When you're young and have been renting for quite some time, you've likely wondered if it's smarter to continue renting or take the plunge and buy your own home. After all, we've all heard that owning a home is equivalent to becoming an adult and having success financially.
But these days, the renting narrative is changing. Recent studies seem to indicate that a different view of renting vs/ owning is emerging, so take heart, you may have been doing the right thing all along.
According to recent research, "the number of rental households is likely to increase by 4.0 million to 4.7 million between 2016 to 2023." For many, owning a home is not only out of reach, it may also not be the best investment for your future. Rent and mortgage costs may not be dramatically different, but the renter also saves on property taxes, expensive insurances and, most dramatically, (especially if you buy an older home) upkeep, repairs and maintenance costs.
It’s a personal decision to rent or buy, but there are many pros to renting your home rather than buying. Here are some reasons why renting might actually be better than buying:
· Buying and selling a home is difficult for everyone involved - Selling or buying a home is more stressful than bankruptcy or divorce. Plus, if you move every few years due to your work, do yourself a favor and rent. A 12-month lease is a whole lot easier to break or buy out than a 30-year mortgage.
· Property taxes can kill you - Many homeowners are unaware of unexpected costs that come with owning a home. Fees, such as property taxes, insurance, and maintenance, add up very quickly. Taxes can fluctuate wildly now that most markets rely on fair market property values when arriving at your tax payments. These values can vary greatly year to year and if you don’t like your valuation there is very little the average person can do to challenge the municipality’s methodology. Rental terms by comparison are consistent across the duration of your lease.
· You can take time to repair your credit - Irresponsible spending habits in college and those sneaky credit card scams will haunt you for years. Sometimes, it can take more than seven years to fix your credit score. Renting to re-establish a solid payment history can be a good way to bide your time.
· You’re financially unable - Those with irregular incomes, such as freelancers or small-business owners, prefer renting as a more stable monthly option. if you’re still unsure about your ability to overcome any potentially rocky housing trends or cycles, consider renting while establishing a bigger emergency cash fund.
· You remain flexible - Buying a home means choosing a location where you want to plant roots for at least a few years. (Usually 3 to 7 years) For those who aren’t exactly sold on their current living situation, city, career, or may be thinking of changing their lifestyle investing in a home would be a mistake. Mortgages and other ownership obligations are like concrete shoes — don’t expect to pick up and move anytime soon.
· Maintenance issues are not your problem - Homeowners are often forced to take out a sizable chunk of their savings to make impromptu and unexpected home repairs. But renters may only need to place a call to the property manager when the sink drains are clogged or the dishwasher gets leaky or the fridge stops running. No extra funds required to make the call.
· There are options for roommates - Roommates are a great option if you’re looking for help shouldering the cost of living expenses. Having someone around to split the cable bill and vent about workplace drama is great, but with home ownership, only you are responsible for the payments at the end of the month.
· You have more access to amenities – You might enjoy the peace and quiet of a home in the country or a friendly neighborhood environment, but you’ll miss other amenities. Renting in a central community generally allows you access things such as a community pool, fitness center, dog parks, and Wi-Fi. If you still want access to these perks after leaving the comfy confines of rental agreements, you’ll need to shell out more money.
· Urban living at a cheaper price - It’s been said millennials prefer city living over driveways and yards, but they are unable to afford the fees that accompany urban life. Living near universities and dynamic night life is not cheap, and purchasing an expensive loft will only ever be a dream for many. Finding affordable homes to buy might require moving into less popular areas.
· There’s better security - Gated communities come at a high price, but most rental complexes have security features already included in their agreements. This is a welcome benefit for women, single renters, or tenants living in urban environments. Homeowners will find neighborhoods with these extra precautions come at a price.
· You have the ability to invest elsewhere – It’s recommended home buyers put 20% down on a home to avoid being house poor. Even when considering upfront rental fees and deposits, it’s still cheaper than the tens of thousands of dollars it takes to buy a home. Some renters might already have potential savings stacked away for this very purpose, but with other uncertainties and future questions, it might be best to invest that money elsewhere. A few grand could do wonders for your future retirement or help take away those student loans that still burden you.
Ultimately, before you rush into buying your first home, consider renting for longer. Renting is not wasting money, rather it can give you valuable time to plan and save for a home purchase down the line, something that will absolutely take time, consideration, research, and saving.