A lot of people will tell you that renting your home or apartment is throwing your money away, but that's not always the case. Just because you're not ready to buy a home doesn't mean you can't get some great perks as a renter.
Image remixed by Nick Criscuolo.
In Some Areas, Renting Is Significantly Cheaper Than Buying
Buying a home is a good goal to have, but depending on your area, buying a home could actually be a bad idea. Being able to afford a $1500 monthly rent in a city doesn't necessarily mean that you can afford a $1500 mortgage in the same area. There are "phantom costs," like council rates, maintenance and insurance, that can shoot up your monthly costs significantly. A rented apartment or house is likely to be better than what you can buy for the same amount, and it gives you a chance to save up some money for the future.
Personal finance blogger Mr. Money Mustache suggests you consider the commuting costs as well. A house in a cheap suburb could be 40 minutes away from your work, costing you petrol and vehicle maintenance if you don't have a public transit option. It probably wouldn't be too difficult to find a rental closer to your work that could save you money on housing and commute costs.
Cities are expensive no matter what you do, but property within cities is at a premium because there isn't a whole lot of it. Apartments and rentals, on the other hand, are in abundance. With some savy searching, you're bound to find an apartment for a decent deal. There's no reason to rush into a buying a home until you know you can afford it. If you're not sure, this Rent Vs. Buy calculator can help you determine whether you're ready or not based on home price, down payments, and how long you plan to stay there.
You Don't Have To Worry About Your Home Losing Value
Lots of people will argue that when you buy a home, you're building equity in that home — after all, eventually, you'll pay it off completely. But remember that you can lose some of that money, too. If the housing market takes a turn for the worse and you have to sell, you could be out tens of thousands of dollars. When you rent, that's the landlord's problem, not yours.
Also, you will be able to save more money as a renter. You can take what you would be paying on maintenance costs and the extra you would have paid on the mortgage and stick it in a savings account that will net you usable, liquid funds you could put toward whatever you want (even a down payment on a home).
You're Not Responsible For Home Repairs
Landlords can be difficult to deal with sometimes, but when something at home breaks, they're the ones that have to fix it. They pay for the repairs, they have to deal with the handyman or exterminator, and they have to worry about the general upkeep of your building. When you own your home, that's all on you. That can add up to a lot of work on your part, or a lot of money — or both.
Your Budget Is More Predictable
Speaking of repairs and maintenance, those kinds of surprises can eat away at your budget at the least opportune times. As Craig Ford at Cash Money Life points out, home ownership lacks any sort of real predictability when it comes to your personal budget:
You do not know when the hot water heater will break, when pests will infest your home, or when your foundation will crack. Each of these emergencies require money to fix. When you rent you pay a set dollar amount every month.
That money you saved to go on holiday? Now it's going toward fixing the sink. That landscaping project that was only supposed to cost a couple hundred bucks? Whoops, now it's looking like it will be well over $1000. As a renter, you pay the same amount every month no matter what needs to be repaired. That consistency makes it easier to save money.
You're More Flexible
Owning a home makes it tough to be flexible with where you live. Michele Lerner at Money Crashers explains that renting makes it a lot easier to move, which is important if you think your career might cause you to relocate any time soon. (After all, it can be good to job hop when you're young.) Steve Repak at the Equifax finance blog agrees:
If you're in a profession that requires you to move often, like I was, renting could easily be a better choice. Buying and selling a home are expensive endeavours, and getting involved with either one could wind up being a losing proposition, depending on how long you will own the house, the housing market in your area, and current interest rates, among other things.
Renting lets you move into a month-to-month situation most of the time, and you just can't do that when you own a home. You should also consider your lifestyle. If you like to travel a lot for pleasure, renting gives you more funds for that and less things to worry about back home.
You Can Get Access To Certain Amenities
Last but not least, rental apartments and other communities usually have perks built right in. Sure, you could buy equipment and setup a gym in your home, or you could use the gym built into your apartment building. A pool would be nice in the backyard, right? Or go for an apartment complex with a pool and staff to clean and care for it. Not every rental has access to cool amenities like gyms and pools, but perks like that can make renting look a lot better than buying.