7 Advantages of Renting vs Owning a Home
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There are several advantages of renting a place to call home that I would like to share with you today.
For the past 13 years, my family has lived in a house that we were paying a mortgage on. Then last summer (2020), we decided it was time to sell and rent a home for a few years.
Our goal is to build our next home over the next 12 to 24 months … but in the meantime rent.
The last time either my wife or I had rented a place to live was back in college. So in the debate of rent vs buy a house – we both were always on the buy a house team.
However, now that we have been renting for a while, I have started to discover a few advantages.
Overall I’d say we still would prefer owning our home … but there are plenty of disadvantages to buying a house. For example, the cost to own a home is not simply paying a mortgage.
We experienced first hand the rising costs of home ownership …. especially as your house ages.
So if you find yourself debating renting vs buying a house, let me share with you some advantages of renting that our family has experienced.
7 Advantages of Renting vs Owning a Home
This list could probably be much larger than it is … but these are the advantages we have seen so far from renting.
We have been renting a townhouse for about 3 months now and have already seen some advantages. Of course, there are several disadvantages of renting, but that is for another article.
As time goes on and we continue to rent (for at least 9 more months), I will add to this list.
But for now, here are the 7 advantages of renting … from our first hand experience.
1. No Property Taxes
I will start with the biggest benefit of renting that I know – no property taxes!
Last year (2020) our property taxes on a 3,300 square foot home we owned were around $4,400.
This year by renting, the landlord is now responsible for paying the property taxes on the townhouse we live in.
Our rent however is much higher than our mortgage was … so in reality we are likely paying a portion of these taxes in our monthly rent.
The good news is that our rent payments are locked in for a year, so there will be no property tax increases to worry about.
And we won’t need to put away money to pay for our property taxes at the end of this year (we did not use escrow when owning our home). That is being handled now by our landlord.
Flexibility is a very close second on the list of advantages to renting from our experience so far.
My wife and I have been wanting to build another house for some time now … and we took the first step last fall when we sold our home.
We debated on the timing for a while on when to list it … so we would have the flexibility to start building our next home.
Staying in our last home while building another was not something we wanted to do. That option didn’t offer much flexibility … which we now have with a rental.
Renting for us has plenty of flexibility compared to home ownership. Other than signing a 12-month lease on our current rental, there is really no other obligation … so we are free to make our next move.
I would caution though that the landlord has some flexibility too … once our 12-month rental lease is up, we may need to look for another place to live if our next home is not ready.
3. Short Term Market Unpredictability
Similar to having flexibility, renting removes a lot of market unpredictability … especially if you are thinking about selling your home.
I would say it is more of a short-term market unpredictability compared to longer term uncertainty.
As I have stated already, my wife and I are planning to build our next home over the next 1 to 2 years.
We debated a very long time about putting our last home on the market and the timing of it. Since we didn’t want to own a home and build at the same time, we had to take action at some point and sell.
Fortunately, we sold during a very hot real estate market in our area and had an offer on the home the 1st day it was listed. The offer was over the asking price and it worked out to be great timing for us.
We probably could have waited another 6 to 12 months and squeezed out a bit more equity in the home … but nothing was guaranteed.
While renting comes with some disadvantages … market unpredictability isn’t one (at least from our experience).
When searching for homes to rent, we knew the market rates of the rentals we had interest in. There was no uncertainty there, as we could lock in a monthly rate for rent.
We don’t know where the real estate market (in our region) is going over the next 1 to 2 years. So we took advantage of renting now to avoid any future market uncertainty.
4. Keep More Equity
When my wife and I purchased our first home, we made a 20% down payment. Fortunately, we had help from our family as we were just starting out building ours.
Then with our second home (larger and more expensive) … we made a 20% down payment again. After closing costs and other expenses, we wrote a check for over $60,000.
Now keep in mind, this didn’t happen overnight and we don’t have $50K or $60K just sitting around in our bank account. That is a big chunk of money.
Fast forward to a few months back when we sold our home.
After 13 years … our home experienced appreciation (a nice advantage of owning).
We also continued to pay down our principal on our mortgage loan every month (another advantage of owning).
So based on appreciation and a lower principal, we pulled out a lot more money than what we put in.
The point here is … we had a lot of equity tied up in our home that was not very liquid. By renting, we now have more flexibility on what to do with this equity – some of which will end up going back to our 3rd house when we buy it.
One of the biggest advantages of renting (I would guess for most people) is the ability to keep more of your equity from being tied up in a home. And not having to come up with a huge down payment.
Our rental agreement required 2 months rent up front and that was it. Less than $4,000 required to rent vs over $60,000 to buy.
5. Low Stress
We were the original owners of our house (13 years) before we sold it this past fall.
The thing is … as a house gets older and older … more big expensive items start to break.
For example, a year before we sold our home, we had to replace our roof ($7,000). The original roof (when the home was built) lasted about 11 years.
One day after a heavy rain, we realized we had a leak in the roof … which caused some minor water damage inside the home.
So the entire roof needed to be replaced … and we needed to fix the water damage inside.
The total cost for everything came to a good chunk of money. But what was worse than the money for me … was the stress.
There are plenty of other stories that I could go into about being a stressed out homeowner.
On several occasions our furnaces went out in the winter (we had one for each floor). Or the time when our door leading out to the back of the house started leaking and caused water damage to the sub-floor.
I could go on and on about the stresses of home ownership.
For me … this is one of the biggest advantages to renting!
6. Lower Utilities and HOA (maybe)
This advantage to renting depends on your landlord and particular rental.
Some landlords cover the cost of utilities or at least some of the utilities. For example, your landlord may pay for – water, electric, and/or heating.
The rental lease that we signed required that we cover the costs of all utilities – water, gas, and electric.
But what we don’t have to pay for our the HOA fees, which run about $175 month in our townhouse.
At our house (the one we sold), our HOA fees were about $160 per year … which covered the cost of yearly landscaping and mowing some common areas.
The neighborhood was planning a community pool in the next few years … which would have drastically raised our HOA dues.
Depending on your circumstances, renting can save you in monthly utility and HOA expenses.
7. Cheaper Insurance
Let me explain it to you like this – $1,284 vs $109!
Last year we paid $1,284 for our homeowners insurance. This year we are paying $109 for renters insurance.
Insurance rates will vary depending on where you live. However, the difference between insuring a 3,300 square foot home and having renters policy to insure our belongings is huge.
We will save over $1,100 on insurance this year from renting. That is equivalent to one mortgage payment that we used to make.
This savings helped us decide that renting was a better option for our family over the next year … compared to staying in our home during the same period.
Benefits of Renting a Home
As you can see (and probably know by now), there are plenty of benefits of renting a home.
There can be some costs savings on things like property taxes, insurance, and utilities. Although make sure you calculate the total cost difference when doing a rent vs buy a house analysis. Often times the monthly rent is a lot more than your mortgage.
Other advantages of renting include less stress, flexibility, less uncertainty, and keeping more of your savings from being tied up in a home.
Renting or buying a house come down to what is best for you … both have advantages and disadvantages.
And depending on where you are at in life and financially, this could change.
My wife and I have owned our house for years. As we now recently transitioned into renting, we can see some advantages.
However at some point, we still feel that owning a house is a better option for us. In the next few years, we will likely switch back over to owning.
What is your preference? Can you add any other advantages of renting?