So, you've been wondering is it better to rent or buy your new home? Well, this is just the article for you.
To make it simpler, we have divided it into two parts financial benefits and non-financial benefits. The financial benefits include, as you might have realized, all things finance from not having to pay maintenance costs or repair bills, accessing otherwise expensive amenities, not having to pay property taxes or down payments, all the way up to allow for better and more secure budgeting options.
The non-financial list is a little more fun and includes the freedom you gain to travel and move around, the additional quality you can gain, and the much better and popular locations you can live in, places you might have not been able to reside in otherwise.
Key Insight: Look at both the financial and non-financial benefits together
Additionally, we explore the financial commitment you have to make, and whether sometimes it may be better not to make the big investment as it has additional risks attached. Both renting and owning a place is a commitment, but in different ways and in different degrees. So, how exactly does renting beat out homeownership? And what factors come into it? Read on to find out 10 financial and non-financial benefits of renting a home that you should consider before making your move.
No Maintenance Costs or Repair Bills
One of the biggest benefits of renting a home is that there are no additional maintenance costs or repair bills. When you rent a property, it is the landlord who is responsible for all maintenance, improvement, and repairs. This means that if an appliance stops working, or even if your roof starts to leak, you can just call the landlord and he is required to take care of it. Not only is this less hassle for you, but can possibly save you a lot, and we mean a lot, of money.
Key Insight: The Landlord is responsible for maintenance and repairs
Access to Amenities
Another financial benefit of renting is having access to amenities that would otherwise be an enormous expense. If you enjoy luxuries such as a fitness center or an in-ground pool, but do not have the money to afford them yourself - considering not just the installation costs, but also the maintenance costs, then renting may be the answer for you. Many middle scale to upscale apartment complexes include such luxuries without any additional charge to tenants. Such luxury is likely to be unavailable even to condo owners, who would need to pay monthly fees for access to them.
No Paying Property Taxes
Another significant financial benefit is that you, in comparison with home owners, do not have to pay property taxes. The rate of tax varies county to county, and is based on the estimated property value of the house and the amount of land, but can sometimes reach up to thousands of dollars annually, which can be a costly expense to some home owners.
No Down Payments
Lenders generally require renters to pay a security deposit, usually worth as much as a month's rent, when it comes to upfront costs. If the renter has not damaged any rental property, the deposit will likely be returned to them after they move out.
On the other hand, when it comes to purchasing a home with a mortgage, as most do, the initial down payment is likely to be around 20% of the property's value. Of course, this also results in having equity in the home, meaning that the value of your house is likely to slowly increase as a result of all your investment.
This increase in the value of your house can renters never experience, however, if you do not have money for a down payment, you are likely to be, at least for now, better off renting.
Better Budgeting Options
One of the best things about renting is its financial security through consistent spending each month you simply know what your rent is going to be. What is more, the majority of landlords offer long-term tenancies. This means that renters can also benefit from long-term consistency, with costs being pre-planned and maintained at the same level for the whole duration of the tenancy.
This is likely to have a very positive impact on your budgeting each month you will have a fixed cost of rent, and the rest of your disposable income can be planned to suit the rest of your lifestyle. Homeowners on the other hand do not benefit from this security. Whilst the mortgage rate stays the same each month, and so does the service charge if you live in a block of flats, unexpected charges are simply just part and parcel of owning your own home.
The maintenance costs will vary, depending on what is broken, and are almost an endless list of possible additional costs, such as:
Broken washing machines or other white goods, Water leaks and/or mould damage
Leaky taps and pipes
Blown light bulbs
All these would be covered under your rental contract, but when you have your own place, it is all on you. So, in this case, really take into account the disposable income you have and whether it would not be more beneficial to have all such unexpected costs covered.
Key Insight: The top financial benefits of renting are access to amenities, no down payments on a house, and a clearer insight on your monthly costs-which relates to an simpler way to budget.
Now that we've covered all the financial benefits, let us explore the ones that cannot be paid for. And amongst these is first in line flexibility, which is simply unmatchable by owning a home. Most rental contracts are around 12 months long, which means that if you want, you could change a home every year.
This provides unmeasurable freedom you can explore new parts of the city, the country, or move abroad! Additionally, you can experiment with different apartment layouts, decorations, and price points to find the best choice for you. Not to mention, you will not be weighed down by mortgage payments and can hand out your notice almost any time, depending on the contract type.
This a point that adds to the access to amenities. Essentially, renting has the possibility of giving you a home of a better quality than you could afford to buy. Let us illustrate by an example. If a person with an annual household income of $80,000, which is double the average salary in America, wanted to find an apartment in Brooklyn, New York, he would generally struggle to find any place he could buy which was liveable.
If he was renting, however, he could afford a large apartment of a high standard, possibly even with luxuries in the building, such as an in-ground pool or a fitness center. Therefore, if the quality is what you are searching for, renting may just be the right option for you.
Additionally, renting allows you to live in more sought-after places than buying would likely do. Let us stick to the London example. Take for example Benthal Green, an area of London within walking distance of East London's iconic Brick Lane or the vibrant Shoreditch, and only minutes away from Oxford Street by subway long story short an incredibly popular near-centre area.
If you wanted to buy a home there, the average price fluctuates at about Ã‚Â£536,000, which is at least to most far too expensive (unless you have Ã‚Â£110k sat in your bank for a deposit of course). Renters do not have the same price barriers. Average rents in Bethnal Green are at about Ã‚Â£1,900/month, a significantly lower price in comparison. This price difference opens doors for a whole new range of residents, who can now afford to live in a popular London area they might have not otherwise.
There is Less Risk Attached
Buying a home is an investment, and as with all other investments, it carries risk attached. When your home is rented, you do not need to worry about the market crashing and putting you under water on your home, or that you will have to pay a costly home repair which will wipe out your whole savings account, not to mention not having to worry about whether your home is gaining or losing in value, in case you will be selling it later.
The biggest risk of renting is usually just how happy you will end up being with the home you chose, and that is a risk most of us are willing to make.
Key Insight: The non-financial benefits can be as simple as peace of mind, being that there is less risk attached than owning the property. Also. depending on your income--renting enables you to be in a more desirable location.
It is a Luxury to Be Able Not to Stress the Small Stuff
Small things such as chipping paint or yellowing grass are obviously far from being the end of the world. However, admittedly, they can still ruin your day, and as they pile up with time can actually make house owning a big responsibility. When you are just renting your place, you do not have to think twice about any of these.
So, if your chosen Sunday plans involve hanging out with your friends or reading with a glass of wine, rather than climbing up a ladder and clearing leaves out the gutter, then renting may just be the better option for you.
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