I keep seeing articles about how Millennials aren’t buying homes and how it is hurting the housing market. Most of us know, however, that the reason most Millennials are not buying homes is that they aren’t in a place of financial security to justify making that kind of leap. So many of them just keep renting. I, myself, have rented five different homes and bought one home, but when I first got the idea for this blog post, I hadn’t gotten into even considering purchasing personal property for a myriad of reasons. Having now been on both sides of this issue, the benefits and detriments of each is pretty obvious. Here’s why renting or buying may be the best option for a person.
Benefits of Renting
You Can Leave a Little Easier
When you rent, the time that you’re stuck there is wholly dependent on the lease you signed, but there is always a clear end date. So if life changes on a person, as it is wont to do, such as a new job, a job loss, neighborhood goes to crap, or the rent goes up, a person only has to holdout until a specific date and after that date there are no more strings tying the person to the rental. Some people see this date as a detriment because they may not be able to hold out until that date, but it is better than owning a home in that regard because when a person needs out of the home they own, offloading that home could be immediate or take years, and in all that time the person will still have to pay their mortgage or property taxes, insurance, and utilities, even if they aren’t physically in the property anymore. So renting is definitely for people who are not sure about where they will need to be in the next year or even the next five or ten years.
A lot of rentals include extras. Perhaps water and trash are included. Perhaps they include internet and/or cable. If these things are important to a person, it can be helpful to shop around for those things per rental. But pretty much universally included is maintenance. Nearly every rental property comes with at least one maintenance person who will come to fix issues as they come up, like plumbing issues, broken large appliances, heating and cooling problems, and such. They often also include pest control. The reason these two things are most often included in a rental is that they help prevent the rental from being unrentable once the current tenant moves out. It is to the rental management’s benefit to maintain and keep the place free of infestations. Especially in the day and age of the internet review. One review that mentions flooding, heating, cooling, or infestation issues can drastically lower a rental’s value. Homes do not usually have this kind perk. Nothing is included. Maintenance and pest control are completely up to the owner and no home includes a utility. The middle ground for an owner is to get a home warranty, which is basically an extra cost that covers most pest control and plumbing, appliance, and heating and cooling. Depending on what a person is willing to pay, it may include more. This is must for the buyer who doesn’t know diddly-squat about home maintenance, but that doesn’t change the fact that the home owner has all their utilities and entertainment costs on top of their monthly mortgage.
A lot of rentals come with a few things that cost a lot of money to lay out in a home, such as landscaping, a gym, a playroom, a pool, or a hot tub. These are great things to have, but to put them in a home, a person needs a lot of extra square footage and acreage. This adds to the price tag of a home and getting all or any these into the home also costs a lot of money. Even buying a home that comes with a pool preinstalled costs more than a home without a pool. But there is more than just a financial cost to set these things up and maintain them. There’s also the time cost to maintain them. Pool and hot tub maintaince takes a lot of time, and knowledge. A rental can push all this financial and temporal cost off of a person with all of the perks of being able to use them.
Some rental properties come with a security patrol and/or gated access. This can make it harder for something to happen to your car and can make you feel safer walking to the mailbox, gym, or pool. To get this in a purchased property, the price tag on the home goes way up. Most rentals have to have one or both of these to be competitive, especially in major metropolitan areas. In this same vein, delivered packages can be taken to the rental office to be picked up later, which helps prevent said packages from being stolen by neighbors. Homes often face issues with package delivery, but a big part of this is the delivery service itself. Some companies have no problem leaving packages at doors, whether or not there is an office at which to drop off the package instead. But a rental has a higher chance of safe package delivery with an office involved than a home without a secluded front.
Benefits of Buying
Rentals come with so many rules. To some extent this can be a benefit to the tenant, but some of them can just be frustrating. You know those perks I mentioned? Well, guess what? You can’t use the pool or hot tub after eight at night and you have to wait until eight in the morning to use them. They even lock up the pool area at night. What if you want to swim laps before you go to work? Well, too bad. So sad. Hate your kitchen? Better move. Would like a garden? You can have a max of three pots on your balcony. Want more than one pet? Not at this place. Purchased homes usually come with way less rules. Homeowners’ associations care about the front look of a home, but inside a private yard and inside the home, the owners can do anything they can afford. General laws still apply, so no loud parties or meth houses still applies.
