Why You Should Be Renting Instead of Buying
If you’re in the market for new home, does it make more sense to buy or rent?
A better way to answer the question is by asking yourself if real estate is a lifestyle choice or a strategy in your financial plan. For many people, the decision to buy a home is a lifestyle choice that requires a good financial plan. For others, buying real estate is an investment that supports a lifestyle.
As a lifestyle choice, homeownership instills a sense of accomplishment and pride of ownership. Homeowner are viewed as more stable, with a vested interest in their community. As a financial decision, people buy real estate to build equity to finance their lifestyle goals.
What many people don’t understand it that purchasing a house or condo may NOT be the ideal lifestyle or financial decision. Here are 3 reasons real estate gurus, like David Guinta, say renting makes more sense.
Save money for the things you really want to invest in
When you buy real estate, expect to make several large investments over the term of your homeownership. You’ll make a 5–20% downpayment when you purchase. If you remodel or upgrade the property you either pay cash out of your savings or take out a second mortgage. When you’re ready to sell, you may need to do some major repairs to make your property marketable or acceptable to your buyer’s mortgage company.
Renting offers a low acquisition cost. In many areas, you can rent with as little as 2–4 monthly payments upfront. That 5–20% you save is a great start for a retirement fund investment. As a renter you can save toward your retirement income rather than building equity to turn into a reverse mortgage. Renting makes more sense.
Renting allows you to pay for your life goals without going into debt. Would you rather pay cash for your dream vacation or finance it with interest? That’s exactly what happens with home equity loans. When you borrow against real estate, your lifestyle goal costs you more in interest and reduced equity.
Renting offers greater mobility
Buying a home can limit your earnings potential. How? Reduced mobility. As a homeowner, you are tied to a 15, 20, or 30 year mortgage. It may be difficult to relocate for a job opportunity, especially if you’ve just bought your home.
If you’re a renter, relocation is easier and more affordable. When market prices are down, you may have to sell at zero profit or at a loss. As a renter, you may get your security deposit back and you’ll already have the money you saved by not making a down payment in the bank.
You have more flexibility as a renter
Before you think about buying real estate, consult with an expert investor, not a sales
person. David Guinta will tell you that the number one advantage that renters have over buyers is flexibility. As a renter, it’s easy to upgrade and downgrade quickly at with a limited investment. Additionally you’ll benefit from the improvements and upgrades your landlord or property manager does to maintain their properties.
Finally, remember these takeaway points:
• Using homeownership to finance your future lifestyle goals means going into debt by selling your equity.
• Current stability associated with homeownership compromises future mobility and flexibility.
• Buying, maintaining, and selling your home each require a substantial cash investment.
When you rent your home from professional and real estate managers and investors like David Guinta, you’re making a smarter financial decision.
