We’ve considered buying a home a major milestone of financial and lifestyle achievement for years. It’s one of those steps that we all feel we need to take in order to be successful. However, I’ve been a homeowner, and I like renting better – even if I am “throwing money away.” (And I don’t think I’m throwing money away either. My investment returns beat the average appreciation on most homes in most areas of the country.)
While buying a home can be a great move for some people, it’s not the answer for everyone. Here are three reasons to consider renting:
1. You Value Flexibility
One of the reasons I like renting is the flexibility. While I don’t have the freedom to paint walls and remodel, I do have the flexibility to leave when I want, without worrying about selling the house and everything that comes with it.
I’m not into decorating or remodeling much, so the fact that I can’t do much more than hang a few pictures on the wall doesn’t bother me. What was very stressful was selling my home quickly when my then-husband got a new job on the other side of the country.
The flexibility to move when the lease is up (or even before, if you can afford the penalties that come with breaking a lease) is one that I prize. It allows me to make lifestyle choices that work for my son and me without worrying about being tied down to one location.
2. You Prefer to Have Someone Else Take Care of Things
My favorite thing about renting is that I’m not responsible for the property. While I obviously need to take care of the home or apartment I rent, I’m not responsible for maintaining the roof, changing out aging toilets, or making sure that other things are taken care of.
When a faucet needs changing, or the furnace needs a tune up, that’s the landlord’s responsibility, not mine. And, while I’m sure that property taxes are taken into account when my rent is set, it’s not a separate thing I need to worry about.
While I live in a rented house right now and I am responsible for yard care, my favorite arrangement (when I can get one that meets my requirements) is an apartment. I love apartment living because of the convenience. When I can find one with a pool and fitness room plus a little balcony for me, I’m happy. I don’t have to worry about shoveling snow or cutting the lawn. If you don’t like taking care of maintenance and repairs, renting can be a good choice for you.
3. Market Conditions Make Renting Cheaper
In my current market, renting is actually more expensive than buying. This wasn’t the case in my last market, however. Where I lived before, it was cheaper to rent and the home appreciation in the area wasn’t worth the cost (consider paying mortgage interest, home insurance, repairs, taxes, maintenance for years and you’re lucky to break even in real terms).
By renting and then investing the difference, it’s possible to come out ahead financially in some markets. It depends on where you are though. For me, right now, renting is mostly a lifestyle choice because of the real estate market. You need to decide what matters to you, and whether or not it makes sense to rent or buy.
{ read the comments below or add one }
I’ve heard countless times that home ownership is overrated. After the way the Market reacted this year I tend too believe that. People are being priced out of the market. Homes are just too expensive for my budget in Arizona. I’m with Miranda I like renting. Freedom is priceless. They way things are going a crash is coming soon.
I’m lifelong renter whose view is that housing is just a cost to minimize, and not some financial milestone I need to reach. As for throwing money away, home ownership isn’t exactly free. Where I live the combination of property taxes, HOA dues, annual maintenance, and insurance adds up to about 60% of my gross rent on a similar property (condo vs apartment).
One additional factor in my decision to rent is the fact that I had stayed in small studio apartments during my decades working in Silicon Valley. These kinds of units are not up for sale. The ratio of my gross annual rent payments to the cash purchase price of the cheapest condos available within the same commute was less than 3%. Granted over the years I might have come out ahead buying instead of renting because of the rapid price appreciation from the housing bubble, but that’s not a bet I would make going forward from today.
My choice has been to keep my net worth earning real passive income rather than imputed income from rent savings. Over-extending on a mortgage might be the only way some people manage to generate any savings at all, but that kind of leveraged financial lifestyle would be way too stressful for me. We’re expecting another round of layoffs at work, and I can sleep just fine.
Thanks for bringing up the point on being able to sleep at night freebird.
A stress free life is priceless, so you made a great decision to rent no matter what happens with price appreciation on homes.
For me the biggest reason to rent is because it is cheaper than buying a home. Even if you buy a home cash you still have to pay tax and maintain the house yourself.
I’m like Miranda in that I hate doing maintenance myself. Maybe it’s cuz I’m not that handy, but I definitely rather have someone else fix things around the house.
And yes, property taxes are a killer!
I am agree with your post arguments. From investment perspective, this is a complete valid reason for not owning house. Because house is not a liquid asset. you can not transfer your asset when you you wish to do. On the other hand, you can easily move from your renting house. Nobel Prize-winning economist Robert Shiller calculated the return of housing vs S&P 500 return from 1890 to 2014. S&P 500 return was 2.2 percent and housing return was .33 percent
khondkar
Good point about a house not being liquid. Most people won’t need that liquidity but for those that unfortunately need it, a house can be quite hard to sell in a hurry.
Interesting discussion… I think a lot of people are fooled into thinking that buying is a better alternative. On average, over the long run, you are better off investing your money than buying a house, but there are some incentives to buying. There are positive tax implications, and in the face of inflation, buying is a great hedge that you can also live inside of. Buying is a great way to fix your cost of housing.
Buying can be the best option for some people, but isn’t necessarily the best option for the majority of people.
Good points Ryan. If it wasn’t for leverage, most people wouldn’t feel that housing is a good investment at all.