What are the pros and cons of renting? Is renting a bad financial decision? If you live in an apartment while you can afford a down payment on a house, is it like throwing money into a black hole?
When I was around thirty years old, my then-financial planner insinuated as much. In her opinion, I’m sure, I was way past the age of owning my own home. There were two reasons I did not. First, I did not want to have to mow lawns and deal with maintenance problems.
Second, I lived and worked in Dallas. As in any metro area, houses are very expensive there, and I was a single woman living on a teacher’s salary. I knew that if I were to buy a house, I would have to buy one in a suburb…and then have to commute to work on the freeways. I had done that for the first three months of my career, and I was not going to go back to it. No way, José.
I ended up buying a condominium in the general area of where I had always rented an apartment. It wasn’t the best area of Dallas, but it wasn’t the worst, either. Still, now that I better understand the pros and cons of renting, I wish I would have stuck it out in my apartment. I have come to believe that if you live in a city and can find an apartment complex that enforces it’s nightly quiet time rules and/or that houses mostly yuppies or older people who either don’t have the time or inclination to party, you should stick to an apartment at least until you start having kids.
Advantages of renting
There are several important benefits to renting an apartment or house. Not all hold the same import, but they should be taken into consideration nevertheless.
- You have no interior maintenance worries. If something goes wrong with the plumbing, you call the landlord or apartment maintenance, and they have it fixed at no cost to you. And if you’re in an apartment, you never have to worry about maintaining a lawn.
- Generally speaking, you don’t have to worry about being thrown out on your ear. Unless you’re living in a house which the landlord is planning to sell at some point in the future, you don’t have to worry about a lender foreclosing your home. Of course, if you don’t pay your rent for several months, you may get put out into the streets. But this doesn’t happen to renters who make decent salaries. On the other hand, home owners who make decent salaries regularly lose their homes.
- You can’t collect stuff. I’m talking about apartment living, of course. When you rent an apartment, your space is limited, and you’re not going to collect furniture, bedding, and other items that you don’t really need. That saves you money and housecleaning time, and reduces your stress.
- Usually, renting an apartment is a lot cheaper than paying a mortgage – comparing prices to either in the same area. Of course, it can cost a lot more to rent an apartment in California or New York City than to pay a mortgage on a house in Missouri. You need to compare apples to apples.
- There’s a lot less space to clean. Again, I’m referring specifically to renting an apartment here. I hate housecleaning, and while the two-story condo I bought felt more homey than any apartment ever had, it was also more than twice the square footage of my last one-bedroom apartment. I had devote much more of my spare time to cleaning it. Yuck. This “pro” of the pros and cons of renting heavily tips my mind in favor of the idea.
- Renting may actually be the better long-term investment. A few short years after buying my condo, I got married. Less than a year later, we sold it. All I got back was the down payment, and when all was said and done I figured out I would have been $11,000 richer if I had stayed in an apartment until marrying my husband, who owned a small, modest home in one of the suburbs.
- No HOA fees. If you buy a condominium, you will have to pay HOA fees. That was an extra $200 a month for me above and beyond the mortgage. Many suburban neighborhoods these days also require its residents to pay HOA fees.
- You have no debt on your place. This point is debatable. One could argue that renting a home – or anything, for that matter – is a kind of debt. After all, you owe the landlord something every month for your abode. And unless you’ve signed a lease-to-own deal, the place will never be yours, no matter how many years you pay the landlord.
However, you do not need to approach a lender and ask for a huge loan in order to live in an apartment or rented house. Typically, you pay the first and last month’s rent as a deposit, and the only thing hanging over you is a lease, if your property manager requires such a contract.
But even if you break a lease, the resulting fees are much less painful than if a lender were to foreclose on your house. Besides, one could argue back that as soon as you’ve paid the next month’s rent in full, you are debt-free until the next rent payment is due.
Lest we all get starry-eyed about renting and begin to regret buying a house, I need to fairly point out the disadvantages to renting versus buying a home. Remember, there are pros AND cons to renting, right? 😉
Disadvantages to renting an apartment
- You may indeed be throwing money down a black hole. If you happen to live in an area where the housing market is booming, it may be a better financial investment to buy a home – as long as you can put down at least twenty percent of the sales price as a down payment.
- There is no space between neighbors. If the lady next door to you has located her stereo system right up against the wall that divides her apartment and yours, and blasts the volume every day, this can quickly make you want to move. Ditto if your neighbor upstairs is a single guy who has loud friends over every night.
- If you want to grow a large garden, you can’t. And if you have a north-facing balcony, the only thing you will probably be able to grow in a pot is chives. There are a few people who have filled their balconies and/or patios with pots. Some even use part of a bedroom for growing plants under lights. But this is a lot of work, and there is no space for people or pets to sit outside.
- Your hobby may require more space than your apartment allows. If you love to dance, oil-paint, create sculptures, or refurbish old cars, an apartment will not work. Dancing requires a lot of space – and hardwood floors, rather than the carpeted ones most apartments have. Oil paints stink, and are best relegated to a garage, or at least an extra bedroom set aside for the artist. The other hobbies, of course, require a large space, such as a garage or outbuilding. This “con” of the pros and cons of renting can be very off-putting for people who genuinely need more space.
Disadvantages of renting a house
- When you rent a house, it may take the landlord much longer to make a repair than would a maintenance man at an apartment complex.
- The landlord may decide to sell the house to someone who wants to occupy it, forcing you to move.
- You have to ask permission to make modifications to either the interior or exterior, such as painting the walls or tearing up the backyard to make a garden.
- The house will never truly be your own.
While there are distinct advantages to single people or couples without children living in a rented place, there are, as with anything, potential problems, as well. But the point I want you to take away is that the sweeping generalization that financial gurus like to spout – renting is throwing money down a black hole – is often not true. In fact, in many places and in many cases, continuing to rent saves you a lot of money and headaches.
Whether you choose to rent or own — however you interpret the pros and cons of renting — you don’t want to make the number one mistake people unwittingly make with their finances. Find out what it is so you can actually achieve your financial goals by downloading my free report, “The Money Monster.”
To your success!