No, renting is really not a waste of money

No, Renting is Really Not a Waste of Money

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You may be wondering if renting is really a waste of money, or is renting a good investment?

Not everyone wants to be a homeowner and that is okay. It used to be that buying a home was a measure of success, a celebrated step of adulthood, but recently things have started to shift. As some people start to prioritize experiences over things, buying a home is no longer synonymous with success. In fact, many successful people still rent. According to Forbes, that includes the likes of Beyonce & Jay-Z, Ariana Grande, Taylor Swift and Justin Bieber to name a few. 

Lately, I’ve noticed an increasing amount of content on social media claiming “renting is a waste of money” and “why pay rent when you can own”? As a renter, these questions made me second guess myself and my priorities. And I know I can’t be alone. So why are we seeing more posts on the topic of renting versus owning? For starters, it’s sensational. It taps into our pain point of getting scammed and missing out on a deal. But is it true?

Why do people think renting is a waste of money?

In high cost of living places like San Francisco and New York, it’s pretty easy to hop on Zillow and find an example that seemingly proves this point. It does not take long to find a home with a mortgage payment equal to your rent, and at times even less. So does that mean these content creators are right? Not exactly.

There are a lot more costs to factor in besides the mortgage payment. Homeowners have many other financial responsibilities that renters do not have to worry about.

Is renting a waste of money? Consider the hidden costs of home ownership

If you are still unconvinced that renting is not a waste of money, here are some of the hidden costs of owning a home:

  • Property taxes
  • HOA dues (if applicable)
  • Homeowners insurance
  • Maintenance and repairs

Property taxes can mean renting is not a waste of money

Something to keep in mind: property taxes are based on the value of the home. For example, if the value of your home appreciates (or increases), which is generally considered a good thing, your property taxes go up too. This may come as a surprise, because not everyone keeps up with the value of homes in their area. For homeowners that pay their property taxes semi-annually, this number can be much higher than expected. 

For homeowners who opt to pay their property taxes in monthly installments along with their mortgage payment, called an escrow account, this would cause their monthly payment to increase despite having a fixed 15 or 30-year mortgage. In this scenario, your loan and interest rate stay exactly the same, but because your property tax is lumped into your monthly mortgage payment, your overall monthly expenses increase.

Homeowners association dues

If you are considering purchasing a home that is a part of a Homeowner’s Association (HOA), it would be a good idea to inquire how much the HOA dues can increase year-over-year. The HOA dues you pay in your first few months of owning a home could very well increase in the next calendar year (and each subsequent year). 

Homeowners insurance

Another cost that is subject to annual increases is homeowners insurance. You might notice that the cost of your medical coverage tends to increase each year. Unfortunately, it is usually the same for homeowners insurance. Renters insurance is much cheaper – just another reason why renting is not a waste of money. More on both renters and homeowners insurance here.

Is renting a waste of money? Consider maintenance and repairs first.

On a different note, when you rent and something breaks, you alert the landlord. However, when you own a home the repairs and maintenance fall on you. While a few things can be fixed with a plunger or screwdriver, there are other much more expensive repairs: roof, plumbing, water heater replacement etc. Some of these repairs can cost you thousands of dollars to fix.

Because these are not considered fixed monthly expenses, these costs are often left out of the catchy Tik Tok videos shaming renters. 

Homeownership is a huge responsibility, one that requires much more consideration than a few short seconds. Asking yourself if you are ready to take on that level of responsibility is a good place to start. 

Five reasons why renting is a good investment

Since there is no shortage of arguments to purchase a home, here are a few reasons why renting is a good investment:

  • Less responsibility (no repairs, and maintenance)
  • Easier to live below your means (ie. shared living space)
  • Less money upfront (rent and deposit are most likely still going to come out less than a down payment for a home)
  • Amenities ( gym, pool, etc)
  • Flexibility (moving, travel)

This last one is probably the best reason, in my opinion. As a renter you are able to move more easily, whether it be for work, a change of scenery or due to toxic neighbors. You may even decide to travel in between leases, like many digital nomads do. In that case, you would have no rent to pay or mortgage payment to make in your absence. 

So, is renting a waste of money? Ultimately, the decision to rent or to own goes beyond a mortgage payment — which is only one part of homeownership. There are so many different factors to look into, important ones like your priorities and goals. And for some, being a renter supports their lifestyle. 

I do not see how a home that keeps you safe and comfortable, while also aligning with your goals, could be considered a waste of money. How could anyone outside of yourself (and your household) be the judge of that? Maybe those are the questions we should be asking instead of shaming people for renting. Plus, assuming everyone is in a position to buy a home comes from a place of privilege, which requires an entire post of its own. 

If you’re still not convinced that renting can be a great investment, read our post on how to lower your monthly rental costs even farther.

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