At the end of the day renting might just be plumb cheaper than owning for someone. The entry point to renting is a security deposit and the first month’s rent. The cash needed to own adds up quick after a home inspection, appraisal fee, survey fee and several others.
You can always make an apartment feel like a home with some of these ideas.
No repairs, no worries, right? When you rent you obviously don’t have to cover the expense of the repairs, which is great when something goes wrong.
Homeowners take heed and prepare against any disaster by doing these things before leaving for vacation.
What’s near the top of the complaint list for every homeowner? Taxes. Renters are saving a couple of grand a year or more by not having to pay property taxes. Plus, some states offer a credit for renters based on the amount of rent the landlord used to pay property taxes.
See what goes into property taxes and maybe you won’t feel so bad about not paying them.
Rates could be astronomical, the housing supply too tight or the next bubble might be on the horizon. It might be better to stay put in a rental than risk the value of a house during a turbulent time in the market. See what’s in store of the housing market this year.
Homeowners insurance isn’t something dismiss as a cost. Depending on your coverage and the types of things you have to insure, homeowners insurance adds up even if it’s paid out of your escrow.
Renters insurance is going to be cheaper than homeowners insurance but see the ways to save on car insurance.
Flexibility to Move
A home purchase gives the impression of throwing roots down and in order to make the purchase of a home a sound financial move, you’re going to have to stay there for a while. Most experts suggest following the five-year rule so home buyers will recoup the purchasing cost of the home through appreciation of the home. Still, you need to keep the home for at least two years or you’re subject to capital gains taxes.
You may not move for a while but the next time you do, learn these tips for moving furniture so you can save some friendships.
A smaller space means less money to heat and fewer rooms to light, thus a tiny utility bill for renters or in some cases, the landlord picks up the tab. A home means a significant increase in utilities that first-time homeowners sometimes forget to budget for prior to moving in.
Faster Way to Build Wealth
Back in November, a study from Florida Atlantic University, Florida International University and the University of Wyoming found that the property appreciation homeowners expect isn’t as powerful in terms of building wealth. The study posits that any gains from property appreciation have been offset by greater gains in the stock market. The study works largely on the idea of if renter’s decided to take the money they would’ve used toward a down payment on a house, and instead invested it in the market and continued to rent, they’d see greater wealth creation through the market rather than the appreciation of a house. However, the idea only works if the renter follows through on investing the savings they get from renting into the market.
All of this is just a fancy way of saying your house shouldn’t be viewed as an investment, though paying a mortgage for 30 years can be seen as a way to build a nest egg. There is a difference. There are ways to increase your home’s sale price, find out how to do it.
For those environmentally conscious or those in the minimalist camp, they can put their money where their mouth is by staying put in a rental apartment and reduce their carbon footprint. Their energy consumption would naturally decrease in a smaller space.
Need to Service Debt
The time just might not be right, financially, and renting is just easier. Student loan debt bills might be too high to move out from under or those credit card bills have piled up. There’s no sense to complicate things with a mortgage.
That credit score really does mean something when it comes to housing. A credit rating of 580 or better will qualify someone for an FHA loan and also qualify them for a down payment of just 3.5 percent. A credit rating of 580 or less will require a 10 percent down payment.
No Lawn Mowing
For those who aren’t as inclined on the handy side, there is likely a relief of not having to mow a lawn, which is a time drain and a buzzkill.
You don’t have to worry when a lawn mower won’t start.
No Snow Shoveling
In a similar vein, those who rent, likely don’t have to shovel a driveway or a sidewalk. But they might have to shovel out a vehicle if they have to park on the street.
You won’t have to know all these great tips on snow shoveling.
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Apartment Complex Amenities
The apartment complexes that have gone up in recent years in metropolitan areas tend to offer an array of amenities like an exercise facility, party room or table tennis area. You might not have to splurge on all that stuff.
Maybe the complex has a pool and you can save those pool noodles for crazy hacks like these.
