A lifelong goal for many Americans is to own a home. Although the homeownership rate is very high in the United States today, it is not always the case. Historically, families either needed to build their own homes or rent houses from others. Although both rent and purchase have financial advantages, owning a home is not suitable for everyone. In this article, we explore why renting makes more financial sense than owning a home.
There are no maintenance costs or repaired bills
A tenant has an advantage over the landlord as they have no maintenance costs or repair bills. When you rent a property, your landlord is responsible for all maintenance, improvement and repairs. If a device stops working or your roof starts to leak, you call the landlord and it is repaired. The owner, on the other hand, is responsible for all home repairs, maintenance and renovation costs. Depending on the nature of the fix, it can get quite expensive.
Access to utilities
Another financial benefit for renting, rather than buying a home of your own, is having access to amenities that would otherwise be a huge expense. Luxury items like an underground pool or fitness center come standard in many high to mid-range apartment buildings at no extra charge to the tenant. If a homeowner wants to fit in with these amenities, it will likely cost thousands of dollars to install and maintain. Similarly, apartment owners need to pay a monthly fee to pay for access to these amenities.
There is no property tax
One of the main benefits of rent versus ownership is that the tenant doesn’t pay real estate taxes. Property taxes can be a big burden for homeowners and vary by county, which can cost thousands of dollars annually. Although property tax calculations can be complex, they are determined based on the estimated property value of the house and the amount of land. With newly built homes getting bigger, the property tax can be a significant financial burden.
No down payment
Another area where tenants have a better financial deal is upfront costs. Renters may be required to pay a deposit equal to one month’s rent. However, when buying a mortgage, you are required to have a large, 20% payment.
Although the exact amount a tenant needs to pay in advance varies from case to case, the total amount is significantly less than the amount ordered to buy a home. For example, with a 10% deposit for a $ 200,000 home market, the buyer would have to give $ 20,000 before moving in, and with a 20% discount, would need $ 40,000. For those who don’t have the savings to pay for a home, they may want to rent a better home.
More flexible for living places
Renters can live almost anywhere while landlords are limited in areas they can afford to buy. A city house may be out of reach for most homebuyers, but it can be made for tenants. Although rents can be high in areas where the value of the home is also high, renters can easily find a more affordable monthly payment than home buyers.
Reduce the value of assets
Property values rise and fall, and although this may affect homeowners in a big way, it affects lesser tenants, if any. The value of a house can affect the amount of real estate taxes you pay, your mortgage, and more. In a housing market, tenants are not adversely affected.
Fixed rent amount
Rent amounts are fixed for the rental period (mark them as production costs). Although landlords may increase rent by notice, you can budget more effectively because you know the rent you have to pay. Meanwhile, adjustable-rate mortgages may fluctuate while real estate taxes may be increased.
Lower utility costs
Although houses can be of different sizes, they are often larger than apartments for rent. As a result, it is more expensive to heat, and even electricity bills may be higher. Rental properties generally have a more compact and efficient floor plan that makes them more affordable for heating and electricity than a home.