Recently I wrote a post about why owning is better than renting. Now I would like to look at the flip-side to that argument…. why renting is better than owning. In my industry, it is taboo to talk someone out of owning a house. It would be comparable to a car salesman convincing you to stick with your current vehicle rather than buying a new one. But, the truth is, there are a lot of advantages to renting, and I would not be a good real estate professional if I didn’t talk about all facets of real estate. So, here we go…
1. More flexibility
If you are new to your career, just arrived to town, still going or just finished college, or if you have a complicated financial circumstance (in the process of divorce for instance), renting may be the better solution for you. The reason is because your future may change in an instant, and it is a lot harder to move from an owned home than it is from a rental. I wrote an article about why it wouldn’t be cost effective to own unless you planned on staying for at least 2-5 years. If you are in a situation where your living arrangements could change quickly, renting definitely offers more flexibility than owning. Some people just love to move often, and renting just works better for them.
Renting also offers more flexibility with your neighborhood preference. For instance, say you moved into a neighborhood because you liked the shops nearby, or liked the neighbors, or whatever, and those factors changed… The stores nearby closed down, a bad factory moved into the area, or your friends moved. If you are renting, you can choose to relocate to another neighborhood pretty quickly. A homeowner may have to wait for a while to sell their house (especially if the neighborhood is no longer as desirable). Overall, renters usually have more flexibility with their living arrangements.
2. Fewer carrying costs (maintenance, insurance, property taxes, etc.)
While it is true that most homeowners pay less for their mortgage than a comparable rental, they also have to worry about maintenance issues. Some of these maintenance costs can be quite expensive; roof repairs, plumbing problems, painting, electrical issues, and more. When you are renting a house, these costs are usually covered by the landlord. This is definitely one of the perks to renting instead of owning. Your rent payments are predictable payments, no worrying about unpredictable maintenance expenses that come up.
3. Sometimes it is cheaper than owning
If a person does not have a large down payment (at least 20%), they will probably have to pay Private Mortgage Insurance, which can make owning nearly as costly as renting. Or, if your credit score is not good enough to secure a lower interest rate, that could make a mortgage more costly as well. Remember, just having a lower mortgage payment is not all that matters, it is the unexpected costs like maintenance that can actually make rent cheaper than owning. If an owner is hit with a $10,000 roof replacement bill, it could take several years to even break-even with a comparable rental. Therefore, if a rent rate is similar to a mortgage rate, renting may be cheaper in the long run due to the predictability of maintenance costs (or lack thereof).
Let’s not forget that some tenants have a really good rent rate because their landlord never raises the rent. In these cases, their rent may be cheaper than owning. No use spoiling a good living arrangement.
4. No risk in economic recession or depression
If our economy goes into a recession, homeowners initially suffer more than renters. During a recession the market slows down, house prices fall, and many homeowners are stuck paying for mortgages on homes that no longer have any equity. Just look at what happened to house prices in bigger cities over the last several years (Phoenix and Las Vegas ring a bell?). Foreclosures have sky-rocketed around the country, and more people are looking to rent to avoid that mess from happening to them.
Let’s face it, the United States is in a lot of debt. There are two ways that a government can pay off debt: inflation of the currency, or stopping the spending and letting the country go into a recession/depression. Usually it is a combination of both.
Renters are not affected nearly as much as homeowners in times of deflation.
6. No Debt
Many financial advisors don’t see a mortgage as bad debt, but it is debt nonetheless. If you really wanted to stay out of debt and avoid the mortgage altogether, renting is your alternative. There are many advantages to being debt-free.
Photo Credit: “Unfurnished Apt for Rent” by turkeychik on Flickr. CC Licensed.