This document compares and contrasts the advantages and disadvantages of renting versus buying housing. It provides details on the initial and ongoing costs associated with both renting and buying. Some key points include: - Renting has predictable costs but limited control, while buying provides more freedom and can be an investment but has higher upfront and maintenance costs. - Initial renting costs include application fees, deposits, and moving expenses. Ongoing costs are monthly rent and renter's insurance. - Buying requires down payments, inspections, closing fees and moving costs initially. Mortgage payments, property taxes, insurance and maintenance are ongoing costs. - Careful financial analysis of income versus expenses is needed to determine afford

1. Housing
Chapter 9
Renting Versus Buying
Learning Objective: Students will
compare and contrast the advantages
and disadvantages of renting versus
buying housing.
FCS Standard: Housing and Interior
Design Standard 2

2. Some Renting Vocabulary
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Renting: Paying money to live in a dwelling
that is owned by someone else.
Landlord: The person who owns the dwelling.
Tenant: The person who is renting the
dwelling.
One can rent anything from a small efficiency
apartment to a single-family house.
The dwelling can be either furnished or
unfurnished.

3. Advantages of Renting
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Predictable Housing Costs
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Limited Maintenance
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Usually nothing is unexpected.
Yard work, snow removal, painting, household
repairs are usually the responsibility of the
landlord. (Single-family dwellings may differ.)
Mobility
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Renters don’t have to commit for a long period of
time. There is flexibility to move due to work,
income level, etc.

4. Disadvantages of Renting
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Limited Control and Freedom
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Lack of Permanence
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Don’t have much say over décor, such as paint.
Restrictions over number of tenants, children, or
pets, etc.
Don’t feel a sense of community.
Financial Disadvantages
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Money spent is not applied toward ownership. No
tax savings. Rent may increase after the period of
the rental agreement. Renter must pay it or move.

5. Some Buying Information
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Most common type of purchase is a
freestanding, single-family house set on its
own lot.
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Units in multi-family dwellings can be
purchased.

6. Advantages of Home Ownership
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Feeling of Belonging
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Independence
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Homeowners develop a sense of stability,
community, and are more likely to participate in
local government.
Can renovate or redecorate as you would like or
need. This can also add value.
Investment Value
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Money put into maintenance is not lost. Cash
value is traded for real estate. A homeowner can
usually sell the house for more than it was
purchased.

7. Other Advantages of Owning a Home
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Good Credit Record
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Making regular monthly loan payments helps one
build good credit.
Tax Advantages
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Interest is tax deductible. It can be deducted from
the income amount used to figure taxes. Property
tax payments are also deductible.

8. Disadvantages of Buying a Home
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Unexpected Expenses
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Maintenance is the homeowner’s responsibility.
Insurance may pay for part of the expense if due
to an accident. It depends what happens!
Limited Mobility
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The cost of buying or selling a home can be
expensive. Buying should be considered a longterm investment.

9. Renter’s Initial Costs
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Application Fee: A fee when filling out an
application. Helps ensure the renter is serious about
taking the unit.
Credit Check Fee: The landlord may charge this to
the renter. It’s the process of finding out if a renter
pays bills on time or has any large outstanding debt.
Security Deposit: Covers the cost of any future
damage the renter might cause to the unit. May be
equal to 1-2 months rent.
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Pet owners may have to pay a pet deposit. Is usually
returned when the renter leaves if the unit is in good
condition.

10. Further Renter’s Initial Costs
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Advance on Rent: One or more month’s rent
that is paid in advance before moving in.
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The landlord considers it a type of “insurance” if
the renter moves out unexpectedly.
Moving and Other Costs
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Expense depends on if you use a moving
company or if you pack and move yourself. There
may also be a one-time start up fee for certain
services (telephone, electricity, cable, internet)

11. Renter’s Continual Costs
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Monthly Rent: Depends on space, age of building,
neighborhood, services provided.
Renter’s Insurance: A policy that covers their
personal property against loss by theft, fire, or other
hazards.
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The landlord’s insurance does not cover the tenant’s
belongings.
Utilities: Sometimes it’s included in the rent,
sometimes the tenant pays for some or all.
Parking: There may be an additional fee for garage
space, especially in the city where there is little
parking space.

12. Buyer’s Initial Costs
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The initial costs of buying are usually much
higher than those of renting.
Earnest Money: A deposit that a potential
buyer pays to show that he or she is serious
about buying a home.
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If the deal goes through, this money is applied
toward the total price payment. If buyer’s can’t get
a loan, it’s refunded.

13. More Initial Costs for Buyers
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Application and Credit Check Fees
Inspection Fees: Usually done by a professional who
checks the structure, such as electrical or potential
problems, such as termites.
Down Payment: A partial payment of cash, at the time
of purchase. May be from 5-25%
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More money put down=Lower monthly payment.
Closing Costs: fees due at the time the purchase is
finalized.
Moving and Connecting Utilities
Possibly also appliances and home maintenance
tools

14. Buyer’s Continual Costs
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Mortgage: home loan. Usually long term, 15-30
years. Includes two components
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Taxes: based on the value of the home. Called
property or real estate. Often added to the mortgage.
Insurance: Should include property and liability
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a. Principal: The original amount of the loan
b. Interest: The fee the lending institution charges the buyer
to borrow money.
liability: covers claims filed against homeowner by person’s
injured on the property
Utilities
Maintenance

15. What Can You Afford?
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Analyze Your Finances
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Income-determine monthly and yearly
Expenses-what are fixed and what are flexible.
Savings
Strengthening Your Finances
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Make a budget
Set aside savings first, not what’s left over
Reduce flexible expenses
Reduce current debt
Limit impulse buying
Continue keeping records