Slave to the Landlord or Slave to the Bank?


I’m sitting here in my office with a south facing window, the sun shining in, and I’m thinking, “Man, that’s almost annoyingly hot on the side of my face.”  Then I turn and look out to see the sun glinting off of the ice covering our parking lot.  This is when cabin fever really starts setting in.  The sun is warmer, but it’s not warm outside yet.  Even if we get a warmish day, it will just be sloppy out there.

As much as I am going to get antsy to enjoy the spring flowers, there’s another cabin fever that will start kicking in soon too.  It’s those who are thinking they want to get out of their house.  Not to the outdoors, but to another home.  While the emotions can really kick in, we need to be sure we are being logical about the decision as well.  So, here are some discussion points on whether you should become a slave to the bank via your mortgage or stay a slave to your landlord via your lease.

Slave to the Landlord:

Let’s be honest – it’s easy.  In most rental situations, you don’t lease agreementhave to deal with any outside maintenance like shoveling or mowing.  If something in the rental breaks, you just call the landlord or manager and they come fix it for you.  Not handy?  Don’t want to deal with hiring a new servicer every time?  Renting is for you.

It may be convenient.  Depending on where you rent, it may include a workout room, pool, party room, movie theater room, and more.  In fact, there is a new complex here in Sioux Falls that, with your rent, you get a membership that gives you free access to golfing and bowling around the area.  And that’s not just chipping-across-your-backyard golf.

Renting allows flexibility.  Not sure how long you are going to be around?  Renting may well be your best option.  It costs money to buy a home.  It also costs money to sell a home.  If you haven’t been in a home long enough to build enough equity to cover transaction costs, you may be writing a check to get out of the property.  With renting, you simply give a 30-day notice (providing you are at the end of your lease) and you are free as a bird to move on.

It MAY be cheaper.  Depending on where you are and what is included (the free golf mentioned above isn’t really free in the big picture), it may be cheaper by the month to rent.  Often times there are also certain utilities that the landlord covers out of your rent that you would be paying yourself on top of a mortgage.  That could be money you free up to fund other priorities.


Slave to the Bank:

Free at last, free at last.  Depending on your relationship with your landlord, you may find home ownership a newfound freedom.  No more house rules (unless your wife makes them), no more parking restrictions, no more begging to paint a wall.  It’s your house.  Do what you want with it.  You’re your award-winning ferns in the back yard.  Dream of living in a carnation pink house?  That’s possible when you own it.

purchase agreementYou have breathing room.  No more listening to your neighbors fight or do whatever else right on the other side of your wall.  Screaming to the side of you, flamenco dancing from the neighbors above you.  Not any more!  You still can’t really choose your neighbors, but you can put up a nice privacy fence, thick bushes, and a water fountain to cover any remaining noise.

It MAY be cheaper.  I know.  I listed this on the other side too.  But again, depending on your situation, mortgage payments and all of the utilities may be cheaper than paying for all of the extra apartment complex amenities you never used, like the gym.  This will also be heavily impacted by your down payment that you have saved up prior to buying.

That’s no deposit you get back when you sell.  If you stick around long enough and make your payments, you may get a lot more back when you sell than you did from the rental deposit.  Compound this with a growth in home values and you’ve hit the jackpot.  I had a Realtor friend estimate the market value of our home last summer, 7 years after we bought it.  By quick and dirty estimates, my home had increased in value (just due to market changes) by 20%.  Make $25,000 in 7 years aside from paying down our principal?  Not too shabby.

There is pride in ownership.  There have been a number of studies done and they all find some interesting correlations between home ownership and other traits.  Areas with high ownership tend to have less crime, homes are in better condition, over-all personal finances are stronger, children do better in school (yup, that’s for real), people know and get along with their neighbors, and a lot of other desirable things.  When you have more investment in the property, you are more likely to invest in everything else around you.

I suppose I could go on and on from either perspective.  But I think you get the point.  Home ownership can be a great thing.  For me and my family, we would have it no other way right now.  But I also recognize that there are people who just should NOT be home owners.  That’s ok.  If that’s you, own it (by not owning a home). There are options out there for people on either side.  The trick is to figure out which side you want to live on.  Figure out which side you want to be a slave to.

Ok, so maybe ‘slave’ is a strong term to use.  But it is definitely a commitment to wherever you land.

If you aren’t sure which is best for you, the counselors at the Center for Financial Resources can help you look at your priorities and help you decide where your future may be.  Is it going to involve a large loan?  They can help you get ready for that too.  Just give us a call at 605-330-2700 or go online to schedule an appointment.


written by Breck Miller
images courtesy

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