Many Americans still hope to own their own home, but 61 percent don’t think they will ever be able to, according to a new survey from market research firm The Harris Poll.
Owning a home can be a smart financial move, but don’t sleep on how renting can still lead you to financial freedom and improve your quality of life along the way.
I have a unique perspective, having owned three homes in the past ten years. I decided to sell those homes and rent now, even though I can afford to pay for a home in cash. My husband and I accumulated a net worth of $1.7 million before I turn 40 years old next year, and renting for the last two years has been a strategic choice that created more financial flexibility, lifestyle mobility, and reduced anxiety for us.
Before you go deeper into despair about how unaffordable homeownership is, consider how renting can free up time, money and energy toward other financial goals, while avoiding the risks and commitments associated with homeownership.
Homeownership Locks Up Your Net Worth
I heard once that your rent is the highest you’ll pay, while your mortgage is the lowest you’ll pay, and I can personally attest to how having fixed monthly rent payments has made budgeting so much less stressful.
Renting where I live in Charlotte, North Carolina only required a security deposit that was less than one month’s worth of rent. Even in more expensive places where I used to live like Boston and New York City, I had to pay first month’s rent, last month’s rent and a security deposit, but that was still significantly lower than a down payment, closing costs, and other upfront expenses required to buy home.
As a homeowner, on the other hand, I constantly had to account for variable expenses such as maintenance, repairs, property taxes, and homeowners insurance, which can fluctuate annually or even monthly, and be harder to predict.
By not tying up your money in a property, you have the flexibility to pursue other financial opportunities and diversify your investments. such as the stock market or starting a business, offering returns that you can access more readily, rather than having your wealth tied up until you sell your property. A big contributor to my business growing to six figures, while still only working 20 hours a week, is having deployed the money formerly tied up in home equity into making my business more efficient instead.
Renting Can Offer A More Flexible Lifestyle
Landlords are responsible for the maintenance and repairs of rental properties, saving you both time and money as a renter. For me, living in a multi-unit property has been such a breath of fresh air to have a property manager readily available. I’ve never had to wait more than 24 hours to have an issue fixed, and I never have to worry about how much it would affect my budget.
Of course, this is not true of all rentals, so it’s important to vet out your potential landlord or property manager. Ask them the processes to request repairs, and talk with neighbors in advance before your pick a place to rent.
Renting allows you the freedom to move without the mental burden or cost of selling a home. Leases typically last one year, giving you the option to reconsider their living situation more frequently compared to homeowners who are tied to a mortgage for many years. It’s ideal if you want to relocate for work, education, or personal reasons.
My in-laws recently retired and travel frequently, but often have to drive 90 minutes or more to the closest airport. They’ve thought about relocating, but the mental burden of moving years’ worth of possessions overwhelms them. And because of high interest rates and home prices, even if they sold their home, the idea of paying more for their next home, leaves them feeling stuck.
On the other hand, my husband and I travel just as frequently as our parents do, but we live ten minutes away from an international airport. We have been able to move all of our possessions three times in the past few years and be completely unpacked in the span of 48 hours, because renting also encouraged us to keep our clutter to a minimum.
Renting Can Make Work And Play More Balanced
In the fastest growing cities like Charlotte, NC where I live, there are so many new options for rental properties, especially apartments and condos. While renting can still be quite expensive, you may be able to offset some of that cost with shorter commute times not just to where you work, but also where you like to spend your free time.
For a similar cost in mortgage, I had no walkable options for entertainment or dining. Renting allowed me to move closer into the city center, where I am walking distance to theater, art and restaurants.
And even though space I rent now is significantly smaller than the last house I owned, my building, like its’ competitors provide amenities such as gyms, pools, and communal spaces that might be unaffordable or impractical to have in a private home. I’ve felt less of a need to spend on more expensive vacations when I have monthly community events to look forward to and a pool I can jump in any time.
Having a nice communal lounge to work from instead of staying inside my apartment has also allowed my husband to make new friends among our neighbors, too. We also enjoy hosting more now also, because we can share these amenities with our friends instead of meeting them at expensive bars and restaurants. As an entrepreneur, knowing I am not coming home to grass that needed mowing, or pressure to keep up with my neighbors gives me a sense of balance I didn’t have as a homeowner.
The Bottom Line
This is not to say that I am against homeownership. I may even consider being one again in the future. These points are here to help you understand that even if you can’t afford to buy a home right now, renting isn’t a waste of money. You don’t need to feel ashamed that you aren’t a homeowner.
It might actually be the opportunity now to expand your wealth building paths, and enjoy the freedom that renting may have to offer you now, rather than later.
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