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Rent or Own: What to Consider

Should I rent or own? It’s a question many will ask and, the truth is, there’s no one-size-fits-all answer. There are many factors to…

February 26, 2019

Historically, the primary factor that dictated the decision between renting or homeownership has been financial. Homeownership has been viewed as a cornerstone of the American Dream, the primary way to build wealth, meanwhile renting has been considered only a necessity of circumstance. That’s still often the case — especially for younger renters — as 48% of millennials have nothing saved for a down payment, and only 11.1% have more than $10,000 saved, driven partly by an explosion of student debt and the shrinking of wage growth. For those few who have saved sufficient funds, there are rule-of-thumb calculations to compare renting and homeownership, such as the price-to-rent ratio. Generally speaking, if the ratio is greater than 20 then renting is likely a better option, according to Fidelity.

But there is much more to consider when deciding whether to rent or own.

  • How much do you value flexibility?
  • How long do you plan to stay?
  • Are you considering all the costs?

Today, many people, and especially millennials and empty nesters, are opting to rent simply for lifestyle reasons.

Renting provides a level of flexibility unmatched by homeownership. Many young professionals are participating in the nontraditional gig economy, requiring flexible living situations as the demands of their careers dictate where and how they need to live. Renters enjoy the ability to travel without worrying about an empty house, and they have the ability to move without managing the complexities of a home sale. Some renters simply enjoy the sense of community that comes with living in walkable urban neighborhoods.

Of millennials who are waiting to buy a home, 34% say they aren’t yet ready to settle down in their current city, while 28.1% want to get married or find a long-term partner first. This generation is delaying family formation and life events to instead pursue their careers.

If a homebuyer is not planning to stay long, it will be difficult to justify the one-time costs of buying and selling a home. Brokers’ fees, appraisal fees, title insurance and the mortgage origination fees can total $2,128 for the purchase of a $200,000 home. And then closing costs can run another 5–6% of the sale price.

When weighing whether to rent or buy a home it’s also important to consider recurring costs. There are property taxes, insurance payments and interest on mortgage payments. Specialists recommend budgeting at least 1% of the value of the home to cover routine maintenance every year — and big-ticket items like gas furnaces don’t last forever.

Finally, while homeowners stand to build equity and use their home to amass wealth, the reality is that home prices don’t always go up. As we saw with the financial crisis of 2008, home values can quickly evaporate given the right economic climate.

To be sure, there’s a lot to consider in weighing the factors of whether to rent or buy a home. But what if it didn’t have to be an either/or decision?

What if millennials, struggling to build wealth because of weak wage gains and increasing student debt, could maintain the flexibility and other benefits of renting while they accumulated significant savings for important life events? It shouldn’t be unrealistic.

Rhove. Rent to Earn.

At Rhove, we believe everyone has the right to invest in their home. Our mission is to expand access and opportunity for people to own in their community. When you live at a property offering Rhove you can make money on your rent, earning a savings match up to 2.5% of your monthly rent.

You don’t have to compromise on your flexible lifestyle or shoulder the expenditures and responsibility of homeownership, like mortgage interest payments, property taxes, insurance, or even maintenance.

Don’t Just Rent. Rhove.

If you’re interested in learning more about Rhove, check out our website to see if we’re available in a property near you. And if you’re still stuck in the rent-or-own conundrum and looking to run the numbers, check out this handy calculator from Fidelity.