Amar Shukla, a 24-year-old engineer at online textbook company Chegg, decided that buying a house was an investment he wanted to make. With some financial help from his parents, he recently bought a 900-square foot home in San Jose, California.
“As long as I’m going to be paying to live somewhere, then I might as well get something out of it in the long run,” Shukla says. To him, answering the classic question “is it better to rent or buy?” was easy.
But owning a home isn’t the best move for everyone. For those weighing renting vs. buying, here are a few reasons why renting can be the better choice.
1. You want maximum flexibility
With renting comes the flexibility to stay put for a few months or years without paying much more than a monthly payment. If your job requires you to move every few years or if you’re unsure how long you’ll be in one place, it can make much more sense to rent. The upfront costs of a home purchase can set you back financially if you move too soon after buying.
You might also consider renting if the neighborhood isn’t one you’re set on. Bethany Mandel, a 29-year-old stay-at-home mom, and her husband choose to rent indefinitely in a house in Highland Park, New Jersey.
“We are not sure we want to settle here, so we don’t want to invest in this area until we feel more comfortable in it,” Mandel says.
2. Buying is out of reach financially
The price tag on a home can be discouraging, especially if space is important. Mandel and her husband, who have two children under age 2, can’t afford to buy a home in that area that’s of similar size and space as the house they rent. Plus, their current place has a backyard.
“We pay $1,850 a month, and we would probably be spending a least $700 more a month if we bought,” Mandel says.
Dori Contreras, a Ph.D. student in integrative biology at the University of California, Berkeley, also chooses to rent. For eight years, she lived in a house she bought in Texas before she and her husband decided to attend graduate school in California, where housing tends to be less affordable. They now rent a house in Davis, where her husband is in school.
“Because home prices are so high,” she says, “they’re just not attainable for people of a Ph.D. student’s income.”
3. You want to avoid maintenance and other added costs
When you rent, your landlord typically has to fix structural defects or other problems such as plumbing or wiring, but once you’re an owner, maintenance and repairs are your responsibility. Shukla in San Jose says upkeep is one of the more surprising things he’s had to invest time and money into since becoming a homeowner.
“Many do not factor in the costs of maintaining a home,” says Ron Throupe, an associate professor of real estate at the University of Denver. “Maintenance, upgrades, property tax, insurance all add up to additional costs per month beyond the mortgage.”
In New Jersey’s Highland Park, the average property tax rose about 7.1% to $10,477 a year in 2014 from $9,779 in 2012, according to state data. Mandel’s family first rented their current home in 2012.
“It’s the property taxes that really would kill it for us,” Mandel says of buying a house instead.
4. Other priorities top homeownership
Location, particularly in relation to work or family, might play a large role in whether you choose to rent instead of buy. Mandel and her husband, for instance, knew they wanted to be close to their extended family in the area.
“We think staying and renting near our family is more important than buying,” she says.
About 42% of renters believe their housing situation lets them live in a more convenient location, according to a 2012 Fannie Mae survey. Among millennials, most prefer city living, and two-thirds of these young adults are renters, according to a 2014 Nielsen report.
“Buying a home is not a rational financial decision,” says Patricia Jennerjohn, a certified financial planner who operates Focused Finances in Oakland, California. “It’s an emotional lifestyle decision that has financial ramifications.”
If buying doesn’t fit into your lifestyle and financial situation, renting might be the better choice.
Image via iStock.