Are you looking to move? Should you rent or buy? There are lots of factors to consider, and the decision can only be yours. Renting has some marked advantages over buying, including the ability to quickly move in, limited cash outlay, flexibility to downsize, often maintenance free lifestyle. Below are 8 specific advantages of renting over buying:
1. Down Payment
- If buying, you’ll likely need to put significant cash down upfront (typically around 20%). For a $200,000 home, that’s $40,000 plus other fees.
- Settlement cost and pre-paid fees can add anywhere from 2% to 5% to the purchase price of the home. Examples of settlement costs when purchasing include transfer tax which can range from 1% to 2.05% of the sales price, mortgage fees which can range from 1% to 2.5% (of the mortgage amount), title insurance and recording fees which can be ½% of the sales price.
- Examples of pre-paid fees when purchasing include legal, inspection, and home association fees.
- For a $200,000 house, these settlement costs and pre-paid fees can add $4,000 to $10,000 to the cost of the home.
- If you rent, generally there is only a modest security deposit and 1st months rent due in advance of moving into your new residence.
2. Speed of Move In
- Buying a home is a time and cash intensive process. It can easily take several months to complete the home buying process.
- You must allow for a lengthy pre-approval process with a bank or other financial institution (4 to 6 weeks). Additionally, you must allow time for inspection, closing, and potential pre-approval from the homeowner’s or condo association.
- With renting, you can potentially find, apply, get approved, and move-in in a matter of a few days to a couple of weeks.
3. Near Instant Mobility
- Standard lease terms for a rental are 12 months. With proper notice to your landlord (usually 60-90 days), you can pick up and move out at the end of 12 months without penalty. For a bit more rent per month, you can generally get a shorter lease term. If you are buying and want to move out, it can take many months (if not longer) to find a buyer. Plus, you are always subject to the risk when selling a property of recovering not only the original sales price, but the additional monies you paid beyond the sales price for settlement costs (transfer tax, mortgage fees, title insurance, recording fees) and pre-paid fees (legal, inspection, home association fees, and other fees).
- Additionally, when you go to sell the house, you should account for the cost of resale, which typically includes a broker’s commission of 5 to 6% plus transfer tax of 1% to 2% (depends on locality).
- Even in a relatively strong housing market, it may be difficult to recover these prepaid expenses in less than several years of ownership.
4. Maintenance Included
- Things break and need repair. If you buy, you are the owner and are responsible for repairs. Not only can repairs of even minor problems be expensive, but they are often extremely time-intensive. When something breaks, you’ll need to find, contact, and schedule reliable vendor(s). While it’s possible to find one firm that can do a lot, you’ll find you often need reliable specialists for heating/air conditioning, plumbing, roofing, pest control, and more.
- If you rent, generally the landlord and/or management company is responsible for maintenance and repairs.
5. Lawn Care Included
- When you buy, you are generally responsible for all lawn care, including cutting the grass, managing weeds, and any landscaping. This is tedious and expensive.
- In the winter, you’ll likely need to clear sidewalks and driveways from snow and ice.
- For the renter, the cost of such service is generally included in your rent.
6. Near Instant Neighborhood/Location
- When renting, you have an instant neighborhood of people around you, and the potential for many new friends with similar interests.
- Apartment communities, by nature, often promote social gatherings.
- Apartment communities are often located near transportation routes, and shopping which makes travel to and from work an easier commute, and entertainment more convenient.
7. Amenities Included
- When you rent, you generally have the advantage of many amenities within the apartment community including a swimming pool, club house, tennis courts, or exercise room.
- When you own a home, these are typically not included, and often require special memberships at other likely costly private clubs to enjoy.
8. The Myth of a Home Purchase as an Investment
- For many years, buying a home was considered an investment opportunity. Homes ‘only went up in value’, adding tens of thousands of dollars in profit.
- Unfortunately, this myth nearly destroyed 1 out of every 7 family’s life savings in the recession of 2007 to 2010. Homes lost as much as 20 to 30% of their value and were very difficult to resell or to refinance.
- Purchasing a home may be the right choice for a family, but the decision to buy should not be based solely on it being considered an investment opportunity.
There are lots of other reasons to rent versus buy, but of course it’s a personal decision, and one that only you can make. Today more and more renters are “renters by choice” because of the many advantages, including, no hefty down payments, near instant flexibility and mobility, maintenance free lifestyle, lawn care included, and more.