Yesterday, I was in my local public library, and I picked up a magazine focused on the local real estate market. One of the articles was written by a couple who had recently sold their house in the city and started renting again. They claim that life has never been better. I devoured the rest of the article with rapt attention. I’ve been renting in the city for years now, ever since I moved here, as the Toronto housing market just seems unattainably expensive. But I’ve always had that nagging itch to buy and to own, to not have to deal with irresponsible landlords and leases. The article, though, reminded me of a lot of the good reasons to rent…Freedom and Flexibility
Being in a career transition phase, its really nice to have the freedom and flexibility to go anywhere at will, without having a house tying me down. The job market here is not too hot right now – if we can find jobs somewhere else, all we need to do is give two months notice and we can pick up and go anywhere we want.
Financial Freedom and Flexibility
When you own your own home, the buck doesn’t stop at your mortgage payment. There’s property tax, insurance, utilities and if you live in a condo, maintenance fees. Then if anything breaks or needs repairs, you’ve got to fix it. Renting comes with none of that (except a small amount of tenant insurance). All of the money that a homeowner would put into the home, a renter has the freedom to do other things with it, such as travel or invest.
Investment Diversification
Homeowners typically wind up with a large portion of their net worth tied up in the value of their home, which goes against the often repeated mantra of diversification. Since a renter has so much more free cash for investments, they can achieve a much better diversification which may help them get through tough times. And in good times, a well diversified investor is more likely to take risks, which could pay off in a big way (and if they don’t, it won’t hurt as much).
More Time to Do Things that Matter
How many times does a homeowner mow the lawn or shovel the driveway, wishing that they could instead be spending their time in a way that was more fulfilling to their lives. As a renter, all that necessary maintenance is done for you, so you can spend your time exactly as you want to.
Rental Properties Can Be Just as Nice as Owned Properties, if Not Nicer
Renting doesn’t have to mean that you live in a dump (though it can if you want to save money). There are rental properties covering the entire spectrum of the real estate market. In some cases, renting might give you the opportunity to live in a place that you wouldn’t otherwise be able to afford if you were buying. When we first moved to Toronto, we lived in a condiminium apartment that had all the amenities we could ever dream of – a full gym, indoor heated pool, a rooftop patio with hot tub and community BBQs overlooking the entire city, a party room to host friends, etc. There’s likely no way we could have had all that if we were buying.
Renters are Just as Happy, if not Happier
Some will say that renters are not as tied to their community and that the overall community feeling of a neighbourhood is lessened by renters. The article I read highlighted a study conducted in the US that concluded that renters were just as happy as homeowners, and contributed to society in just as many ways, albeit differently. While they are not supporting the housing market, all their extra, disposable cash allows them to be greater contributors to the dining and entertainment markets in their communities. They found that renters had lower stress levels and actually spent more time engaging in community-building activities than their homeowner counterparts.
If You Invest the Difference, You May Come Out Ahead
Many people will say that renting is just paying someone else’s mortgage, and that you’re just throwing your money away. That may be true, but total housing costs for renters are nearly always lower than for homeowners. If you invest all that saved money, you may be able to come out ahead in the end, especially because the opportunity cost of owning a home can be large in the first few years (where much of your money is going towards paying for interest, which is in essence just renting anyways).
So with all this in mind, do I still want to buy? Eventually, yes. But not anytime soon. When I’m settled in a career and a location, I have a stable income and I know I’m not going anywhere, then I will likely buy a place as long as it is affordable and makes financial sense. But until then, I’m all for renting!
I HATE renting and can’t imagine renting for the rest of my life. I also don’t know that I’d ever use the word “flexibility” under the renting category – but maybe I’ve just had some bad experiences.
I’m super bias because I grew up in a home that we owned, and everyone that I regard as successful owns their own properties and homes. I don’t believe in spending money on something that isn’t yours, so I live in an apartment in the ghetto while we save up for a down payment, haha.
Interesting, I’ve always had pretty good experiences. Even if you are in the middle of a lease, you can always sublet or assign your lease to someone else, usually without much difficulty. The tenancy laws in Ontario very much favour the tenant over the landlord, so maybe it is worse in other places.
