Surely, you’ve heard from someone that money spent on rent is wasted, this is not true. Sure, you won’t make any money off of your home if you’re a renter, but you won’t make any as a buyer either unless you decide to sell. There are many benefits that come from the flexibility of renting, and I’ll break some of them down for you.
Buying is a huge commitment
If you buy a house you have a guaranteed place to live, but this also means you’re tied to it. You can control what happens inside your home, but not around it. Your neighborhood could receive an influx of people above your income level who decide to pour a lot of money into the community, making your tax rates and HOA fees go up. It could also go the other way, your neighborhood could decay over time, and you’d be stuck living in the bad part of town in an underwater mortgage.
Buying isn’t cheap, and owning isn’t easy
While many enjoy the stability and pride of owning their own place, paying for the property is only the beginning. As a homeowner, it’s your responsibility to keep the property in apt conditions. Any repairs, renovations, or improvements added to the home come out of your pocket; not to mention taxes and HOA expenses. Renting is a different story, you pay a flat, monthly fee with no surprises. There is also a landlord at your disposal to deal with any repairs or renovations needed. You get to focus on your personal obligations and still have a place to call home at the end of the day.
Money spent on rent is gone forever while owning a home builds equity. Right?
Well, yes, but equity isn’t really all that useful in most situations. Equity is earned by paying off your mortgage’s principal and increases or decreases with your home’s market value. Although, during the first few years of any mortgage, the majority of the monthly payment is spent on interest, making the process of building up equity very slow at first. After a few years of monthly payments, equity can amount to a considerable sum, but it’s an illiquid asset, meaning there is no way to access it that doesn’t involve selling or refinancing the home that you went through so much trouble to own. While renting does not build equity, it is not wasted money. You may choose to look at it as the expense for a place to live.
Renting is not for suckers. Once you strip yourself of the idea that buying a house is the first and most important investment of your life, you can see that renting makes more financial sense in many situations.