Should I be renting or buying? It’s one of the most commonly asked personal finance questions in the book. Unfortunately, there is a damaging narrative that’s been circulating for what feels like eons: ‘if you’re renting you might as well be setting your money on fire’. We beg to differ. In this post, we break down how to determine whether renting or buying is the better route for you.

A complex question.

There is no simple or easy way to answer this popular personal finance inquiry. Asking if you should rent or buy is like asking ‘should I travel to Italy or to Thailand? Which one is better?’ The truth is, one isn’t really better than the other.

How do you determine which camp you fall into?  It depends on a number of variables including your lifestyle, your values, and, of course, your bank account. Let’s dive in.

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“The first step to figuring out the right route for you is to reframe the question.”

Reframe the question.

1. What are the pros and cons of renting and buying?
2. Which route will allow me to live the kind of lifestyle I want, and also reach my long-term goals?

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Build your pro-con list.

No matter who you are, you’ll probably find that there are both pros and cons to renting and buying.

But, brace yourself, because neither option is going to be a perfect scenario. So, you’ll have to consider the various pros and cons of each route and decide which ones are most important to you.

Here is a breakdown of the pros of both homeownership and renting.

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Buying:

• A home is an asset that appreciates, could potentially provide rental income, and "forced savings."
• If it's your primary residence, you don't pay taxes when you sell it.
• You don’t have to pay “rent”. (But, you do, most likely, have to pay a mortgage)
• If you know you want to live in a certain city or area long-term, buying a home "locks in" the location, and you can settle in.

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Renting:

• Flexibility and freedom to move neighbourhoods or cities with ease.
• Avoid homeownership costs like property taxes, strata fees, interest on the mortgage, and maintenance costs.
• If you invest the difference between renting and monthly mortgage payments, you can end up with the same amount of long-term wealth as a homeowner. That is to say, renting isn’t just wasting money.

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Reflect on your goals.

Now that you’ve considered the pros and cons of renting and buying it’s time to reflect on what is most important to you. Ask yourself the following questions:

1. What does my ideal lifestyle look like?
2. Am I ready to lay down roots or would I rather have more flexibility?
3. Would the money for a downpayment be better spent on something else like travel, building a business, or continuing education?
4. Where do I want to be five years from now?
5. What are the things in life that I value the most? Is it having opportunities to explore? Flexibility? The comfort of a safe space to land? Living in the city? Having space in the country?

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With these questions answered the fog should start to lift and the right path for you should start to become more and more apparent. The most important thing is that it’s your path and yours alone. Take the time to be introspective as you explore your options. Don’t get caught up in outdated perspectives on financial success and the pressure to check things off your “adulting” list. Do what works for you and, whether you end up in a home in the countryside or a rental apartment in the city, you’ll be a whole heck of a lot happier.

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Want to make sense of your money and goals? Let us show you how.