Posted by Lending Club :: March 5, 2011 @ 5:00 am

For the first time in almost a generation, it may be a better idea to rent a home than to buy one, at least for many Americans. With the housing market still falling in some cities around the country, potential buyers are justified in feeling skeptical about investing their time and money the way many citizens have for years.

This new thinking can leave some, especially young people who haven’t purchased a home before, wondering what they should be doing. If you’re pondering whether to buy or rent a home or are looking for a new place to live, think through some of these issues before you jump into anything.

Buying

Pros

You have your own place. While this comes with the responsibility to make mortgage payments and repairs, it also provides a place to put down roots, decorate with utter abandon, and store your stuff for free.

It might be a good investment. If you buy in a place where property values have plummeted (like Florida or Las Vegas), your home may soon start to rise in value. This means more cash for you.

You’ll get tax incentives. Paying less to the government is always a good thing, and owning a home gives you just cause to keep your money yourself instead of passing it on.

Cons

It’s expensive. When you add up mortgage payments, redecorating costs (and there are always redecorating costs when you buy a new place), and the cost of repairs, owning is often more expensive than renting.

You could lose big. Experts are divided on what exactly is going to happen to the housing market. If you buy and it continues to fall, you can end up underwater in your home fast.

It’s a hassle. Instead of calling a manager or landlord when something breaks, you have to get it fixed yourself, even if it means taking time off work or rescheduling other commitments.

Renting

Pros

Renting gives you flexibility. If a great opportunity pops up across the country or even across the globe, renting doesn’t tie you down like owning your own home does. For folks who want to be able to move quickly and easily, renting is the way to go.

It keeps your assets liquid. Even if buying turns out to be a good investment for you, it ties your assets up. You may have the net worth, but you won’t be able to access it if you need to.

It’s cheaper. For the most part, renters have lower living expenses than those who purchase a home. Even if the monthly payments are the same, homeowners also have to pay property taxes and maintenance, along with insurance payments that are usually higher that what renters pay.

Cons

The landlord makes all the difference. Renters need to face the fact that many landlords aren’t very good. While there are gems here and there, renters usually wait longer than homeowners to have things fixed, and they don’t get a say in the quality of carpet, paint, or installed appliances.

It feels like throwing your money away. While homeowners don’t get their mortgage payments back right away, at least they are investing in something. Even if the bottom drops out of the market, they’re putting their money into an asset, believing in something, while renters just write a check each month.

It’s hard to put down roots. Communities of homeowners connect differently than communities of renters. When you know everyone will be there for at least a couple of years, it’s easier to reach out and make friends. Renting can make finding this kind of community difficult.

What Should I Do?

In the end, there isn’t one option that works for everyone. Instead of trying to find it, examine your own situation. This will help you choose the option that’s best for you.

Sit down and determine what, exactly, you would want out of a house. If you plan to stay in one place for a while, don’t mind the responsibility, and want to know your neighbors, consider buying. If, on the other hand, you want to be able to move quickly, worry about having enough liquid assets, and don’t mind if your furnishings aren’t always up-to-date, renting may work better for you.