There is a constant battle in real estate between renters and homeowners: owning a home is a serious responsibility that not everyone can take on, and renters are often told they are throwing their money away - but are they really?
The following are 5 reasons that make renters smarter than homeowners according to Daily Finance:
You get more perks and fewer worries
Paul Purcell of William Raveis real estate firm in New York is sold on the idea of renting than owning a home. For him, rental properties offer a wide array of perks that homeowners are deprived of. "The last time I checked, most homes don't come with a gym, a swimming pool, a clubhouse, a roof deck and a guy who comes to pick up your laundry once a week."
He also believes that while renters are able to enjoy a sense of freedom, homeowners are confronted by a tremendous amount of responsibility. "I don't have to clean the pool or water the flowers, and if I want to go on vacation, I just lock the door behind me," Purcell says.
Houses are illiquid assets, with no guaranteed profit
Homeownership is also moneymaking; however, you have the unpredictability of the market to worry according to Gabby Warshawer, director of research and communications at CityRealty in New York City.
"People who bought condos in Manhattan in 2007 and then sold them in 2014 realized an annual growth rate of 3.4 percent, which is way off the 10-year average of 7.9 percent, which shows how you really can't predict these things," she says. "In 2006 and 2007, there was a feverish, 'buy, buy, buy' mentality, but the people who bought are now realizing the lowest rate of return in a decade."
There is also an element of gambling when owning a home, Warshawer adds. And unless you are willing to wait 20 years, she believes that renters are doing it right instead of homeowners.
You can be as mobile and flexible as life dictates
When talking about millennials, Purcell stressed their value of flexibility. "Younger people value happiness in their jobs more than they value job security, so they're not afraid to pick up and move. They say, 'Sure, I live in New York, but I just got a great job offer in San Fran. I'm moving!' They're portable."
Homeowners would usually have to wait several months or even years before they could sell their homes. "Millennials know this. They say, 'Why do I want to tie myself to an expensive investment that prevents me from taking advantage of the opportunities that come my way?' "
When buying a house, you should be willing to commit that area for at least three to five years to break even on your investment, and ten years (which seems like an eternity for a mobile generation) to make a profit.
Closing costs? Two mortgages? That's throwing away money
For Purcell, it's not the renters who are throwing away money, but homeowners who have to make monthly payments. "You can throw more money away if you buy a home that's a [bigger] mistake than you ever could on renting," he says. "When you get ready to sell, if you have not recouped the money you put into the house and then you have closing costs, brokers fees, it can cost you tens of thousands of dollars."
In some circumstances where a move is unexpected and necessary, homeowners may end up paying for two mortgages or a mortgage and a rent. "If you own a home, you can't say, 'I'm going to sell my house tomorrow," but if you rent, you may have the option of going on a month-to-month lease and leaving whenever you like. Imagine if you said to the bank, "I only want to pay my mortgage for one more month.' They would laugh at you," he says.
You have a ready-made sense of community
Renters have instant community and neighborhood connections, Purcell says. More than just putting a roof over your head, apartment building also now have weekly yoga class offerings, or monthly pot-luck dinners that they post on community bulletin boards to keep everyone updated.
"As soon as you step out of your door you're going to see someone you know and have someone to chat with while you walk the dog. That doesn't happen in Greenwich, Connecticut," he says. "On the weekends, instead of mowing your lawn and coming back inside your house, you can hang out at the pool with friends. It's a no-brainer."
