Homeownership vs. Rentership

Homeownership is often a sign that dictates how an individual (general public) is doing. Below are some of the pros and cons of homeownership vs renting. Let me know in the comment section below if you are add/reinforce any point.

Rentership – Pros and Cons

+ mobility

+ lower upfront cost

+ not personally liable for property maintenance

– No asset on your net worth

– No store of value

Homeownership – Pros and Cons

+ Own an asset – future increase in net worth

+ potentially higher net worth 15-30 years in the future

+ Build solid credit reports

-House maintenance cost

My analysis includes several fix criteria that may/may not happen in reality. For example, I assumed the home value will remain fixed at 300k for the next 15 years, mortgage rate is fixed at 4% (unless you use the fixed and not variable or ARM, then this should be fine), and “excellent” credit score depends on which bank(s) you decided to take out your mortgage. Through my college rental experience, it is safe to assume that landlords will highly likely to increase your rent with the annual inflation rate of 1.5-3%. Another point to take into consideration is that annual income is fixed at 75k (historical data has shown that the annual income tends to increase in most corporate setting).

Net Worth = Assets (cash from salary, property value) – Liabilities (home mortgage, other loans/debt, taxes)

My analysis below shows that you will have ~$1.16M in net worth at the end of the 15 years with the homeownership option while you will have a net worth of $966k in net worth at the end of the time frame with rentership. At first glance, it is without doubt that buying a property is a worthwhile decision over that of rentership. However, please also bear in mind that most homeowners keep a financial reserve in repair and maintain the property (this cost will vary in location and homeowners themselves consideration). Also bear in mind the property value will fluctuate with market conditions (might potentially increase/decrease your net worth)