We Glorify Home Ownership, But What’s Wrong With Renting?
For decades, owning your own home was part of the “American Dream”. However, that really isn’t the case anymore. In today’s day and age, people are starting to realize that owning versus renting is more dependent on your situation and what’s better for you rather than thinking that home ownership is some sort of status symbol. It does ultimately come down to what has more benefits to you. We will discuss the pros and cons of home ownership in another article but this will focus on why renting where you live has a lot of benefits as well.
It is not only with a personal home either. People will: use ride-sharing services or rent/lease instead of owning a car; stay at an AirBnb instead of owning a vacation home; and even rent clothes and furniture. This “sharing economy” has become very popular especially with the younger generations and people have realized they don’t have to own everything. Anyways, here are some reasons to rent a home over owning:
When you rent where you live, you will have some maintenance to worry about. For example, depending on the type of property, you may be responsible for keeping the grass cut and snow removal. If it’s a condo, townhouse, or apartment, you may not be responsible for those things and it may fall upon the landlord or HOA. Generally, keeping the place clean and general interior maintenance will come with living anywhere. On top of that, any damage that you cause will be your responsibility (at least financially). However, as a renter, many things will be the responsibility of the landlord or HOA. This can include big ticket items like the roof, siding, driveway, HVAC systems, plumbing, electrical, appliances, etc. or even smaller items that are just at the end of their useful life. Every rental agreement is different so it is good to know ahead of time what you are responsible for but a lot of maintenance/updates will generally be handled by the landlord.
Overall, renting is much more flexible than owning. There are a lot more hoops to jump through when you own a home and decide to relocate. You will need to market to find a buyer, hope they can close without any issues or delays, and worry about the other details when selling a house. And if you have a high mortgage relative to the value of the property, you may have issues selling because you are underwater on your mortgage. This can happen when someone buys a home and then within a few years has to relocate. When you are renting, you will just need to give proper notice to the landlord and make sure you aren’t violating the lease in any way. As long as you were a good tenant, there shouldn’t be any issues. After that, just pack up and go. This is a great perk if you move around often for work or other reasons. Renting allows you to not be tied down in one place. Renting = More Freedom.
Because the property is not owned by you, some of the liability of what happens on the property falls on the landlord (depending on the situation). This is case-by-case and pertains more to unsafe conditions or the property not being up to code. You are still responsible for your actions and those of your family, pets, and other visitors. We are not attorneys so any questions regarding this topic should be answered by a competent attorney in your state.
Invest Money Elsewhere:
There are a lot of costs in the home buying process and after. These can include: home inspection, appraisal, mortgage origination, down payment, realtor costs, closing costs, mortgage interest, repairs and capital expenditures, taxes, insurance, and more. Imagine the opportunity cost. All of the money you put into buying a home could be used elsewhere when you rent. You could invest money in other things so that the money grows instead of being spent on a house. Many people fail to realize that a personal residence is a liability that takes money out of your pocket in pretty much all cases. It is not a good investment but it is also true that we all need a place to live. Instead of tying the money up, you could go and invest it to make you more money.
Real Estate Market:
When renting, you are not actively involved in the real estate market (unless you invest in properties besides where you live). This means you don’t have to worry about the downturns that others might experience. The crash of 2007-2009 saw home prices drop on average somewhere around 30%. Some people were underwater on their mortgage and others walked away from homes and were foreclosed on. It was a rough economic time for just about everyone. Because many people were underwater, they were trapped in their house because they couldn’t afford to sell it or make their payments. With renting, you may still experience a loss of income in hard economic times but you won’t be trapped. You have the flexibility to change your situation more easily.
Everyone is going to pass away at some point and we don’t know when. Dealing with death can be an emotional time for anyone but it doesn’t help if there is a complicated estate to worry about. Many people who own a home do not have an estate plan in place. When they pass, their heirs are left to deal with their house and other properties they own. This can make going through probate more complicated as well. One of the benefits of renting is that the house they live in doesn’t go through probate because they don’t own it. This can save heirs a lot of headache and countless hours of time when handling an estate. Renting can be an ideal choice for elderly people for this reason alone.
There are definitely some drawbacks to renting where you live. Some of these include: limits to remodeling, pet policies, no tax benefits, rent increases, and you don’t build equity. Although, in this day and age, it is important to weigh your options to find the right fit for you. We live in a time where relocating is more common, we change jobs more, and the world is much more accessible than it has ever been. People are starting to realize that renting doesn’t have the negative connotation that it used to. On average, millennials are buying less houses than previous generations and the ones that do are more likely to have regrets about their purchase. We cannot stress enough how important it is to really look at your situation to see whether buying or renting is the better choice for you.