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Cost of Housing
If rent prices are out of control, it probably makes sense to take the steps to own. But if home prices are too high in your market, then it’s better to rent. There are a number of rent-or-buy calculators out there like Realtor.com or the New York Times.
Opportunity to Invest
Harkening back to the study that found investing is likely a better way to create wealth, the opportunity to invest makes renting an attractive option. That’s if that money does get invested.
House is Not an Investment
Historically, housing prices have increased slightly more than the level of inflation. The only time the housing market rivaled the stock market came between 1990 to 2006. Learn how to avoid common mistakes that others make when buying a house.
Avoid Being House Poor
You bought a great house but now you don’t have any money to do anything else besides leave for work. What good is that? It’s called being house poor and it’s something to be avoided. You’ll be walking a tightrope of paying bills, including the mortgage, and in that case it’s better to continue to rent until you have some more breathing room.
Down Payment Determiner
So the decision to rent or to buy should also include consideration of how much of a down payment you can make to purchase a home. Obviously there are minimums that must be met for down payments but there are risks of putting down a low down payment. Those who purchase with a low down payment face more risk in losing value in their home if the market drops off.
Mortgage Interest Deduction
One of the impacts of The Tax Cut and Jobs Reform Act of 2017 is that it increased the breakeven rent points since the mortgage interest deduction became capped at $750,000 and the standard deduction got raised. According to the Urban Institute, the annual breakeven rent rate increases for families who earn $75,000 or more a year. The breakeven rent rate is the point at which it makes more financial sense to rent a home. Since the new tax plan de-incentivizes itemization, the point at which the family should own has increased by about $100 a month for a family of three earning $50,000 a year, according to the Urban Institute.
Find out what else you need to know about the new tax laws, which take effect next year.
How Long Do You Plan to Stay?
Buying has a lot of up-front costs that take a while to pay off. As noted earlier, most people use a five-year rule as to how long to stay in a house before you can leave without losing money. It should be noted how long you want to remain in that neighborhood before you move there. A lot can change in a couple of years and you really have to commit to at least five years in one place.
Want to know how long things in a house should last? Find out.
No Homeowners Association Fees
That homeowners association is a vitally important thing to take into account when buying a home because they’re often restrictive on what you can do to and around your house. If you rent, you likely don’t have to worry about that.
No Worries About Depreciation
The volatility of the market can send buyers scurrying away. But renters can remain calm since they don’t have to worry about their property losing value at a crummy time in the market.
More Leisure Time
Renting allows people to avoid the shackles of chores around the house and gives them a little more free time to do what they want. Renters don’t worry about carving out an hour to mow the lawn or having to climb a ladder to clean gutters in the fall.
Not Stuck With Neighbors
Thin walls are definitely a problem but it’s not like you have to chat with someone in the hallway like you might when you go to the mailbox.
If you have nosy neighbors already, a privacy fence isn’t such a bad idea.
Live Without Clutter
Renting, depending on the storage situation, will force someone to declutter whether they like it or not. They simply won’t have the space usually to sprawl out that massive Beanie Baby collection.
No Messy Divorce
You might not think it’ll happen but if it does, renting is going to make things a lot easier if a divorce takes place. There won’t be the messy breakup of one partner buying the other out of the house and the need to refinance the house in order to do so.
Easier to Budget
Renter can pretty well predict their monthly expenses whereas homeowners have to budget for catastrophic events like a water heater going out or a furnace. Sometimes it’s just easier to Keep It Simple, Stupid.
We love living on a budget here. Get down on some of the best frugal tips we’ve got to help keep you on budget.
Market Ultra Competitive
When the market is hot for sellers, buyers who face heavy competition aren’t going to get the best deal. Buyers might feel the need to overpay for a house because there are so few listings. If you’re renting, just let the market cool off and pick your time to buy.
Save on Furnishing
Maybe you love the couch that is perfectly conformed to your body and don’t want to get rid of it. Chances are the couch will be on the curb along with a number of other pieces of furniture if you decide to buy. Your new home will have to be furnished accordingly, lest you be judged.
Finding the right furniture is a bit of a science, just don’t accessorize with these items from the thrift store.