According to the Federal Housing Finance Agency, housing appreciation has been largely negative since the fall of 2007. I know that this a general stat and it doesn’t factor in location. The stat does however indicate that home ownership doesn’t always trump renting a place. This shows that buying a home isn’t always the logical choice once you start making real money in your 20s.
Today I wanted to present the case for renting a home. I wanted to shift away from common advice that suggests that renting is simply “throwing money away.” I’m here to show the positive side of renting out a place when you’re making good money.
When and why can it be better to rent a place instead of owning one?
Uncertain future plans.
If you don’t know where you’re going to end up work and life wise in 6-12 months, it’s not really worth going through the extensive process of trying to buy a home. You should buy a new place when you’re ready to settle down and stay in a certain community for an extended period of time. When your future is uncertain you don’t want to commit to a set location. It could really mess up your plans.
Looking to save some money.
If you still need to save up more money before you’re ready to own your own place, renting is the ideal solution. You can rent out a cheap little pad with a few friends where you pay a few hundred bucks per month for rent and save the rest towards your home down-payment. The benefit of renting is this situation is that you give yourself some more time to save money. It’s not worth trying to buy a home where you’re financially unprepared.
Plans to travel.
If you want to do some long term traveling in the near future you’re going to want to hold off on buying a place for now. Real estate should be about your unique priorities in life. Some of us will want to settle down and get married right after college. This is when buying a home can be a good idea. On the other hand, if you’re like me and you want to travel the world, you might want to stay at home or rent for now. There’s no one-size-fits-all when it comes to real estate, regardless of what experts try to tell us. If you want to travel, then do it. You don’t HAVE to buy a home if you don’t want to.
You just need a place to stay.
Not everyone is fortunate enough to have a supportive family that will let them stay at home until they’re 35 years old. If you just need a place to stay then renting will provide you with the shelter that you need. Buying a home shouldn’t be done out of necessity. You should be in the market for a home when you’re financially prepared, not when you simply need somewhere to stay.
You simply want flexibility.
If you’re looking for flexibility, then renting is the right option for you. Once you tie up a significant portion of your savings in a home, you’ll eliminate a lot of flexibility from your life. Flexibility is highly valuable as a 20-something. You never know when you can land a job offer in a different part of the country. You also never know when you can fall in love with someone in a different. You really never know what can happen from the years that you graduate college until you turn 30.
I hope you guys now understand when it’s a better idea to rent instead of owning. If you want further help on making this important decision then please check out my very new manual. Home ownership is the most important decision (aside from getting married) that we can make in our 20s. Please take it seriously.