Why Rent an Apartment?

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Why Rent an Apartment?

There are many good reasons for renting instead of buying.

It is often cheaper than owning

Some monthly mortgage payments are lower than rent, but some cost more. And of course, since houses are normally larger than apartments, you should ask yourself whether you actually need the extra space. Keep in mind, too, that there are the various things that people naturally buy once they get into a house and see all kinds of space just waiting to be filled up with stuff; that’s less likely with a rental.

Remember that a large portion of your monthly mortgage payment is interest. By the time you have paid off your mortgage, you may find that half or more than half of the grand total you paid went to interest. The mortgage interest tax deduction does offer some relief, but that requires you to itemize deductions. Since the proportion of the mortgage loan payment that goes to interest decreases each month over the term of the mortgage, it could stop being beneficial to itemize rather than take the standard deduction.

Another advantage of renting: there are no property taxes to pay. Property taxes add hundreds of dollars to an owner’s monthly costs. Again, there is a tax deduction for property taxes, but it is an itemized deduction and may not be as advantageous as the standard deduction eventually. In fact, federal tax reform legislation now limits the maximum state and local tax deduction (which includes property tax and either income or sales taxes) to a maximum of $10,000 per year.

There are no condominium fees or homeowner association dues to pay, either.

If you are fortunate enough to have some or all of your utilities paid by the landlord, there’s another chunk of change you are saving.

No maintenance costs

Mortgage and tax costs are predictable and can be planned. Not always so when your pipes burst, your furnace dies at 2 am on a cold January morning, you suddenly discover termites, or your roof starts caving in. Renters don’t have those large maintenance costs. They are typically limited to light bulbs and other small things.

As a rule, then, renters have more predictable housing costs.

However …

Landlords work their own ownership and maintenance costs into the monthly rents that tenants pay, and rents can and do increase over the years. When the housing market tanks and home prices drop over the course of years, renting becomes more attractive, and landlords may increase their rents accordingly.

You can leave your apartment behind

On top of the advantages noted here, a renter isn’t tied to a home. He or she can pack up and move across the country without worrying about whether the home will sell.

No fear of losing your investment

Not everyone makes a profit when selling a home. During a bad housing market, millions of owners find that their homes are worth less than what they owe on them (this is called negative equity, or "being underwater"). Renters need not worry about losing an investment.

Advocates for owning often refer to renting as "throwing your money away" because you are not building equity. Though you’re not building equity through owning, any money you save can be invested elsewhere to build wealth. There are, in fact, renters who have become millionaires this way. Besides that, renters aren’t really throwing their money away, because they are getting the use of a home and its advantages for their money.