The Advantages of Renting a Home Vs. Buying (and Vice Versa)

Renting or buying a home is a major decision with distinct advantages and drawbacks. Renting offers flexibility, lower upfront costs, and freedom from maintenance, but it doesn’t build equity or provide long-term stability. Buying allows you to build wealth, customize your living space, and enjoy potential tax benefits, though it requires significant upfront costs and ongoing responsibilities.

For those torn between the two, a home sale-leaseback may offer a middle-ground solution. In this guide, we’ll explore all three options to help you make the best choice for your situation.

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What are the advantages and disadvantages of renting a place to live?

There’s a lot more to know about renting than the monthly payment and annual lease agreement, some of which could have game-changing benefits. Here are the advantages and disadvantages to consider.

Flexibility

If you want or need to move, you don’t have to worry about waiting to sell.
Lower upfront costs

Many landlords or leasing offices require a deposit for the first month’s rent––much more affordable than a 3% to 20% down payment and other transaction costs associated with buying and selling, such as realtor commissions and title insurance.
No maintenance responsibilities

If anything happens to the main appliances, fixtures, structure, etc., it’s your owner’s responsibility and you won’t need to fork out extra money to fix it.
Access to amenities

Clubhouses, gyms, basketball and tennis courts, and pools are some of the most common perks offered at no extra cost in rental communities.
Cheaper insurance

Renters insurance is generally less expensive than homeowners insurance. The average monthly cost in 2024 was $14, although it may be higher if you properly account for the value of your possessions and contents.

No equity building

Monthly rent is just another bill, that can’t get you any closer to homeownership.
Rent increases

Landlords can typically increase the rent at their discretion—with little notice. (According to the National Apartment Association, only seven states have statewide or local rent control laws.) Sometimes, that’s $50 extra per month, but other times, it may be hundreds more per month.
Limited customization

Since your rented place doesn’t belong to you but to your landlord, you can decorate a little, but you can’t do any remodeling or renovating.
Strict leasing agreements

You may have to pay rent for the remainder of your lease if you decide to move out sooner than expected or what you agreed to. In addition, if there’s any damage to the property, you may not get back your deposit.
Instability

In many cases, your landlord may ask you to vacate and find another place to live for various reasons.

Pros and cons of buying a home

Besides the fact that becoming a homeowner––especially for the first time––is like hitting a milestone plenty of folks dream of, it’s the beginning of many other things. Here’s a look at the pros and cons.

Long-term stability

Homeowners with a fixed-rate loan can depend on a steady monthly mortgage payment, so they do not have to worry about a rent increase.
Freedom to customize

Even homeowners who live in an association have much freedom with home upgrades and modifications.
Potential tax benefits

What you pay in interest and property taxes, and even some energy-efficient upgrades or modifications are tax deductible.
Pathway for generational wealth & leaving inheritance

Homeownership is a great pathway to building generational wealth, not to mention it’s the most valuable asset for most folks.
Potential source of income

There is an opportunity for homeowners to use their house as a rental to make some extra money. It’s basically passive income you can use to give, save, invest, or spend more.

High upfront costs

Unless you’re a veteran, homebuying requires a down payment, which, depending on the selling price, could be tens of thousands of dollars. This is in addition to the other transaction costs of buying/selling mentioned above.
Maintenance responsibilities

You break it––even if you didn’t break it––you fix it. Nothing lasts forever, and unfortunately for homeowners, that means coming out of pocket sooner or later. The roof, fixtures, plumbing, electric… It’s only a matter of time.
Market risk

Fluctuations in the housing market could tank your home’s value, leaving you with little to no equity. That’s why, purchasing your home with at least a 20% down payment is best if you can.
Lack of flexibility

Most homeowners have to sell before they can move elsewhere, because they can’t afford a mortgage while paying to live somewhere else. According to the Federal Reserve Bank of St. Louis, the median number of days on the market is 62.
Legal implications

If someone gets injured on your property, say by tripping over uneven flooring, you may be liable. Granted, your homeowners insurance may cover it, but it’s still a sticky situation nobody wants to be in.

