned 3 homes and rented 2, and I know which I'll choose going forward

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couple new houseWestend61/Getty ImagesThe author is not pictured.Westend61/Getty Images

  • Eric Rosenberg has owned and rented several homes over the last few years in Denver, Portland, and Southern California.
  • Renting can be great when you may want to move in a relatively short period of time or want to avoid the added costs of maintenance and repairs, he says.
  • But buying helps you build equity, he continues, which can be a great asset when you do decide to move at some point in the future. In most situations, he's a firm believer in buying over renting.

There is no shortage of opinions about whether it is best to buy or rent.

Some lifelong renters argue that buying a home saddles you with extra costs, limits your freedom, and puts you at risk of losing money should your local housing market drop. Homeownership advocates say that renting is just giving away money to a landlord without building an asset of your own. Knowing whether to buy or rent can be tough.

Over the last six or so years, I have owned three homes and rented two. Having gone back and forth, I have seen some of the best and worst of both owning and renting.

I'm currently a homeowner in a house I've had for two years and don't plan to go anywhere. Here are some pros and cons of buying and renting to consider if you want to know what's best for your money in the long-run.

Buying can help you build equity and grow your net worth

I'm a firm believer that owning a home is better than renting in most situations. If you can afford it and plan to stay in the same place for a long time, owning a home helps you build a valuable asset that is worth more than just a place to live.

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I owned a condo in Denver, then rented a condo in Portland, then owned a house in Portland, then rented in Southern California, then bought a house in Southern California. If I had not owned the homes in Denver and Portland, I would never have been able to buy my current house in the expensive California market.

As long as you can afford the monthly mortgage, property taxes, insurance, and can budget for maintenance and repairs, owning your own home is awesome!

Renting is a smaller commitment

But wait! Don't rush and buy a home before considering the alternatives. In some markets, renting is actually a better deal. If the monthly rent is significantly less than your mortgage payment would be, renting can save you money in the long run. But there are other reasons to favor renting in some cases.

Real estate transaction costs can be significant. While the standard fee is 6% for each home sold, you may be able to get a better deal with some modern real estate firms like Redfin, which I used for my last home sale. But even with a lower percentage, you are still likely to spend tens of thousands of dollars in fees to buy or sell a home.

A common guideline for people debating whether the fees are worth it is the seven-year rule. If you will own the home for at least seven years, you will probably live there long enough to cover the transaction costs. Less than seven, you're probably better off renting.

But again, there is a however. I owned two homes for far less than seven years and came out way ahead. Because I lived in the red-hot Denver and Portland markets, I did very well on those two homes. Had I been a renter instead, I wouldn't have done as well.

Renting has some additional merits. You are not responsible for taxes, homeowner's insurance (you still need renter's insurance), or repairs. You can also decide at the end of your lease to move with no transaction costs. That can be a big benefit.

Do the math to decide what's best for you

It's a lot easier to estimate the costs of renting than buying. If you are on the fence, try out an online mortgage calculator that can help you understand the estimated monthly payment of the mortgage including property taxes and insurance. Once you have those numbers, you can decide which makes the most sense.

There is no right or wrong when it comes to buying or renting, just what makes the most sense for you, your money, and your needs. It may be renting. It may be buying. You don't know until you run the numbers and compare.

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