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Five Situations Where Renting Makes More Sense Than Owning a Home

by Kevin Mercadante

I think we can generally agree that for most people, owning a home is better than renting, especially from a financial standpoint. But are there times when renting makes more sense that owning a home? I think there are – and here are at least five of them.

When You Move a Frequently

Renting better than buying

Sometimes renting a home is better than buying a home

If you have the type of job that has you moving around every two or three years, or it’s simply a lifestyle choice that you prefer, you’re almost certainly better off renting than owning.

It’s not just that renting is a more mobile form of occupancy either. Every time you buy and sell a house, you are incurring transaction fees that typically cost thousands of dollars. These can include mortgage closing costs when you’re buying, and real estate commissions when you’re selling. Either way, you are incurring fees on both ends of the transaction.

Even if the value of properties that you own generally rises, it will be difficult to recoup all the transaction fees with just two or three years of real estate appreciation. In addition, many markets are not seeing price increases at all. If that’s the case, the transaction fees you are paying to buy and sell are coming right out of your bank account, rather than the sales proceeds. It’s an expensive way to live.

When Owning Would Leave You Broke

Despite the fact that most people would prefer owning over renting, everyone is not in a position to own a home from a financial standpoint. If not, you may be better off renting than owning.

We’re not just talking about the monthly payment on the house either. As a rule, owning requires more out-of-pocket costs than renting. For example, any costs for repairs and maintenance will have to be paid by you as the owner of the property. If you don’t have sufficient resources to be able afford the several thousand dollars per year that repair and maintenance costs require, renting may be a less expensive way to live.

Many of the houses that you see that seem to be in disrepair are occupied by people in this exact situation. Credit – particularly mortgages and home equity lines of credit – are not as easy to get as they were a few years ago. That means the cost of repairs and maintenance will have to be paid out-of-pocket. If a homeowner does not have the extra funds to cover these costs, the house will fall into disrepair.

In addition, since the majority of people buy homes that are either at or beyond their maximum ability to afford, and they end up being “house poor.” This is a situation in which you live in a home – often a very nice one – but have very little money beyond the home, causing a strained financial situation.

Make no mistake about it, owning a home requires extra room in your budget. If that extra room isn’t there, renting may be the better option.

When You Don’t Have the Ability to Maintain a Home

The cost of repair and maintenance expenses can be reduced if you have the ability to provide many or most of the work yourself. But if you don’t, and you need to pay contractor to do virtually every job that needs to be done on the home – from cutting the lawn to fixing the furnace – you may lack the ability to maintain the property affordably.

When it is More Expensive to Own than Rent in Your Area

There are some areas where the cost of rentals is not consistent with the price of buying a home. For example, if the typical home in your area sells for $300,000, with a monthly payment of $1,800, but you can rent the same property for $1,000 per month, you may be better off renting than owning.

True, you won’t the tax advantages that homeownership brings, nor the equity buildup from the amortization of the mortgage, but saving $800 per month on the basic payment is close to $10,000 per year – and that’s pure cash. You can use that for investing or paying down debt. And that doesn’t even taking account the repair and maintenance expenses that you won’t have as a tenant.

When Making a Major Life Change

There are various times in life when you might be making changes that are highly disruptive. This could include a divorce, a financial crisis such as bankruptcy, relocating to a new area, during a job transition, or starting a new business. It’s the kind of change that will radically alter your life, and even your financial priorities.

Many people look to own a home even going into such major transitions, but it might be better to rent until the dust settles in your life. Renting will provide you with the flexibility that you need, particularly in the event that circumstance don’t play out quite the way you’d hoped or planned.

It may be that there are times in life when it is better to own, and other times when it’s better to rent.

Have you ever thought that there may be times when it is better to rent than own a house?


Published or updated February 25, 2014.
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{ 10 comments… read them below or add one }

1 Traciatim

It seems like number 2, 3, and 4 are all just extensions of the rent/price ratio being out of whack in whatever area you are shopping.

Maintenance is priced in to rental properties already, you still have to pay it, just you don’t see it because it’s not a separate line item.

1 and 2 are really the only ones I consider to be valid points toward renting. The other points generally rely on either renting a crappy apartment vs owning a McMansion or only doing the comparison for a certain number of years that almost never includes still paying rent after your mortgage is gone and almost always assumes that you are investing the difference religiously at assumed majestic returns.

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2 Kevin Mercadante

I’d say #4 only, and it’s specific to your local market. #2 is more about your own ability to afford to buy a house. When you consider down payment requirements, and repair and maintenance costs, the overall cost of owning a house is almost always understated. This contributed significantly to the housing and mortgage metldown a few years ago.

#4 is really about your personal ability to do the work that owning a house requires. A lot of people buy homes who can’t even use a screwdriver or a rake, then end up paying others to do those jobs for them.

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3 Jonathan Look, Jr.

I am renting now and don’t think I will ever buy again. There is a freedom that comes with knowing you are not anchored in place. Over the years I have owned three houses. I figure I have roughly broken even profit wise. Not worth the headaches or risk.

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4 John Standard

When you consider down payment requirements, and repair and maintenance costs, the overall cost of owning a house is almost always understated. This contributed significantly to the housing and mortgage metldown a few years ago.

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5 Kevin Mercadante

Hi Jonathan – I’ve long thought that the mobility factor in renting isn’t fully appreciated. It’s even more true with today’s less certain economy when you never know if you’ll have to move to another city to land a job.

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6 Leonard @ The Wallet Doctor

There are a lot of pluses to renting. I think the best reason to rent is if your life is going through some unknown changes. Having the ability to relatively easily pick up and move can make a big difference when you are looking to stay flexible.

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7 Kevin Mercadante

Hi Leonard – There have actually been articles written by economists on that very subject. They say that the economy hasn’t been able to recover as fast or as fully as it should because jobs have become more mobile, but people haven’t. Anchored down by their houses – often with outsized mortgages that prevent them from following employment.

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8 dojo

We’d like to move to the US, if possible, so we’ll probably rent for a long time. We have our apartments here (which won’t be sold), so we’ll rent and avoid debt.

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9 Kevin Mercadante

Hi Dojo – That’s an excellent idea. I think that when ever you make a major geographic move you should start by renting for a while. That will give you a chance to learn more about the area before making a more permanent living arrangement. Also, renting allows you to leave more easily should you decide that you want to go back. In that case, owning would create complications.

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10 Marie @ 724 Credit

Right now, we preferred to rent rather than buying our home. First, we are not financially that stable, second, we do have more priorities, third, I need to help my younger sister to pursue her dreams and lastly, my husbands work is not permanent and he is planning to work to abroad maybe by next year.

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