When does renting make more sense?

Here are some instances where renting may make more sense:

Short-term living situations (e.g., internships; temporary relocations): If you travel often for work, school, or even leisure, this lifestyle might be more conducive to renting. Owning a house can be considered an investment, but if you’re not spending much time there, then it might be a bad investment.
Unstable income or limited savings: Without reliable income, the responsibility of a mortgage is risky. If you fall behind, you have better chances and more flexibility of finding a cheaper place to rent, as opposed to facing foreclosure or waiting months to sell.
To prioritize flexibility or avoid property maintenance: Let’s say you need a new roof to replace your 20-year-old one. As a renter, you’re not responsible for replacing it––an expense that could easily set you back anywhere from $5,000 to $50,000, according to Angie’s List.
Non-housing-related consumer debt: If you’re bogged down with bills for credit cards, a car loan, or student loans, these payments are likely taking up a large chunk of your income. For starters, that means less buying power.

That said, even with an approval––most likely with a higher interest rate––adding a mortgage could spread you way too thin to afford:

Unexpected expenses
Regular savings
Regular home maintenance costs

Most lenders prefer to approve loans to prospective homeowners with a debt-to-income ratio of less than 43%. However, it would be wise to focus on paying off debt before buying a home.

When you’re ready to buy, aim for the mortgage, property taxes, and insurance––and association dues, if you have any––to account for no more than 25% to 35% of your take-home pay.

When does buying a home make more sense?

Buying a home may make sense if you:

Plan to stay in one location for several years: If you’re staying put, might as well let your monthly payments gradually build equity. As mentioned earlier, homeownership is one of the greatest ways to build wealth.
Have a stable income and savings for a down payment: Reliable income to comfortably pay your mortgage and enough savings for the down payment may be a sign you’re ready to buy a home.
Desire greater control over your living space: You have more freedom with a place you can call your own. Think painting the interior/exterior, refurnishing, kitchen remodeling, or other large projects.
Want to save on the overall cost of living: Purchasing a home is an investment and establishes a housing expenses budget. Your mortgage payment won’t change; and if your insurance, property taxes, and utilities do increase, they most likely won’t as much as landlords often increase rent.
Expect to use home equity in the future to upsize: If you buy and sell a “starter” home at the right time, you can use the proceeds as a down payment for your dream home. That’s a smart investment.

The cost of buying a house with a mortgage is higher today (in 2025) than in the past. Potential homebuyers must weigh their cash flow, budget, and affordability to determine whether a new home or a move is financially viable.

Eric Kirste, CFP®

Home sale-leaseback: A middle-ground option

If you’re stuck between the advantage of renting a place to live vs. purchasing a home, you might not have to choose either one. With a home sale-leaseback offered by companies like Truehold, after selling your home to an investor or buyer, it’s no longer yours but you pay monthly rent to the new owner and continue living there.

Read our full article on home sale-leasebacks before considering this, as some factors, like potential rent increases, make it risky. Here are a couple of scenarios where this option might work best.

Homeowners looking for a new home or downsizing: Many homeowners put their home on the market while they search for a new one. If you don’t have much savings, you could rely on a home sale-leaseback for the down payment or all-cash purchase when you find the right place––and then move out when you’re ready.

Relocating homeowners with bad credit and severe financial hardship: Financial hardship, such as job loss or extensive medical bills, and bad credit narrows your loan options. But if you’re moving within a short timeframe, a home sale-leaseback gives you quick access to cash.

If you’re interested in this renting alternative, our research will tell you everything you need to know about the best home sale-leaseback options available.

Recap: Renting vs. buying at a glance

Renting	Buying
Flexible for moving	Market fluctuation
Lower upfront costs	Substantial down payment
No maintenance or repair costs	Maintenance or repair costs
Amenities	Potential income and tax benefits
Limited customization	Freedom to customize
No equity	Builds equity and wealth
Rent increases	Steady payments