5 Compelling Reasons Why Buying is Not Always Better Than Renting

by Connie Mei · 8 comments

“Stop wasting your money on paying rent” is likely a phrase you’ve heard often. After all, the common version of the American dream consists of owning a home.

But is renting really all that bad? No, and sometimes it’s actually better than buying your own home. Yes, it’s true! In some cases, and for some families it’s smarter to rent than to buy.

However, that’s not the advice we often hear. I was personally suckered into the notion that buying is always better than renting. Why not, right? I was throwing thousands of dollars into rent each year. That’s money I could have used to buy a home and start building equity.

For about a year, I was looking for a place to call my own. But the catch? I live in NYC where property values are notoriously through the roof. Doing a quick search on Zillow.com shows the average home value in NYC is $548,000. If I had a million or two lying around, I wouldn’t have to think twice about buying.

But after searching and searching in the Big Apple, I soon realized that maybe buying wasn’t in my cards right now. Here’s why:

Housing Association Fees

First things first: let’s dispel the notion that you’re always throwing money away when you’re renting. While that’s definitely true, you can also be throwing away money when you’re buying.

For me, it hurt a little to be paying someone a couple thousands dollars each month, to live in THEIR apartment, when I could’ve been putting that money into my own place. However, the more I looked at buying, the more I realized I’d still be throwing money away, just in another form.

Depending on how much I would put down, I would have to pay a considerable amount of interest on my mortgage, compared to the principal, especially in the first few years. And since I was looking at condos and co-ops in NYC, I’d have to pay a maintenance fee, which can be as high as $2k every month.

Less Flexibility

As a young 20-something many things in my life are still up in the air. While I love NYC and want to be here for the long run, I wouldn’t be opposed to moving for the right opportunity.

Just picking up and relocating would be a complete headache if I had a mortgage. Renting, versus buying, just gives me more flexibility and convenience. Those are two things you can’t necessarily put a price tag on but are worth a lot to young adults and those just starting out their careers.

Unforeseen Fees and Expenses

Many home-owning hopefuls tend to forget the many, many other additional costs to home ownership. As I mentioned, maintenance fees are one of them. There’s also insurance, utilities, closing costs, selling costs, etc.

Closing costs can be as much as 4% so on a property that costs $500,000, that’s already $20,000. You have to consider all these additional costs when calculating whether your investment is worth and when you can actually break even.

Plus, there’s always going to be something that needs to be fixed or repaired, and don’t forget about the lawn work and grounds upkeep. When you’re renting, you don’t have to worry about any of those things.

Paying for Location

Sure, buying can be better than renting, but it depends on where you want to live. It’s all about location, location, location.

Manhattan is notorious for high prices and, while property values typically and historically appreciate, it would take me years before my investment would make sense.

This brings me back to flexibility. By that time, I’ll probably want to start a family and need more space. I could consider moving further outside the city, but that would lengthen my commute time and just be inconvenient overall.

There’s definitely a price to pay for a good location, and that’s one sacrifice I’m not sure I’m willing to make right now.

Buying vs. Renting is Personal

At the end of the day, making the decision to buy or rent is personal. Someone could tell you it’s better to buy but that opinion doesn’t mean anything because it’s not based on your own needs. There’s more to this decision than just money.

Factors like flexibility, convenience, and lifestyle count for a lot, but we often discredit those things because we can’t put a monetary value on it.

For now, I’m happy to stay put where I am and rent. That’s not to say my opinion won’t change a year from now or even a few months for now. But in this moment, it makes sense for me.

How do you feel about buying vs. renting? Do you think owning a home is smarter than renting, or vice versa?

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{ read the comments below or add one }

  • Elaine says:

    I rented for a long time and was happy doing that while I wanted the flexibility to move frequently. Now that I’ve moved over 13 times across 4 states, I’m pretty happy to stay in one place for a bit.

    Having my own home also allowed me to get two dogs which would hard to do if I was renting. That said, I’m not sure I would have been comfortable buying a home without living close to my brother. He can fix just about anything and has been teaching me a lot about home repair, so he’s been a great safety net. If I had to hire someone every time something broke, I think renting would be a better choice.

  • Arminius Aurelius says:

    The highest percentage of my family members are intelligent and somewhat thrifty . Therefore they are financially well off …….except one member of the family that lives in Nebraska . He got married when he was about 26 years old or so. They immediately bought a house with I assume a 30 year mortgage . After about 20 years , they were foreclosed on . The first 10 or 12 years your monthly payments go mostly to interest. By then he was probably about 49 or 50 years old . They said , no problem , they will again buy a house in 3 or 4 years , which they did . Now most of their excess money after the necessities will go to pay the mortgage . He has at best 15 years left to work and absolutely NO savings
    But the problem is he will still have monthly mortgage payments plus paying property taxes , insurance , house and grounds maintenance . He and his wife are absolute Idiots .

  • Riverdale says:

    we bought our first home in a remote town and paid $10,000, as you can tell that was a long time ago….every time we moved….we sold and bought a home in the next town and 4 moves and nearly 50 years later our home is worth over a million $……we keep our homes up as we are proud of the place we live and we need space …so we don’t have a small home….at one time we were short of money and decided to keep track of where the money went….it was being spend on things we didn’t need lottery tickets ..gas for a gas guzzler truck etc….we have always needed a home ….and now we are comfortable not rich as we don’t intend to sell our home till we are too old to look after it.

  • Kate says:

    I am 66 years old and have always lived in rental accommodations. I like to move from state to state and country to country, and sometimes I have moved into a city and discovered that the PR was written by someone who had never even visited the place. (example: a suburb of Buffalo NY advertised that a place was “right on the city bus route.” Turned out to be a commuter bus that ran twice in the morning and twice in the evening! The nearest regular bus stop was more than a mile and a half away.) And here in the Northeast, the unblinking fact of life is that the neighbourhood may fall to pieces in no time; not only will you be unable to move, but your house will become worthless. And if you buy a condo you also have the prospect of having a new management company that is incompetent and crooked. My sister and I moved into a rental condo in a very nice community — that was very nice until the management company changed and they started to rent to anyone who had one month’s rent in hand. And of course you’ve got the Marching, Chanting, Smashing, Looting and Burning Krews that can spring up anywhere. Get insurance but rent.

  • I honestly think renting is the right financial decision for most people. Today’s job market requires moving around to advance, and the flexibility of renting is a huge benefit.

    On the other hand, most Americans are terrible at saving any money. And a house is sort of like a forced savings account if you consider the equity part of your monthly payment. So if this is the only way a person is going to save… then maybe it makes sense.

  • Alexis says:

    Less flexible? My friend moved into a rental this summer and spent months painting (with the owner’s permission) and buying furniture to make the place her home, only to be notified last week that the owner is going to put the unit on the market and will give her 24 hour notice of showings. Her lease expires in 6 months and now she has to think about moving again, only this time with the expense of carting major furniture, in addition to the intrusions of any showings.

  • Michelle says:

    As we are in the very beginning stages of selling our current home, I wish we would have rented. There are many things we need to update, and the stress of selling our home is really getting to me.

  • I’ve never rented and I think it’s been a good choice for me. I don’t live in NYC.

    But I agree that owning isn’t always the cheapest option, or the best for someone’s lifestyle. I think it depends on your market and your needs.

    I’m glad you figured out what really works for you instead of just blindly following someone else’s advice.

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