Many Americans still hope to own their own home but 61% don’t think they will ever be able to, according to a Harris Poll.
Owning a home can be a smart financial move. But don’t sleep on how renting can still lead you to financial freedom and improve your quality of life along the way.
I have a unique perspective after owning three homes in the past 10 years. I decided to sell those homes and rent now, even though I can afford to pay for a home in cash. My husband and I accumulated a net worth of $1.7 million before my 40th birthday next year, and renting for the last two years has been a strategic choice that created more financial flexibility, lifestyle mobility, and reduced anxiety for us.
Before you go deeper into despair about how unaffordable homeownership can be, consider how renting can free up time, money and energy toward other financial goals, while avoiding the risks and commitments associated with homeownership.
Homeownership Locks Up Your Net Worth
I once heard that your rent is the highest amount of money you’ll pay, while your mortgage is the lowest you’ll pay. Yet I can personally attest to how fixed monthly rent payments have made budgeting so much less stressful.
As a renter in Charlotte, North Carolina, I only needed a security deposit that was less than one month’s worth of rent. Even in more expensive places where I used to live like Boston and New York City, I had to pay the first month’s rent, the last month’s rent and a security deposit. But those costs were still significantly lower than a down payment, closing costs, and other upfront expenses required to buy home.
As a homeowner, on the other hand, I constantly had to account for variable expenses such as maintenance, repairs, property taxes, and homeowners insurance. Those costs can fluctuate annually or even monthly, and be harder to predict.
By not tying up your money in a property, you have the flexibility to pursue other financial opportunities and diversify your investments. such as the stock market or starting a business. Those options offer financial returns that you can access more readily, rather than having your wealth tied up until you sell your property. To grow my business growing to six figures, while still only working 20 hours a week, a big contributor was deploying the money formerly tied up in home equity into making my company more efficient instead.
Renting Can Offer A More Flexible Lifestyle
Landlords are responsible for the maintenance and repairs of rental properties, saving you both time and money as a renter. For me, living in a multiunit property and having a manager readily available has been such a breath of fresh air. I’ve never waited more than 24 hours for an issue to be fixed, and I never have to worry about how much it will affect my budget.
Of course, this is not true of all rentals. So, it’s important to vet out your potential landlord or property manager. Ask them about the processes to request repairs, and talk with neighbors in advance before you pick a place to rent.
Renting allows you the freedom to move without the mental burden or cost of selling a home. Leases typically last one year, giving you the option to reconsider your living situation more frequently than homeowners who are tied to a mortgage for many years. It’s ideal if you want to relocate for work, education, or personal reasons.
My in-laws recently retired and travel frequently. But they often have to drive 90 minutes or more to the closest airport. They’ve thought about relocating but the mental burden of moving years’ worth of possessions overwhelms them. And because of high interest rates and home prices, even if they sold their home, the idea of paying more for their next home leaves them feeling stuck.
On the other hand, my husband and I travel just as frequently as our parents do, but we live 10 minutes away from an international airport. We have been able to move all of our possessions three times in the past few years and be completely unpacked within a span of 48 hours. That’s because renting also encouraged us to keep our clutter to a minimum.
Renting Can Make Work And Play More Balanced
In the fastest growing cities like Charlotte, there are so many new options for rental properties, especially apartments and condos. While renting can still be quite expensive, you may be able to offset some of that cost with shorter commute times —not just to where you work but also where you like to spend your free time.
For a similarly priced mortgage, I had no walkable options for entertainment or dining. Renting allowed me to move closer into the city center, where I am walking distance to theater, art and restaurant options.
And even though the space I rent now is significantly smaller than the last house I owned, my building and its’ competitors provide amenities such as gyms, pools, and communal spaces that might be unaffordable or impractical to have in a private home. I’ve felt less of a need to spend on more expensive vacations when I have monthly community events to look forward to and a pool I can jump in any time.
Having a nice communal lounge to work from instead of staying inside my apartment has also allowed my husband to make new friends among our neighbors, too. We now enjoy hosting more often because we can share these amenities with our friends instead of meeting them at expensive bars and restaurants. As an entrepreneur, knowing I will not come home to grass that needs mowing or pressure to keep up with my neighbors gives me a sense of balance I didn’t have as a homeowner.
The Bottom Line
I’m not against homeownership and I may even consider buying one again in the future. These points are here to help you understand that even if you can’t afford to buy a home right now, renting isn’t a waste of money.
You don’t need to feel ashamed that you aren’t a homeowner. It might actually be an opportunity now to expand your wealth building paths, and enjoy the freedom renting may offer you now, rather than later.
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