While a majority of people will purchase a home sooner or later in their lives, renting a home for the time being has its own advantages and does make sense for various reasons.
Benefits of renting a home as opposed to buying one.
Simplicity. Trying to find a home and property to rent that matches your requirements and what you want in a home is going to be difficult and is going to take time. However it is probably going to be easier than finding a place to buy. When you buy a home you have to line up financing, conduct inspections and deal with so many other issues that renters never have to face. When you do it, finding the right home to buy can be extremely time-consuming.
Convenience. As long as you’re staying in a rented property, it is your landlord who is responsible for the property maintenance and upkeep of repairs. Maintenance of buildings and appliances, plumbing, heaters, air conditioning, roof maintenance etc. is all the responsibility of the landlord. Not only do you save money on not having to spend on home maintenance, you do not have to trouble yourself with these matters as well as long as landlord is proactive about his property maintenance. The only problem is that many times, difficult landlords are slow to react to the needs of tenant when it comes to property repairs and maintenance.
Flexibility. As long as you are staying in a rented property, you have the freedom of moving whenever you wish. As a homeowner, if you wish to relocate you to deal with the significant task of selling your home or finding a tenant to rent.
Increased liquidity. When you rent a home, you do not have make large down payment or pay for the closing cost like you have to when purchasing a home. In case of most people, purchasing a home really stretches their financial resources and empties the bank accounts. By renting a home you can continue to maintain your liquidity and have the freedom of using the extra cash for other expenses. As a renter you are also spared from sudden urges that happened to strike homeowners frequently to bring about improvements and changes in their home such as replacing a leaky roof or an old furnace. You do not even need to buy a home to cut your taxes. If you have access to a retirement account such as 401K, 403B, SEP–IRA or Keogh plan you can slash taxes while you save and invest your extra cash as a renter. So saving on taxes should not be your sole motivation for buying a home.
Diversification. Many homeowners stretch their finances when they purchase a home. The result is that most of the money is tied up as an investment in their own home. As a renter you can invest your money in a variety of sound investments such as stocks, bonds and even your own business. You can even invest a small amount of money in a smaller property for the sake of investment. Over the long term the stock markets have produced comparable rates of return on investing as the real estate market. So you do not necessarily have to feel like you are missing out on making your money grow. There are plenty of good investment opportunities if you do not want to purchase real estate. However, you do need to have the discipline to save the money as a renter. The obvious disadvantage here is that, when renting your monthly payment does not go towards building as asset for you as it does when you are paying for a mortgage.
Possible lower cost. There are certain areas where the home prices are not in tandem with the rental prices. If the prices of purchasing a home have skyrocketed whereas the rents are still reasonable, you may be able to save money for some time by renting. In the next few sections we will explain how to compare the cost of owning to the cost of renting in your area and how to spot potentially overpriced real estate market. Renting should also be cheaper than buying if you expect to move soon. Buying and selling property costs money. The brokers and agents commissions, loan fee, title insurance, inspections and all sorts of closing cost add to the cost of selling a property. A property must appreciate approximately 15% just for you to break even and recoup these costs. Therefore if you buy a property and don’t expect to hold it for the next 3 to 5 years, buying does not make much economic sense. Although if you expect the property to increase in price by much more than 15% in the next 3 to 5 years, some properties are known to double in price in developing areas, you can still consider buying. However, this is not something that happens very often and might not be a risk that you want to take.