Is Renting Really Throwing Money Away?

We hear this statement often in the real estate industry: Renting is throwing money away. But is it true? The truth is that it depends. Let's review the pros of renting versus buying and then draw conclusions.

Renting

The reality is that renting does have its perks.

Flexibility: When it comes to renting, many of us will use the equity argument as a justification against it. The reality is that renting does have its perks. While it is true that renters may not be building equity in a home, renters do have more flexibility. When a person is discovering their career path, where they would like to settle down, and figuring out their lifestyle, flexibility is key when one desires to have the freedom to relocate quickly.

Costs: Let's face it, when embarking on one's own path as a young adult, the upfront investment one has to make as a renter versus an owner is a far easier bar to achieve. In renting, one must have a deposit and a means to make a predictable monthly rental payment and set aside savings and an emergency fund for a rainy day. It's practice for adulting.

Responsibility: Speaking of adulting, each person needs to decide if they are self-disciplined enough to handle the maintenance costs that come with home ownership. When a plumbing pipe bursts or that doorknob falls off, do you want to be the one to handle these minor repairs, much less far more significant repairs and responsibilities like HVAC and homeowner's insurance, taxes, etc.?

Buying

"Owning a home is a keystone of wealth… both financial affluence and emotional security." ~ Suze Orman

Equity and Investment: We are back with this word again: equity. What is equity, and why is it important? Equity is the difference between the value of your home when you purchased it and what you owe on your mortgage (if you didn't pay cash). If you bought your home with cash, you have 100% equity upfront. Each year, if your home value appreciates, your home equity also increases.

Many will assert that home ownership is the key to wealth. Specifically, homeowners can build wealth by investing in their homes and other real estate, paying down debt, and even starting a business. Of course, a homeowner should always consult with their certified financial planner or similar professionals.

Even if a homeowner doesn't utilize their home equity, provided the right environment, the home appreciates, giving you a long-term investment vehicle.

Stability and Peace of Mind Suze Orman says, "Owning a home is a keystone of wealth… both financial affluence and emotional security." Having control of one's living environment can undoubtedly bring one peace. As a homeowner, you can customize your space to reflect your style. You don't have to worry about lease renewals or rising rent prices. Finally, homeownership creates a more permanent community connection.

Conclusion:

The core of the decision about renting versus buying is based on financial readiness and lifestyle. There is nothing wrong with renting when one does not feel financially stable or stable enough with where one wants to live to take on a homeownership commitment. However, if you are financially ready to take on homeownership, have a stable job history, and know where you want to settle, becoming a homeowner is a rewarding journey, both financially and in terms of well-being. I have helped hundreds of homeowners on their homeownership journey. Feel free to ask me anything!