A common question we get asked: What are the pros and cons of renting vs buying in Chicago? Well, there are many, many points to consider. More than just a casual conversation could encompass, at least. That’s why we wrote this blog post, to take a deep-dive on the pros and cons of renting vs buying, and present the cases for both.
The Case for Buying
A mortgage forces you to save.
Many argue that an easy way to build wealth is to use your mortgage as a forced savings account. A mortgage “forces” you to save, since you need to pay your mortgage every month in order to keep your home. Remember as a kid when you had those piggy banks that you’d have to break in order to get the money out? Like that, but the adult version. And for a lot more money than your piggy bank ever saw.
“It’s like if every time you paid your rent, you also put $300 into savings – and it gets better every year. Between my two places, I put more than $1000 into savings every month. And since I’m renting one of them, $350 of those dollars were someone else’s.”
Founder & Managing Broker
You get to borrow, like, a lot of money.
It’s worth noting that being able to borrow hundreds of thousands of dollars at a fixed rate for 30 years is actually BANANas. Think about it. A lot of us had siblings growing up that wouldn’t even let us TOUCH their stuff, let alone borrow it. Now we’re taking out mortgages for hundreds of thousands of dollars. Talk about a glow up.
You could be eligible for tax benefits.
Mortgage interest is tax deductible, which means owning a home could save you money on your taxes every year. Depending on your personal financial situation, it might make sense to itemize your tax return and claim a deduction on your mortgage. According to the IRS, you can also deduct up to $10k of state and local property taxes. (Click here for some clarity on Cook County property taxes if you’re one of the many, MANY people confused by these.)
If you end up renting out your home down the line, you’ll have to report the rent you receive as income, but the write-offs get even more attractive.
“If you rent out a property that has an HOA payment, you can write off that HOA payment on your taxes every year. But only if you aren’t living in that home as your primary residence.”
You have more control.
With great responsibility comes great power. While you do have to deal with repairs and maintenance as a homeowner, you also have the ability to customize your place to your liking. Paint those walls the Pantone Color of the Year. Install that herringbone backsplash you saw on Pinterest. Invest in that custom bathtub for your dog. The sky’s the limit.
Also, you’ll get the peace of mind that comes from knowing you get to stay there for as long as you want without having to move. (See: How to Lose an Apartment in 10 Ways) No answering to your landlord about where the hole in your wall came from or why you’ve been watching “your cousin’s” cat for three months now. Of course, if you own in a condo, you have your HOA to deal with, but they have no control over you leaving or staying.
Your home could appreciate.
There’s a nationwide trend of both people and businesses moving to urban environments. A number of companies that had previously moved to the suburbs are now moving back to major cities where jobs are in demand. McDonalds is a perfect example, moving their headquarters from Oak Brook to Fulton Market last year. This is because the people they’re trying to recruit for high-paying jobs are also moving to the city. This pushes housing prices up. So if you already own a home, and the surrounding area experiences job growth, your home typically becomes more valuable. Simply put: Mo jobs, mo property value.
“There’s only one type of investment that you can live in, and that’s residential real estate. A business, a stock, commercial real estate; you can’t live in those. There’s no dual-purpose there. Buying a place is turning your home into an investment that can get more and more valuable. That will never happen in your apartment – your rent’s just going to keep getting more expensive.”
Founder & Managing Broker
Your taxes and assessments won’t increase as much as your rent would.
Renting in Chicago, you can generally expect your rent to go up every year. (Not to mention all the random fees that apartments love to throw at you.) Generally speaking, taxes and assessments for homeowners don’t increase as much as your rent would.
The Case for Renting
You have more flexibility.
Variety is the spice of life! When you live in a city like Chicago with so many unique and exciting neighborhoods, renting allows you to more easily experience the diversity that comes with residing in all these different areas. You can move essentially whenever, wherever you want. Homeownership, on the other hand, ties you down to one area.
It’s also worth noting that if you want to get up and go, renting works in your favor. It’s a lot easier to break a lease or find a sublease than it is to sell a home. If you’re a spontaneous person, change your mind a lot, or need to move relatively frequently for work, renting will be much more conducive to your lifestyle.