I agree that the satisfaction of living in a place that you own free and clear is very appealing!
My wife and I have joked about this topic several times – about how nice it would be to never have to fix anything, work on a lawn, or pay property taxes! If you had a lifestyle where you liked to move around from place to place, I could definitely see how there may be advantages.
Agreed, it is definitely a little bit better suited to some lifestyles than others. But think of the possibilities!
Coming from a home that was owned, I never imagined my self renting. When I moved out, I bought. I don’t believe in paying off someone’s investment. They’re no better than me.
I always found this topic funny, because if renting was so awesome, then why do many dream of becoming homeowners? Landlords? and diversify through owning and having real estate part of their portfolio?
Every dollar invested in rent is every dollar you have nothing to show for.
“Every dollar invested in rent is every dollar you have nothing to show for.”
I disagree with this statement. Renting gives people opportunities that they might not have if they bought, both financial and otherwise. Depending on what you do with those opportunities, then their result is what you have to show for the money you invested into rent.
I agree with the points raised. It will all depend on the circumstances of the person, though, if one has to choose between renting and buying. For one who has kids, there’s the need to settle in a permanent place to make a real home for the family. For couples with no kids, it will be ideal to rent while they hop from one place to another in their travels or job transitions.
Why does a home have to be owned in order for it to be a ‘real’ home. I know lots of people with kids who rent, and I don’t think their kids think any less of their home than those who own. I don’t think kids is the issue, but I agree that if you are planning to settle somewhere for 10-20 years, then it might make financial sense to buy, whether you have kids or not.
i can see why renting is an attractive option in some markets.. i live in the midwest where housing is dirt cheap (relatively), and it still takes a major bite out of our budget..
i can only imagine what it must be like to live in a market where $250,000 gets you pretty much nothing..
Thanks for your comment Jefferson. $250,000 definitely does not go far in a major urban centre.
Same here. $250,000 in most cities in Australia is unlikely to even get you a tiny unit, even in the outer suburbs of major cities.
But I do know of other areas that are cheaper (out west).
I hate renting and just living in apartments in general. I grew up in apartments and have never really lived in a house.
I’d rather spend a bit more and have something be mine and (within reason) do whatever I want with it. My husband is pretty handy, so that will hopefully save us a fair amount when repairs and such come up.
I can understand why it’s much easier and less stressful to rent, but I think it depends on the people. 🙂
I definitely agree that the way we were raised has some bearing on our attitudes and decisions as an adult. Thanks for sharing Jen!
I’m the rare case of a guy who owns his own house but sees the value in renting. I totally agree with your rationale in terms of flexibility and cost deferential. I bought because I love living rurally and this changes the dynamics considerably. Canada has seen a long escalation in house and property values and this has supported some semi-irrational “common sense” perspectives about “throwing your money away”. If you want to look at throwing your money away look at the folks in the States who now owe more than their house is worth. To each their own, and the “right” decision is often contingent on a lot of personal variables.
Thanks for your comment TM! I think the other reason why people are much more likely to buy when living in rural areas is because there just isn’t as much of a rental market to begin with. Buying is sometimes the only option.
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I hate renting with a passion, but sometimes it is better. I had this discussion with my sister in law recently as she wanted me advice as to what I would do in her situation. I turned it around and asked a bunch of questions to help her decide what is best for her. (Which I posted about too)
I like the stability of owning my home, being able to renovate whenever I like and I have had too many nightmare landlords to want to rent again.
That said, in Aus our taxes benefit investors, so financially, it would be better for me to rent and own a rental property instead of own a home.
Landlords can be a pain! We have one now that we don’t particularly enjoy but have to put up with.
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Well put article.. i can share your views here in Toronto… your bang on about the costs of renting vs owning a home for what i’ve figured..i think my rent right now is cheaper than the costs of running a home would be.. without even including a mortgage and maintenance.. I think Toronto is growing into a New York style city housing price wise.. and i look longingly at those house prices outside major cities in the U.S. houses for under/around $100,000 or seems crazy here..
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