I know most people have been told "Don't rent, you are just throwing money down the drain!!" To a certain extent this is true but there are some benefits to renting as well.
I know when I got my first real job, my immediate goal was to buy a house. I pulled my credit, started paying off some of the stupid things I did while in college, and saved money. I was doing all the right things. I got some good debt (cause there are some good debts. I will get to those later), paid my bills on time, and got pre-approved. I was on my way to being a homeowner!! I was so excited! I would own my own piece of America! Well several bidding wars later and my current position ending I was totally discouraged. I was like "this is it, I am going to live at home FOREVER!! Well my company promoted me and I had to move in a short amount of time to the Washington D.C. metro area. I had to do the thing I was avoiding all along...RENT!! Oh my goodness this was not in the plans. I was thinking, people with smart financial sense don't RENT! What am I going to do at tax time? Who is going to take me and my gigantic dog as a tenant? Am I going to be forced to have this crazy nosey landlord? Happily, I found the perfect place. It was close to my job in my price range and a good size and I was RENTING!! I was like ugh this is going to be the worst 18 months of my life. In my journey, I found some benefits in renting.
1. Renting is affordable. I would be considered a first time homeowner using the traditional FHA loan, which requires a lower down payment but comes with some additional insurance fees that are not tax deductible. Additional insurance fees mean higher monthly payments. Living in a big metro area is usually expensive so any additional cost would mean a lot less house. In many instances, renting will allow you to still save a considerable amount of money. Sometimes families want to live in an area where the school systems are great, crime is low, and it’s close to everything but they can not exactly afford to live there if they bought a house. You can luck up on people who have owned their house for years and have a low mortgage payment and can pass those savings on to you as well. I was able to take advantage of the cost savings my landlord experienced. Sometimes investors can afford opportunities the average person cannot like putting down huge down payments or even paying for property cash. These are all factors in addition to the current rental market landlords use set rent.
2. Renting buys you time. When I moved to this new area, I had no idea where I wanted to live. The area I ended up living in, ended up choosing me. It was the only area affordable and close to my job (the two top things on my list). I needed somewhere to stay while looking through new areas, finding my favorite spots to hang out, and seeing traffic patterns. When you move to a new area, you may not know where you want to live. Renting for a year or two can give you the freedom to explore without being tied down to a place. Renting also gives you time to get yourself together. Let's just face it; everyone is not in the position to buy. There can be credit problems, divorce, or even job loss. These things can cause your life to go into a frenzy. Low credit scores or unstable employment are all things that can cause an underwriter to deny your loan.
3. Renting is quick. Buying a house takes time and lots of it. You have to find an agent and then look... and look...and look some more. Then when you finally find a place it takes about 30-45 days to close unless you are the exception like an all cash buyer. If you are relocating to a new area or your house is sold and you need a place quick, renting is usually a great option. You can find rentals yourself or enlist a real estate professional for assistance. Remember, if you are doing it yourself, set a budget and don't exceed it. Most landlords or property management agencies will use a formula where you take the monthly rent and multiply it by 40 and this number cannot exceed your annual salary (for example if you want to rent a place for $1,000 a month, you have to make at least $40,000 annually)
Am I saying renting is for everyone? NO! By all means if you are in a place where you know where you want to live, know you are going to be there for a while or have a plan of how you are going to sell it later on, then please buy buy buy!! Find something in your budget and proudly wave your keys in the air! Buying a house has all kinds of perks from tax breaks, to being able to customize the house to your personal style, and just overall stability. As long as you keep paying the mortgage and taxes you can stay there as long as you want!