For many people, renting a home feels like a “bottomless pit.” Likewise, an equal share of people would see numerous advantages to owning. To confirm that renting can even be better than buying a home in many cases, we will show you some of the situations that turn tenants into the masters of their finances.
The value of homes in the United States may seem out of reach for many wallets. Rents can also appear high, but they are more affordable for the vast majority of Americans, depending on where you live. But beyond the prices of each option, we’ll give you more reasons to feel confident that renting a property is the better option.
Avoiding High Expenses
Besides the actual price of the home, being an owner makes you responsible for many costs you can avoid when you’re only a renter. Setting aside recurring expenses, the ones that hit your wallet the hardest are maintenance costs. When homes suffer damage, you can’t afford to let the problem grow, but it can catch you off guard to the point that you might delay repairs due to a lack of funds.
No Large Upfront Payment
The down payment on a home typically ranges from 10% to 20% of the property’s value. If you wanted to buy a property that would cost at least $200,000, you would have to come up with upfront between $20,000 and $40,000.
While the vast majority of rental properties will ask you to pay a security deposit equal to one or two months’ rent in addition to the current month, that amount, depending on the dwelling, may not exceed $10,000. In addition, security deposits are safeguards that you must be given back or offset in months of free rent when you move out, so the initial outlay remains incomparable to the down payment for a house.
You Won’t Be Tied Down to One Place for a Long Time
If one of your plans is to emigrate in search of new opportunities for growth, owning a home would not let you move as easily as renting. To have confidence that you won’t lose money, you’d need to live in your property for at least five to ten years before thinking about selling it to offset the costs you’ve laid out between the down payment and the monthly payments, known as the break-even point.
Renting a property gives you the freedom to live wherever you want.
You Won’t Worry About Property Taxes
Property taxes can be a major expense: in New Jersey, Illinois and New Hampshire, property taxes are more than 2%, according to the Tax Foundation and The Fiscal Times. In New Jersey, for example, a $250,000 home with a tax rate of 2.38% would entail an annual tax payment of $5,950.
Many states don’t have property taxes that high, but the more valuable a home, the higher the property taxes will be. And as a renter, that’s another concern you won’t have.
• Everything you need to check about a neighborhood before buying or renting a home
• What does “renting a home with an option to purchase” mean and how can it be done?
• How to determine if it’s the right time to buy a home or if it’s better to wait
