Author: TheArcadian
June 12, 2008
When I was younger (and dumber) I used to think that renting was for poorer folks. My parents hammered into me the belief that renting was equivalent to throwing money away every month. Fortunately, college taught me that it was necessary to challenge everything I’ve learned as a child and realize that many things in life aren’t black and white. Can renting be a waste of money? Yes, but it doesn’t mean that’s always the case.
Putting the current inflated prices aside for a moment, let’s take a look at 4 reasons why MSN Real Estate says you should consider renting:
1. Renting can save money
At the very minimum you’ll be shelling out PITI for your home. That is:
- Principal
- Interest
- Tax
- Insurance
That doesn’t include property maintenance like upkeeping the yard, paint, plumbing, ect… When you rent, most people just make one monthly payment and that’s it.
2. Homeowners’ tax deductions are overstated
According to research quoted by MSN, “… half of homeowners don’t get a break, because even with mortgage interest and property taxes, their total deductions do not exceed the standard federal tax deduction ($10,900 for couples and $5,450 for singles)”.
For these folks, it’s like spending $100 to save $20. They’re better off saving the difference and investing it.
3. More options are available to renters
This is a no-brainer. Renters have a limitless supply of apartments, condos and empty homes to choose from. Even for a larger family it is possible to rent cheaper than it is to own.
4. Renting gives you flexibility
This point is dependent on your current situation. For the up and coming young professional, you’re better off renting and saving for a few years than to buy a small condo. Who knows how fast you will outgrow it?
Depending on how much you can save, families with children may be better off settling now since moving is a hassle.
My #5 reason why you should rent right now?
Property prices are declining, foreclosures are picking up and even with a sizable down payment, renting is still cheaper that owning. Don’t worry, you’re not going to miss the bottom because unlike stocks, real estate takes years to go anywhere. The bottom will be 2-3 years of flat prices and even investors will be crying doom and gloom.
That is when you know it’s time to buy.
I might add that for higher [and some middle] income people the alternative minimum tax negates some of the write-off for property tax and mortgage interest.
Sadly, many are brainwashed into thinking buying a home is a great investment. Despite the fact the investment produces no income, requires monthly cash outlay and often is never sold until after the owner is dead. Some investment huh?
In this whole debacle I have no sympathy for those caught in this mess. The telltale signs have been there for over 30 months.
Renting isn’t the American way. With renting you often rent only what you need. Like a small 1 or 2BR apartment that is cheap to heat, cool, and has a lower fixed monthly cost.
With owning you often put yourself into 30 years of debt, you endlessly spend on repairs and updates, you often buy a home 2-3 times large then an apartment so it costs more to heat and cool. And you need to buy more furniture, paint, …. it’s endless.
Also your boss at work loves when you own! He knows you can’t take that better job out of state since you need to sell your home first. So he/she doesn’t need to be as liberal with the raises.
Home ownership is an excellent thing, but you have to buy at the right priced, and buy what you need and can afford. You need to own your home, not let your home own you. (As it does so many people these days.)
The only advantage in my opinion of owning rather than renting is that with a 30 year fixed mortgage, your monthly payment stays the same. However rent always increases through time and someone with a fixed monthly mortgage payment will be further ahead in the long run.
Also one more thing, you can do whatever you want to do with your place, inside and outside, within constraints of local code, when you own.
Agree w/Matt regarding the cost of owning if you get a fixed rate mortgage. When I bought my current house I financed with 15 year mortgage and the payments were a stretch. 10 years later the payments are much lower than anything that I can rent. Other advantage of owning is that I can do whatever I want with my house. I knocked down a wall in my house to expand a room. Good luck doing that with a rental. Also, the advantages of moving whenever you want is greatly diminished when you have kids and have accumilated lots of stuff. The kids don’t want to move away from their friends and I’d rather have a root canal than try to move all of our stuff and three little kids.