Since 1971, Paul has rented and owned real estate in Taiwan, Thailand, and the United States.
Throughout most of my life, I have rented and owned real estate. This real estate has been in the form of rented rooms, houses, and apartments. I have also owned a condominium in Taiwan and homes in Thailand and the United States.
When renting, there are both advantages and disadvantages. Some are more prevalent depending on your income, family members, and age in life. In this article, I discuss both the advantages and disadvantages of renting.
The Pros and Cons of Renting
Lower monthly payments
No right of ownership
No property taxes
Bound by terms o frental contract
No homeowners/fire insurance
No tax write-offs
No maintenance/repair costs
Money can be channeled into other investments
No equity buildup
Relative ease of relocating
The Advantages of Renting
The advantages of renting are described below. I experienced these advantages when younger and with a lower income.
Lower Monthly Housing Payments
Lower monthly housing payments are one of the biggest advantages of renting. This is especially important for young and old people as well as those on fixed incomes. Unless you are renting a very large house worth hundreds of thousands of dollars, your monthly rent will be much less than a mortgage payment to a bank. In the 1970s, I rented rooms for $25 monthly and the second floor of a house for only $160 per month.
No Property Taxes
Property taxes in suburban areas can be very expensive. In 2007, I was paying about $7,500 per year for property taxes while owning a home in Howard County, Maryland. Of course, when renting, you have no property taxes to pay.
No Homeowners and/or Fire Insurance
A renter doesn't own a home; therefore, he or she doesn't have to insure it against fire or storm damage. My homeowner's insurance was about $600 yearly when I lived in Maryland in 2007. A renter should, however, consider buying renter's insurance to insure against the loss of personal property and protect against lawsuits for personal liability such as a guest slipping on an icy sidewalk and suffering injury.
No Maintenance and Repair Expenses
Renters are not responsible for any home maintenance or repair costs. If there are plumbing problems, a leak in the roof, or a window damaged by wind, the homeowner or landlord must repair it. Renters or tenants, however, are expected to keep a home clean and usually cut the grass if there is a yard.
Money Can Be Channeled Into Other Investments
At a time when the value of real estate isn't increasing very much, renters can use their extra savings for investments in the stock or bond market.
Relative Ease of Relocating
A homeowner must first wait until selling his or her home before relocating to another. Sometimes this might take up to a year or more. Most renters, however, are only locked into leases of no more than one year. In most cases, the renter can get out of the lease by giving the landlord at least a one-month advance notice.
The Disadvantages of Renting
When younger, my wife and I encountered problems with landlords. This was the biggest catalyst for us to buy our own home. Five disadvantages of renting are discussed below.
No Right to Homeownership
A renter or tenant has no right to homeownership. Therefore, any requests that the tenant might have for wallpapering a room or perhaps planting a garden in the back yard must be approved by the landlord.
Bound by Terms of Rental Contract
When a tenant rents, he or she must usually sign a fixed-term lease of one year and pay a security deposit or one or two months' rent in advance. Also, some rental agreements prohibit a tenant from having a dog or any kind of pet.
In 1983, we snuck a dog on to the house property that was rented. Although we kept our dog outside, the landlord found out when he paid us a surprise visit. Our ultimatum was to get rid of the dog or move. We bought a house and moved two months later.
I have found that most rental contracts are written primarily for the benefit of the landlord.
Bad Landlords and Neighbors
A tenant can be unfortunate in having a landlord who doesn't make or is slow in doing home repairs. The landlord might also be insensitive to the renter's needs and often raise the rent for new fixed-term leases.
In the mid-1950s, my dad rented a small farm in Wisconsin. After moving to a farm that mom and dad bought in 1957, dad still had corn stalks in one of the fields of our old rented farm. When dad came back to load the corn stalks on a wagon, the landlord rushed on to the field and said dad was stealing. Thankfully, the landlord took no legal action.
No Tax Write-offs
A tenant is not able to use rental payments as a tax deduction. Homebuyers, however, may deduct their monthly mortgage payments from taxes. As a renter, your rental payment is usually helping the landlord make his mortgage payment.
No Equity Buildup
Finally, when a person is renting, he or she is not building up any equity as a homeowner is doing. When a homeowner makes a mortgage payment, he is paying off his loan and adding to the equity that he has in a home. The tenant's monthly rent in most cases is only helping the homeowner build up equity.
Why You Should Rent vs. Own
The Right Choice for Me
I will most probably relocate back to the United States sometime soon. Based on my age and financial situation, I will be renting since there are more advantages for me doing that.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2020 Paul Richard Kuehn
Paul Richard Kuehn (author) from Udorn City, Thailand on September 13, 2020:
Thank you for commenting. I appreciate your good review.
Liz Westwood from UK on September 13, 2020:
This is a well-balanced and interesting article, which addresses a dilemma that many people face.
Paul Richard Kuehn (author) from Udorn City, Thailand on September 12, 2020:
Thanks for your comments, Pamela. Sometimes, when the housing market was very bad, I wish that I had been renting.
Pamela Oglesby from Sunny Florida on September 12, 2020:
This is a good article that explains the benefits and disadvantages or renting or owning a home very well. I like owning a house and that has worked well for us.