April 02, 2020
Renting Vs. Buying: Why Renting is a Sound and Smart Decision
For many years, it’s been the American Dream to buy a home. Recently, due to economic changes, generational changes and a smaller, more connected world, that dream is ever-changing. Now, it seems that convenience, ease of life, sustainability, and living small are increasingly becoming the new normal. Everyone is different. Each person has his or her own story. Yes, affordability is important, but there are many variables that go into making this decision.
First and foremost, is renting financially sound?
Many people believe that renting is throwing your money away because there is no equity to be made. However, this blanket statement is not always true. Most importantly, it’s not throwing money away because you get a place to live. Also, there are so many other costs that go into homeowning, so it might not be the right decision for where you’re at financially. Don’t forget about your down payment, closing costs, property taxes, home-owners insurance, furniture and maintenance/repairs. And, if you can make it through all of that upfront, you don’t want to become “house poor” and not be able to live your life or maintain your home. There are always unforeseen costs that happen once you’ve signed on the dotted line. What happens if your A/C unit breaks? A pipe bursts? Sewage backs up? It’s all on you.
Experts agree that you shouldn’t spend more than 30% of your gross monthly income on housing. There are a couple of tools that can help you learn if renting is the right financial decision for you. Just remember, that what might look good on paper is not always what’s best for you personally.
Buy vs Rent Calculator by NY Times
Mortgage Calculator by Quicken Loans
But, buying a home is the American dream!
Sure, emotionally speaking, there’s something to be said for owning your own home. But, since when should we make a giant financial investment on our emotions alone? Buying a home is not a no-risk investment. They say that you need to plan to be in your home for a minimum of 5 years before the costs outweigh the benefits. But, The real estate market is unpredictable. Some people who bought their homes right before the market crashed in 2007, are still, trying to break even—13 years later! Truthfully, while owning a home can be wonderful, there are other investments with way higher return rates in a much shorter period of time.
Renting gives you flexibility and mobility.
Finances are only one piece of the puzzle. You also have to examine your lifestyle and where you are in life. What’s your job like? What are your career goals?
If you’ve just gotten engaged and you are thinking about starting a family down the line, then hold off until you and your partner can combine your finances and figure out what your new life together will look like. If you have a job where you’re constantly traveling or you can be moved around the country or the world with the drop of a hat, then wait until you can really lay down some roots. Maybe you’re a new empty-nester and you’re looking for less space, commitment, and responsibility; renting is a great option. Every person has different circumstances.
Renting also allows you to test drive new places or areas to figure out where you want to be. This is especially helpful if you’re new to a community and you want to learn the lay of the land before you commit.
Last, you need to be aware of how much responsibility you’re willing to take on. Owning a home is a giant undertaking both financially and physically. There’s a ton of upkeep, and it’s up to the owner to maintain it. While renting, if something breaks or if you travel, you just call the maintenance tech. The responsibility falls on the landlord.
In general, there are many reasons why renting is a great option. There can also be wonderful amenities these days that come with renting an apartment: a fitness center, dog run and grooming station, car wash, bike rentals, and fix-it stations, and club rooms—just to name a few. Remember to evaluate your own unique situation. We all want different things out of life. Renting can provide flexibility, lower costs, and less responsibility. For many, renting is a smart and sound decision.