By Alexander Shaw
If somebody asked you would you rather rent or own a building, what would you say and why? If you said you would rather own than rent that might make the most sense and it may be common to most, but here’s why. Rommel Shaw, a real estate broker in Chicago said, “If you’re renting a building [or apartment], you essentially pay somebody to use their property for the time being, which means maybe for a couple months you’d be paying somebody money to use that property whereas if you own the building you’re the person being paid money.” However, owning buildings isn’t all rainbows and sunshine. There are setbacks that could hinder a property owner such as recessions and depressions. Recessions are economic declines that can last for as long as six months according to The Balance. Depressions are a more severe case of recessions.
Flexibility, less responsibility, financial simplicity and investment flexibility are all benefits that come with renting. Renting is a simpler process than owning something. According to PewResearch.org, there are more renters than any time since 1965 with 36% of heads of households who rent. However, 72% of renters say they would like to own property someday.
A key pro to owning a building is its income potential. Income potential is the profit you could potentially make over time. According to Nolo.com, commercial properties often have an annual return off the purchase price between 6% to 12% and owned buildings have a return which is 1% to 4%. Dana Bolton is a real estate broker in the Chicagoland area that believes it is better to own than rent. Dana stated, “I believe it is better to own than rent because owners enjoy several benefits over renters plus have the additional benefit of flexibility. The financial benefits include the use of monthly payments toward principal balance which increases equity, market appreciation which increases equity and tax advantages due to exemptions and depreciation.”