Make It Your Own
There’s basically no reason to paint your walls in your rental. You’re going to have to repaint them when you leave or pay out of your deposit or above your deposit for the rental owner to do it. Even if you hate those beige walls, they will haunt you for months and months until you can’t stand it anymore and unfortunately, you know that every freaking rental you look at has those same beige walls. Look! There’s one that isn’t, but hey, they are prison grey, so that’s not really an improvement. Rentals are quite possibly the most average and least unassuming residences ever. They lack character. Nearly all of them. And there’s no reason for you to change it because you don’t own it. When looking for a home to buy, you can focus solely on the look of the outside because that’s the only part you most likely won’t be able to change. The inside? Paint the walls as black as your soul if you want; it doesn’t matter. Even if the previous owner painted all the walls chartreuse and your eyes feel like they might burn out of your skull, it doesn’t matter because before you move in, you can just paint them that lovely chocolate brown you’ve always wanted. Also in a rental, any minor damage you cause is immediately a castrophe. “They’re going to make me pay for that hole in the wall from me tripping on my bag!” Versus, the same minor damage isn’t great but doesn’t feel like a parent is going to come screaming out of the woodwork at you, demanding money to fix it. You can fix it at your leisure. It still sucks, but it doesn’t make you feel like a child.
Comparing a mortgage payment to a rental payment for a place in the same area for the same square footage, a person can see how buying can be financially better. A thousand dollar rental can have a five hundred dollar mortgage. Of course, that doesn’t include any utilities, but does often include homeowner’s insurance, property taxes, and sometimes the home warranty. It does take a lot of research and a lot of smarts to make sure that the mortgage is the best one for the home and for you. Predatory home loans swept the market leading up to the housing market bubble burst and far too many people got taken for a ride. Mortgages are not something to be entered into lightly and a person should really get a smaller home to be able to cut their housing costs in half to make the purchase worth it. If done right, this switch can be very beneficial. Some may wonder why rental prices are so high. It’s not just what the rental may include, but the risk involved in renting to people. Another current issue effecting the prices of rentals is AirBNB and similar companies. People with the cash can make a hefty profit by renting a bunch of apartments and always have them on AirBNB. This lowers the turnover rate on rentals, resulting in a scarcity issue. With the same or possibly more people wanting to rent fewer properties, the value of each one goes up. AirBNB was not designed for this secondhand market wherein this was the only way some people make a living. It was designed so that people could rent out their homes more easily for short term stays as an alternative to hotel rooms. Rental companies are seeing a piece of the pie too, so they aren’t against it. In fact, some of the people doing this on the side work for the rental companies. This is mostly happening in major metropolitan areas, so rentals in smaller areas are only seeing the normal property tax and maintaince hikes that come with rising values and older properties.
Renting a House
A standalone rental house can give a tenant a little more privacy from the rental owner and neighbors. It still gives the benefit of maintenance but takes away the typical rental benefits of included bills, perks, and security. If privacy and a quieter environment are more important than those things and the ability to leave by a certain date is still a requirement, this can be a good choice.
Renting a Room
This is often done without contracts. I suggest that you demand a rental agreement with rules of conduct anyway so as to not get any surprises and that the person renting the room can’t just kick you out. Getting those two things will lock both the tenant and the owner into following the contract. It’s better for everyone if the lay of the land is clear from the beginning. A room rental also comes with nearly all lack of privacy. A bathroom is usually shared with other people in the home and parking is often a problem. It’s more like living with family or roommates in college and often results in arguments. However, it is usually cheaper than renting an actual apartment or a mortgage payment and can still come with some perks, such as a pool or some gym equipment if the owner has it.
Buying an “Apartment”
In other words, purchasing a condo or townhome. Some of the responsibility of maintainance falls on the HOA, and they do enforce some rules. Certain specific renovations might be against those rules and some may need to be approved. It may also come with a gated community, a pool, a hot tub, a playroom, landscaping, and trash service. The home owner gets the benefit of the lower mortgage payment, the “make it your own” mentality, and sometimes even a yard at smaller condominiums. It’s like buying a mini-home, except it also usually comes with the close neighbors. HOA fees go up and down depending on how much they have to maintain; gates and pools cost more, so the fee is more if the community has those things. The only utility that’s usually included is trash. Everything else is up to the homeowner. A middle level of privacy and enforcement of some rules are the biggest factors in if this is right for a person.
What Should You Do?
At different stages in our lives, we are ready for different characteristics from our homes. Figuring out which is a higher priority and what we really want is a very personal thing. It is effected by the market and what you need right now. Still in college? Rent. Looking for a job out of state? Rent. Got your dream job? Start shopping for a home. Dream job doesn’t pay that well? Shop for less square footage. Want all the perks but don’t want to take care of them yourself? Get an apartment. Want privacy and need to be able to leave? Rent a house. You can see how it really depends on you. I do not suggest buying a place unless you are financially ready and are settling down. People often say that buying a home is the right thing to do once a person is out of college or once a person gets married. That is typical, but if you aren’t typical, there’s nothing wrong with that. It is okay to not ever buy a home. It is okay to wait to do so as well. It’s really up to you. Make the decision that is best for you.