Renting: Pros and Cons

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Renting: Pros and Cons

Most people’s first experience with living on their own is through renting. There are many good reasons for renting a home instead of buying. A home could be a unit in an apartment building or duplex, or it could be a whole house.

It is often cheaper than owning

Some monthly mortgage payments for a house are lower than rent, but some cost more. Therefore, you might find your monthly rent payment to be less than that of owning a home. If you have roommates, it will be smaller yet.

Also, when you buy a home, you usually must put down a down payment. This could be as little as 5% or as much as 20% of the actual price of the home. When you rent, you put down a security deposit that you will get back when you move out (unless you have damaged the apartment). The security deposit will cost you much less than a down payment would.

No property taxes

Another advantage of renting: there are no property taxes to pay (your landlord pays them). Property taxes add hundreds of dollars to an owner’s monthly costs.

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. And in some larger apartment complexes, there might be a free gym, a swimming pool, and other nice amenities that are part of your rent.

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.

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 pick up and move across the country without worrying about whether the home will sell.

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.

What are the disadvantages of renting?

Here is a list of disadvantages to consider:

• No equity. For one, you are not building any equity (ownership). That means you can’t get any money back like you could with a house.
• You could get evicted. You could be evicted for breaking a rule or because the landlord is selling the building to someone else.
• Rents rise. Rents can and do increase over the years. Your mortgage payment will stay the same.
• You have to pay homeowner costs indirectly. Landlords work their own ownership and maintenance costs (such as the mortgage on the home, if they are paying one) into the monthly rents that tenants pay.
• You might still have maintenance duties. This is especially so if you rent a duplex or a house. Maintenance duties could include mowing the lawn and shoveling snow.
• Less freedom. Many apartments won’t let you paint the walls, put in new counters, or add a new wall. You might not be allowed to have a pet, or smoke, or take on additional roommates.
• Fewer tax breaks. Homeowners get the big tax breaks. Renters get very little. They might get the homestead credit if they have to pay state income tax, and if they are running a business out of an apartment, they might even get a home office deduction.
• The long-term effects of bad rental experiences. If you damage your apartment, get behind on rent, or get sued by your landlord, this will have ripple effects. Your credit report will be affected, and your ability to rent another apartment or take out a mortgage for a home will be affected.