Why renting can be a good financial decision for you

Why renting can be a good financial decision for you
Why renting can be a good financial decision for you

While many Americans still hope to own a home, 61 percent don’t believe they’ll ever be able to afford it, according to a new survey by market research firm The Harris Poll.

Owning a home can be a smart financial decision, but remember that renting can also give you financial freedom and improve your quality of life along the way.

I have a unique perspective, having owned three homes over the past decade. I decided to sell those homes and rent now, even though I can afford to pay cash for a home. My husband and I have amassed a net worth of $1.7 million before I turn 40 next year, and renting for the past two years has been a strategic decision that has given us more financial flexibility, lifestyle mobility, and fewer worries.

Before you sink deeper into despair over how unaffordable homeownership is, consider that renting can free up time, money and energy for other financial goals while avoiding the risks and obligations associated with homeownership.

Home ownership ties up your net worth

I once heard that rent is the most you pay while your mortgage is the least you pay. And I can personally attest that fixed monthly rent payments make budgeting a lot less stressful.

The rent where I lived in Charlotte, North Carolina, only required a security deposit, which was less than one month’s rent. Even in more expensive areas where I’ve lived before, like Boston and New York City, I had to pay first month’s rent, last month’s rent, and a security deposit, but that was still significantly less than a down payment, closing costs, and other upfront costs required when buying a home.

As a homeowner, however, I constantly have to deal with variable expenses such as maintenance, repairs, property taxes and building insurance, which fluctuate annually or even monthly and are harder to predict.

By not tying up your money in a property, you have the flexibility to pursue other financial opportunities and diversify your investments, such as the stock market or starting a business that offers you more accessible returns, rather than tying up your assets until you sell your property. A big contributor to my business growing to six figures, even though I’m still only working 20 hours a week, is that I’ve instead used the money that used to be tied up in the property to make my business more efficient.

Renting can offer a more flexible lifestyle

Landlords are responsible for the upkeep and repairs of rental properties, saving you, the tenant, time and money. For me, living in an apartment building and having a property manager available at all times has been a blessing. I’ve never had to wait more than 24 hours for a problem to be fixed, and I’ve never had to worry about how much it would impact my budget.

Of course, this isn’t true for all rental properties, so it’s important to do your due diligence on your potential landlord or property manager. Ask them about procedures for requesting repairs and talk to neighbors in advance before you decide on a rental property.

Renting gives you the freedom to move without the mental stress or expense of selling your home. Leases are typically for one year, so you can revisit your living situation more often than homeowners who are tied to a mortgage for many years. This is ideal if you want to move for work, school, or personal reasons.

My in-laws are recently retired and travel frequently, often having to drive 90 minutes or more to the nearest airport. They have considered moving, but the mental stress of moving years of property is too much for them. And with interest rates and real estate prices so high, they feel helpless even if they were to sell their home if they had to pay more for their next home.

On the other hand, my husband and I travel as often as our parents, but we live ten minutes from an international airport. We’ve been able to move all of our belongings three times in the last few years and unpack completely within 48 hours because renting also encouraged us to keep our stuff to a minimum.

Renting can make work and leisure more balanced

In the fastest-growing cities like Charlotte, North Carolina, where I live, there are so many new opportunities for rental properties, especially apartments and condos. While renting can still be quite expensive, you may be able to offset some of that cost with shorter commute times, not only to your workplace, but also to your favorite recreational spot.

With similar mortgage costs, I had no way to walk to entertainment or restaurants. Renting allowed me to move closer to the city center where I can walk to theater, arts, and restaurants.

And although the space I now rent is significantly smaller than my last home, my building, like the competition, offers amenities like gyms, swimming pools, and community spaces that might be unaffordable or impractical in a private home. I’ve felt less of a need to spend money on more expensive vacations when I can look forward to monthly community events and jump in the pool at any time.

Since I now have a nice common space to work in instead of staying in my apartment, my husband has also been able to make new friends among our neighbors. We also now prefer to host because we can share these amenities with our friends instead of meeting them at expensive bars and restaurants. As a business owner, knowing that I won’t come home to find grass that needs mowing or pressure to keep up with my neighbors gives me a sense of balance that I didn’t have as a homeowner.

The conclusion

This is not to say that I am against home ownership. I may even consider owning a home again in the future. These points are to help you understand that even if you can’t afford to buy a home right now, renting is not a waste of money. You should not be ashamed of not owning a home.

Perhaps now is actually the opportunity for you to expand your wealth accumulation and enjoy the freedom that renting offers you now and not later.

ForbesStop living paycheck to paycheck with this one financial habit

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