Alexander Diaz de Villegas

Alexander Diaz de Villegas Explains the Differences Between Renting and Buying a Home

There wasn’t previously much of a debate about whether to buy a home or remain a renter. If you were pulling in even a moderate income, you were expected to go down the home buying path, setting you up with a nice long-term investment and a place to truly call your own. 

Times have changed however, says Alexander Diaz de Villegas, who took up a career in real estate after a decorated 26-year career in public service. Alexander Diaz de Villegas, who has since become part of Battlefield Investment Group’s most successful Homestead, Florida real estate team, says the combination of rising home prices and stagnating rental rates has made a lifetime of renting a viable investment option.

Let’s examine the renting versus buying debate from several key points of view to determine the pros and cons of each.

Where Do You Want to Live?

Home prices have risen considerably across the U.S since 2012, including 5%+ annual gains since 2016 according to the Case-Shiller index. 

However, that doesn’t mean every market is overpriced. In fact, 25% of markets are underpriced based on CoreLogic data. When coupled with falling mortgage rates, there is still potential to nab a great deal on a home in many areas. 

Alexander Diaz de Villegas says one of the best methods you can use to compare the affordability of renting and buying is by consulting the price-to-rent ratio for a specific city. This metric takes the median home price in a city and divides it by the median annual rent price, with higher ratios equating to homes being more expensive relative to rental rates.  

Unsurprisingly, San Francisco, Los Angeles, New York City, and Seattle have some of the highest ratios in the U.S, with homes in those cities costing at least 36x more than annual rental rates on average. On the other hand, home ownership is far more attractive in several major cities that have ratios under 15x, including Houston, Pittsburgh, Indianapolis, Milwaukee, and Memphis.

What Kind of Lifestyle Do You Want?

Homeowners have a great long-term investment under their belts, but there are some drawbacks. Due to home maintenance and other associated costs of home ownership, your monthly bills can fluctuate greatly, while renters tend to have steady bill obligations. You’re also more restricted in your ability to pack up and move to another area if the need or will arises.

Renters on the other hand have more freedom and less obligations, but those benefits come with other drawbacks. A renter’s monthly payments aren’t building any equity even though they can be higher than a homeowner’s mortgage payments. 

Renters also have far less control over their living environment than homeowners. They may be surrounded by other renters, have no outdoor space to call their own, no incentive to upgrade or modify their living space, and little control over when maintenance is performed. 

Alexander Diaz de Villegas believes the choice to rent or buy should come down to personal preference and desired location and that ultimately there’s no wrong answer.