I don't regret purchasing my home, but there are a million little incidentals and life lessons that will completely blindside you if you're used to living in an apartment. I got so inspired by all the things I didn't know about homeownership, I wrote my first book about it, but in the very first chapter I include a section on how to tell if you're ready and the benefits of renting vs. buying if you feeling uncertain or need a bit more time.
Homeownership isn't a one-size-fits-all thing. And while I think it can be a great thing for your finances, if it doesn't jive with your values or lifestyle, then what's the point?
Owning a home is also a big lifestyle change. I rented an apartment with my boyfriend (now husband) for nearly two years and I can definitely see the benefits of renting vs. buying – especially now that my stint as a homeowner has been sandwiched between periods when I lived as a renter.
Is it cheaper to rent or buy a home?
Depends on where you live. You may actually have to run the numbers on renting vs. buying based on your area in order to get a clear answer. Here's a great rent vs. buying calculator I like.
Is renting better than buying?
Financially speaking, if you live in an area where it is cheaper to to rent, and you can afford both a mortgage and home maintenance (about 1% of the purchase price of your home each year, according to The Balance)…then buying is better because you can build equity in the home.
But here's also value in being a renter if that's the type of lifestyle you desire. There are many benefits to renting, but I've listed five of the biggest ones (at least, the ones I found the sexiest while being a renter) to consider. Here's an extensive list of all the pros and cons to factor in when ultimately decided if you should buy, or keep renting for now.
The five biggest benefits of renting vs. buying
And questions to ask when deciding if you're ready to take the leap.
Benefit #1 – Flexibility
I think that this is the go-to argument for renters. Even a 12-month lease is way more flexible than a 30 years mortgage. If you plan on relocating in the near future (for work, for family, or just ‘cause) renting is the way to go. I'm not saying you can't buy a home and then rent it out or sell on a short timeline (like I did), but it's just harder to set these things in motion than it is to just break a lease.
Questions to ask: Am I rooted in this area (career, family, deep community ties?) Do I like where I'm living now or would I like to move in a few months time? Have I been renting the same apartment already for many years?
Benefit #2 – Maintenance
If you aren’t that handy with a wrench, you can rest easy knowing that your landlord should take care of any repairs your rental property needs. When you own a home it becomes your responsibility to fix, replace, and pay for those repairs yourself. Even if your home is in good working condition, it will still need regular maintenance. We have professionals who fix our home, but it still feels like we're at Home Depot a lot getting bulbs, or air filters, or mulch for the yard.
Questions to ask: How do I like to spend my time on the weekends? Would I enjoy home projects and maintenance? Would I find the upkeep stressful? How will my partner and I divide these duties if we share a home together?
Benefit #3 – You can get away with less of an emergency fund.
Everyone needs an emergency fund, don't get me wrong. But when you rent you can get away with having a smaller emergency fund (such as a small $1,000 fund for example) because, well, you don't have much that you're financially responsible for.
Since you’re not responsible for maintenance or other related upkeep, you’re less likely to drain your emergency fund on your home. This makes renting a surprisingly helpful strategy for saving money for other expenses such as paying off credit cards or making a dent in your student loans.
Questions to ask: What other debts do I have right now? Could money for a home be better spent on debt repayment? What could I achieve if I put off buying a home for (x) years and chose to rent instead?
Benefit #4 – You can choose where you want to live
It depends on your area, but maybe all the apartments are closer to the city, and single family homes are out in the suburbs. Or perhaps you'd like to “Try out” a few different neighborhoods in your city before choosing the one where you'd like to put down roots. All of this is completely possible with renting.
Renting an apartment in one area, and then get a job in another? Because you're renting, you can easily move to be closer to work (or family, or whatever) and make that change happen sooner rather than later.
Questions to ask: If I want to buy, do I know where I'd like for it to be? Do I see anything in the next 6-12 months that will impact my commute or my ability to be close to (x)?
Benefit #5 – Fewer Upfront Costs
If you’re hesitant about buying a home, you probably should rent. Homes are a huge financial responsibility and can end up costing even more if you aren’t prepared or don’t do your research.
- Think about it this way: the upfront costs alone of buying a home are usually tens of thousands of dollars.
- Compare that to the upfront costs of renting, which typically include security deposits, pet deposits, and any move-in fees.
Before you buy a home you typically need to have plenty of savings as well as a stable job and good credit. While you work on achieving these goals, renting can be a great option for you.
Questions to ask: Do I have enough money to buy a home? Do I have good credit? Enough for a down payment? Do I have enough for a monthly mortgage upkeep and expenses? Even if I have some money saved, will I need to use it in the next 12-36 months?
Why renting may not always be the more expensive option
When I worked in NYC, we got ridiculous Christmas bonuses at the hedge fund where I was employed. RIDICULOUS.
So large, in fact, that we joked about how everyone started shopping for newer, bigger, apartments in January because of the yearly Christmas cash influx.
My colleague Jen, (who is a now a famous author, mentor and friend) thought the idea of owning a home was ridiculous. I began slowly warming to the idea and she strongly discouraged me against it.
“Lauren, houses have roofs that leak, and heaters that break.” She'd say.
“But renting is so expensive!” I countered.
“Yes, but you pay for the luxury of not having to worry about those things.”
And you know what? It turns out she was right. There is a dollar value to your emotional energy and mental bandwidth you can't put a price on. Ultimately, taking some time to gut check will help renters decide if buying is really the right option in the short or long term.