Luxury apartment complex offer better amenities.
Generally speaking, Chicago’s luxury apartment buildings offer better amenities than Chicago’s condo complexes do. Pools, co-working spaces, bars, dog salons, bocce ball courts, rooftop hammocks, Peloton bike rooms with live classes, etc. etc. etc. The list of crazy amenities we’ve seen at Chicago apartment buildings doesn’t end.
Apartment buildings are more social.
When our agent Kate Gaffey moved to the city, she initially rented, then bought a condo, then returned to renting. Needless to say, the debate on renting vs buying has been a big one for her. Kate says that the one of the things she missed most about her days of renting was the social aspect.
“Moving back into an apartment, I immediately realized there was more of a sense of community there than when compared to a condominium complex. In apartment buildings, a lot of people are moving in at the same time and there’s this “summer camp” vibe. Everybody is new and excited and trying to make friends. With buying a condo or home, in some instances your neighbors could have lived there for 20 years and they don’t really want anything to do with you.”
You can put less money down.
The money you have to put down when you rent (i.e. a security deposit or move-in fee) is much less than a down payment on a home. Sometimes it doesn’t even exist. We’ve seen a lot of apartment buildings that don’t even require a security deposit these days. A caveat to this is that instead, some will charge move-in fees. While these are usually much less than a security deposit, but they’re non-refundable.
You aren’t responsible for maintenance.
This is a big one if you don’t know the difference between an Allen wrench and a Phillips screwdriver. They’re both dude’s names, true, but completely different tools. While some issues are easiest to fix yourself, a nice perk of living in an apartment is having someone on-call whose job it is to fix more complex issues quickly.
Your cash is still liquid.
Buying a home means transferring cash into an illiquid asset. Let’s say you have $100k to invest in a mutual fund. If you want to access that money, you can essentially use whenever you want, toward whatever you want. If you take that same $100k and buy a house, then later decide you want to invest it in something else, you have two options. You would either have to get a home equity line of credit, which includes a lot of fees and paperwork, or sell your home, which can take a lot of time, a lot of work, and is relatively expensive.
Other things to consider
HOAs and taxes in Chicago keep going up – but so does rent.
HOA dues generally go up everywhere, and property taxes are continuing to climb. Both will make monthly payments for homeowners more expensive. However, when you’re looking at it from a renting vs buying perspective, this point becomes null. Most rental properties increase their rent every year, and those increases typically outweigh the increase in property taxes and assessments.
If you live in a big condo complex, you get some of the same perks as apartment complexes do.
In terms of responsibility and maintenance: The roof, windows, landscaping, and common areas are none of your concern as a homeowner when you live in a condo complex. In terms of amenities: There are plenty of condo buildings out there with gyms, pools, concierge, etc.
Forbes claims it’s cheaper to buy than to rent – but they’re only comparing median rent and mortgage.
This article from Forbes back in November 2018 claimed that it’s cheaper to buy than rent in Chicago. They took the monthly mortgage from the median single family home price ($1,456) and compared it to the median monthly rent ($1,800). A couple things to note: 1. Condos aren’t included in this. 2. Neither are all the other costs associated with buying a home. This includes stuff like closing costs, HOAs, and down payments. All things considered, their claim doesn’t paint the entire picture. However, there is an argument to be made that goes something like this: If you’re spending money, you might as well be building equity while you’re doing it.
So there you have it. We could go on and on about the pros and cons of renting vs buying in Chicago, but when it comes down to it, it really depends on you, your financial situation, and the Chicago real estate market.
If you feel like you and your bank account are ready to buy a home, enter your info below to receive our Buyer Power Calculator. It will help you plan your real estate purchase, set a budget, narrow your search, and ultimately find you a home you love within your price range.
If you’re currently renting and are still on the fence, take a peek at 5 Things Renters Need to Know About Owning.
If you’re moving to Chicago and have decided to rent, we’ve got something for you as well: Your Chicago Apartment Rental Timeline.
Any further questions on the pros and cons of renting vs buying in Chicago? Just ask! We’re all ears.