Rent or buy?

Should you buy or rent a place to live? Buying allows you to start building equity by owning something of value. That’s an important first step in becoming financially secure. But buying a home requires a sizeable down payment — often 10% to 20% of the cost of the property. As an example, 10% of a $250,000 home is $25,000 in cash. And even if you can afford to buy, you may find renting has certain advantages when you’re just starting out.

For one thing, renting gives you more freedom. If you’re still in school, just launching a career, or contemplating more school in the future, you’re probably not yet ready to spend several years in one place. Renting gives you the flexibility to move as soon as your lease ends. That’s usually every year, or perhaps every six months. Some leases are even set up to run month-to-month. And to rent, the only money you usually need up front is the first month’s rent plus a security deposit.

Buying a house or condo, on the other hand, means you stay put until you can sell it — at the risk that the price you get will be less than you paid for it. And then there’s almost always the cost of real estate agent expenses and other things, such as legal fees. Your only alternative to selling is to rent out your home, which turns you into a landlord, a difficult role that you may not want. And renting your home may leave your down payment tied up in the property, if you’re unable to get a home equity loan. That may make it hard to buy a new home.