Advantages of Renting a Home Instead of Owning

Posted: 25 Jan 2011 04:00 AM PST

Right now, home prices (especially in the U.S.) are quite low, and mortgage rates are fairly low as well. A number of foreclosures means that there are cheap homes on the market. As a result, it is really tempting to buy a home. However, in some cases it might be to your advantage to keep renting. This has occurred to me as my family faces the prospect of moving and possibly selling our house, as well as the expenses associated with paying for a flooded basement. I’m wondering if maybe we should go back to renting. Here are some of the reasons that renting is looking tempting:

Photo: Phil Sexton

Owning a Home is Expensive

Forget about the line from real estate agents about a home being a great investment or your biggest asset. Your home is a purchase. An expensive purchase. By the time you pay interest (even though you can get a tax deduction), property taxes, maintenance costs, repair expenses, insurance and utilities, the expenses really start to add up. Even if you do sell your home for more than you paid, it may not be enough to offset the accumulated expenses associated with owning a home for decades.

Renting, on the other hand, is usually less expensive. You aren’t responsible for the repairs or maintenance costs (unless you do something you shouldn’t), renter’s insurance is much cheaper than homeowner’s insurance, and you don’t have interest or property taxes. Depending on the market you’re in, a rent payment for a decent-sized home may be a couple hundred less than a mortgage payment. Some folks like to invest the difference, hoping for a better long-term return.

Greater Flexibility

If you aren’t going to be an area for very long, the flexibility of renting might be attractive. Aside from having to sign a one year initial lease, renting offers the ability for you to pick up and leave if you need/want to. We had hoped to be in our current home for a longer period of time, but, like so much in life, it isn’t working out. We will probably have to move to a new town, and that means trying to sell this house. If we were renting right now, we could just offer 30 days’ notice to the landlord and leave when ready. And, because we don’t want to be landlords, we will probably have to take a loss on the home when we sell it.

Bottom Line

As with all things financial, what works for you is different from what works for someone else. We probably weren’t exactly ready to buy a home, and we might not rush into it in the next place we live. While we can afford to live in the house, the responsibility of it, and the expense associated with it, can be irritating at times — especially when I think that we are likely to be moving after staying in the home for less than five years.

In the end, carefully weigh the pros and cons of buying a home versus renting it. Think about what is likely to happen in the future, and whether or not the money you put into home ownership might be better used elsewhere.

Dollar Matters: Career Moves

Posted: 24 Jan 2011 09:00 AM PST

The beginning of a new year is often the time that we begin thinking about perhaps taking a new direction with career choices. If you are interested in different aspects of your job, and learning more about your career options, here are some great posts:

Changing Careers: Are You a Burnout, or a Cross-Functional Dynamo Seeking a Challenge?

PT Money offers a look at how you can switch careers. It’s all in the type of person you are — and how you present yourself.

Should I Work for Free?

This awesome flow chart, brought to my attention by My Money Blog, helps you decide whether or not you should be doing work gratis. I loved it. (This link takes you to the “F-bomb version”, but you can also see a clean version of this flow chart.)

How to Deal with a Boring Job

Free Money Finance provides a look at how you can make it through when you have a boring job.

Why Young Entrepreneurs Should Hold Down a Job After College

Frugal Dad makes a compelling case for holding down a job. It’s an interesting look at why, even though you might be considering becoming an entrepreneur.

The Most Important Factor in Retirement Savings

Part of smart career decision making is being ready for retirement. Get Rich Slowly offers a look at the importance of retirement savings.

Life Insurance Blog