Many savvy millennials are transitioning from renting an apartment to owning a home. Are you looking for a quick checklist to see if you’re ready for homeownership? Here is an overview of the pros and cons of renting an apartment versus owning a home.
We asked millennials who are currently renting about the pros and cons of their living situation. We also asked apartment managers who rent to millennials about the challenges and benefits of apartment living. Both groups shared their insights with us. Here are some of the key points they told us.
You sign a lease for a short duration of time, anywhere from 6 months to 1 year, sometimes 2 years, which means that afterwards, you have the freedom go somewhere else. Finances are less likely to tie you down.
You are not responsible for the costly repairs to things such as roofs, water heaters, etc.
The government does not require you to pay property tax.
You may not have to pay for certain utilities, depending on your lease arrangement.
Often you are not responsible for lawn care. No yard work! This article suggests that for millennials, who have busy schedules, the prospect of not having to take care of a lawn is a major plus.
If you sublet during your lease, you are responsible for any damage that the person subletting creates.
Your rent payments do not gain you equity. Your rent money just disappears, and you gain nothing in return.
You do not always get to choose your neighbors. People come and go.
You will have people living above, below and to either side of you.
There may be people you don’t know passed out, sleeping in the common areas of your apartment. There are a myriad of stories about this curious phenomenon, from homeless people sleeping in hallways, to your drunk neighbor mistaking your door for his, and falling asleep leaning against your door after trying to fit his keys in your lock. In the latter example, renters have been on the outside and inside when this has happened. Both situations are equally startling.
You have the option to buy renter’s insurance. You could lose all of your stuff, including beloved pets, if someone else carelessly forgets to turn their space heater off before they leave the building. Additionally, you cannot control whether or not a property has a security system, and if it does, how it is used.
We also asked millennials who own their first home, as well as those who have sold their first home and purchased their second, about the challenges and advantages to homeownership. Additionally, we talked with baby boomers who have decades of experience in home ownership to weigh in and give us the pros and cons. Here is a list of what they told us.
The value of your house increases over time, so if you are in the same house for decades, you can sell your house for more than the purchase price, thus making a profit on the sale.
Homes are more family friendly if you plan to have little ones running about.
You may have as many animals as you could possibly want, provided you take care of them.
The pride of ownership. Unquantifiable, but important! You own your own castle.
Saw holes in your roof, hang weird artifacts from strange places, put graffiti on the walls, or decorate just like your mother did. It’s your stuff so who can stop you?
You can make as much noise as you like, provided your neighbors across the street do not care. You could finally start that garage band you’ve always dreamed about!
If something breaks, you must be ready to put out the cash, or fix it yourself.
There may be an HOA, or home-owners association, to which you may be required to pay yearly fees for general maintenance, security or repairs in common areas. Additionally, your presence at HOA meetings may be required for voting purposes.
You will need homeowners insurance to cover replacement of belongings and large repairs after a disaster, such as a new roof after a hail storm. Or new flooring after a major plumbing catastrophe.
If you do not have enough cash to purchase the house in full, you need to take out a mortgage loan and you will need to cover your mortgage payments with insurance. Because you are taking out a mortgage loan, you will need PMI, or private mortgage insurance. PMI is required if you pay less than 20% of the total price of the home in the downpayment. In addition to monthly mortgage payments, there will be a required monthly PMI fee.
In summary, your decision to own a home after renting an apartment should take into account both the pros and the cons of each. If you are planning to own a home, you may want to consider some of the online tools available to you. One of these tools is Payleaf, which provides a highly accurate homeownership cost calculator, as well as an online budget tracking tool. Go to Payleaf.com to find out how much purchasing and maintaining your home will cost per month and learn how Payleaf can help track your savings over time as you approach your savings goal for your downpayment.