The marquee of the American Dream is the single-family home surrounded by a white picket fence. While owning a home certainly comes with many benefits for some, renting is still a smarter choice in certain situations. Sure, homeownership is said to be the ultimate investment that appreciates in value over the years. But don’t be fooled––sometimes renting is still the way to go. Below are some of the scenarios in which renting is superior.
There are no property taxes involved with renting
One of the most significant benefits of renting over buying is that renters are not required to pay property taxes. Real estate taxes may be a heavy burden on homeowners as the rate varies greatly depending on location. The expense can be a few thousand dollars per year. While property tax calculations can be complicated, they are generally assessed based on a home’s estimated property value. In the simplest terms, a home valued at $250,000 at Cook County’s tax rate of 2.117% would require a $5,293 annual payment. Although this cost is typically bundled into each mortgage payment, it’s still a hefty added expense that renters don’t have to worry about.
Renters have access to included amenities
Another financial advantage of renting is instant access to amenities and sustainable living extras that would likely be an added cost to homeowners. Many apartment communities have indoor fitness centers and/or swimming pools. These are amenities that a homeowner would have to pay dues for, or pay for their own custom gym or pool construction and maintenance. Another plus these days is that more apartments come with energy efficient kitchen appliances, yet another feature that a homeowner would have to pay out of pocket for.
Renters don’t need a down payment
You may be thinking that a security deposit is the same as a down payment on a house, but it’s not. A down payment represents a portion of a home’s purchase price. As a buyer, you pay a percentage (typically anywhere from 3-20%) to a lender or bank at the time of closing. That means a $250,000 home would require at least a $7,500 down payment––a large sum of cash that the average person just doesn’t have access to. To top it off, the down payment is never returned to the buyer.
A much more reasonable arrangement for renters is the traditional security deposit. Here, a potential renter and a landlord seal their agreement with an official signed lease and a deposit, often in addition to the first and last month’s rent. Upon moving out, security deposits are often returned to the renter if the unit is left in good condition.
Renters have more freedom
If you don't plan to stay in the same area for a long time, renting is the way to go. Not being locked into a commitment like a mortgage makes it possible to up and leave whenever you choose––or at least when your lease it up.
Owning a house will be valuable in the long run considering the amount of equity gained over time while renters do have little to show after years of rent payments. Nevertheless, for those who seek to escape the burdens of homeownership, maintenance costs and property taxes, renting may be a safer alternative.