You'll often hear the argument that renting a home is the same thing as throwing your money down the toilet. If that's true, then I guess every service we purchase in life is a waste of money. But besides that, there are actually many reasons why renting is a better decision than buying - and yes that includes financial reasons as well. Here are just a few:
Greater Flexibility
There are many of us out there that get tired of the same old same old. I don't eat the same meals every night for years so I think it's actually quite natural to want to change your home once you get tired of it. Yes, you could just remodel and redecorate the home you own, but guess what? That's just an out of pocket expense that you won't likely recover and you have to have the work done yourself. If I'm tired of the home I rent, I can simply look for another one that tickles my fancy and move in within a day. No hassles and I can also change my neighborhood just as easily if I like.
You don't have to be liquid
Ok. This point doesn't pertain to those of you who have tens of thousands of dollars to spend as you wish. But given that a large portion of the country doesn't have that luxury, a significant advantage to renting over buying is that you don't have to have disposable capital to move into a new place. The down payment on a 300k house can make a serious dent in your bank account. Even if you can find a loan with a low down payment, you'll still need to always have cash aside for maintenance, those dreaded property taxes and closing costs when you decide it's time to move on.
Diversify your investments
Learn from the Enron scandal that caused thousands to lose their savings because they had everything invested in their own company. Because they didn't diversify, the result of the company's stock plummeting resulted in them not only losing the value of their investments, but also their future income as they were now jobless. For most people, their home is the largest investment they have. That's great in good times and horrible in bad times. Take the volatility out of your investment portfolio by renting and having the luxury of better diversifying your savings.
So as you can see, the answer when deciding whether buying a home or renting one is not as one sided as you may think. There are plenty of advantages to renting and plenty of reasons to not buy a home. As always, it will depend on the person's individual circumstances and preferences, but the answer is certainly not always to buy.
Greater Flexibility
There are many of us out there that get tired of the same old same old. I don't eat the same meals every night for years so I think it's actually quite natural to want to change your home once you get tired of it. Yes, you could just remodel and redecorate the home you own, but guess what? That's just an out of pocket expense that you won't likely recover and you have to have the work done yourself. If I'm tired of the home I rent, I can simply look for another one that tickles my fancy and move in within a day. No hassles and I can also change my neighborhood just as easily if I like.
You don't have to be liquid
Ok. This point doesn't pertain to those of you who have tens of thousands of dollars to spend as you wish. But given that a large portion of the country doesn't have that luxury, a significant advantage to renting over buying is that you don't have to have disposable capital to move into a new place. The down payment on a 300k house can make a serious dent in your bank account. Even if you can find a loan with a low down payment, you'll still need to always have cash aside for maintenance, those dreaded property taxes and closing costs when you decide it's time to move on.
Diversify your investments
Learn from the Enron scandal that caused thousands to lose their savings because they had everything invested in their own company. Because they didn't diversify, the result of the company's stock plummeting resulted in them not only losing the value of their investments, but also their future income as they were now jobless. For most people, their home is the largest investment they have. That's great in good times and horrible in bad times. Take the volatility out of your investment portfolio by renting and having the luxury of better diversifying your savings.
So as you can see, the answer when deciding whether buying a home or renting one is not as one sided as you may think. There are plenty of advantages to renting and plenty of reasons to not buy a home. As always, it will depend on the person's individual circumstances and preferences, but the answer is certainly not always to buy.