Renters by Choice
The current sentiment on renters and landlords would lead one to believe that all renters are forced into a lifestyle of throwing away their hard-earned money each month to pay their landlord because they are priced out of homeownership. While this may be the case for some renters, it certainly isn’t the case for all of them. In this article I’d like to make a case for why renting can be a very smart choice for many people.
Renting affords flexibility to the renter. You sign a 1-year (or sometimes shorter) lease and are only responsible for that term. You only need to provide a 30 or 60 day notice to your landlord prior to your current lease expiration, indicating whether or not you’d like to renew for another term. Owning a home isn’t that flexible. Usually, you are locked into a 30-year mortgage and if you have to move, you would need to sell or rent your house, which triggers additional expenses and major efforts on the part of the homeowner. Many people aren’t sure if they’ll live in one location forever. Therefore, renting provides the feasibility of moving if another opportunity arises or if there is a need to relocate due to a family emergency or other circumstances. Many homeowners are not able to capitalize on relocation opportunities due to the financial burden and complexities of owning and selling/renting a home. The general rule of thumb is that it’s not financially worth it to own a home unless you are 100% certain that you will remain there for at least 5 years. Why tie yourself down if you don’t have to?
Savings – Yes, Savings!
Yes, rents are high right now … But so are home prices. Rental rates fluctuate with the market and can sometimes be negotiated.
One thing renters don’t have to worry about is large expenses to maintain their homes. No need to budget for a roof replacement, cosmetic updates, sewer line replacement, asphalt work or a new fence. Furthermore, if something goes wrong in your rental, it is usually your landlord’s responsibility to repair it (unless it is considered tenant damage). No need to worry about homeowners insurance, which costs much more than renters insurance. Some of these replacements and repairs can exceed $10k per project, so the savings are significant here. In some markets, you can even rent for less than what you’d pay if you were to purchase a home, making it a no-brainer if you’re also seeking flexibility.
Amenities & Services
This pertains mainly to folks living in apartment communities/large buildings. Apartment communities these days are usually bursting with amenities such as: fitness center, pool, yoga studio, concierge, package receiving, meal delivery service, frequent resident events, complimentary WiFi in common areas, business center, clubhouse/community room, coffee station, and much more. If you can think of it, I’m sure there’s a community that offers it. These little perks add up if you use them, and that helps to offset the rent you’re paying. Your regular $4 coffee from Starbucks is now free with the gourmet coffee station available, for example. Complimentary fitness classes and access to equipment such as Peloton bikes, Fitness on Demand and a plethora of strength and cardio equipment result in no need for a gym membership. As a homeowner, all of the items just mentioned are on your dime.
Many apartment communities and landlords do NOT report your rental obligation to credit bureaus, although some property management companies have started doing this as a way for renters to boost their credit scores and encourage timely rent payments. If your landlord doesn’t report your rent to the credit bureaus, then your debt-to-income (DTI) ratio is much more favorable than that of a homeowner, whose mortgage payment is already tracked. When you apply for new credit, whether it be for an auto loan or new credit card, your DTI as a renter will allow for more credit.
Well, there you have it. Several reasons why it is beneficial to rent instead of own. The goal of homeownership is a dated one which fails to take into consideration the increasingly mobile nature of humans and globalization. Freedom and flexibility are highly valued nowadays which makes it impractical to idealize owning a home and remaining there for 30+ years.
What do you think? Are there any other benefits to being a renter?