Depending on your age and the decade you grew up in, “conventional wisdom” on the topic of renting vs. buying a home could have varied tremendously. If for example you grew up in the 90s, you may have been brought up to believe that renting is just throwing money down a drain, and buying is a solid investment. But if you are among the younger Millennials and you grew up watching the recession, you may see buying a home as a potential trap and renting as a safe alternative.
Which of these perspectives is the right one? Well, both are extremes, and neither account for your personal situation. I am going to tackle that in the third part of this series. But first I want you to understand the pros and cons of both renting and buying. I covered buying in Part 1. Go back and read that article if you haven’t yet. Once you are ready, read on to learn the advantages and disadvantages of renting.
Pros of Renting:
- Flexibility is one of the prime benefits of renting. If you rent, you can move almost at the drop of a hat. You generally need to wait for your lease to expire, but there are exceptions where you can get away with breaking lease. But you will never find yourself trapped for more than the duration of your lease anywhere.
- A lot of the costs associated with a mortgage are nonexistent when you rent. You do not need to worry about property taxes, homeowner’s insurance, etc.
- You have no contract beyond your lease and no interest to pay. That means you never need to worry about ballooning mortgage costs.
- Life is a lot simpler. A mortgage can be a huge source of ongoing stress and worry with plenty of paperwork and administration involved. With renting, if you are unhappy with the situation or can no longer afford it, you can move somewhere else.
Cons of Renting:
- All the money you pay goes to someone else; none of it is invested. At least with a mortgage, some of the money you are paying each month toward your housing costs are also an investment in your future. Renting gives you nothing to pass down to your heirs.
- Costs are not always as predictable as you might think. You might think you know what you are getting with a rent scenario, but landlords can suddenly raise rent prices and add in unexpected and often arbitrary fees. This can force you to move on a regular basis. You can also find yourself in some fairly unpleasant situations if the landlord takes a set against you.
- You have a lot less control in your day-to-day environment. In many ways, renting gives you more control over your general life, but it also gives you less when it comes to your environment. What if you want to give the kitchen a makeover or erect a new fence in the backyard? You have to get permission from the landlord for everything. This may even be true of smaller jobs like repainting a room. All of the money you put in is also lost. If you leave the home you are renting, the next tenant reaps all the benefits. If you were buying, you would be increasing the value of the home.
So now you know a lot more about the pros and cons of renting vs. buying a home. As you can see, there are many advantages and disadvantages weighing in for each. So how do you decide what is right for your family? I will discuss that in my next post, Renting vs. Buying, Part 3: Questions to Ask Yourself.