The Case for Renting

This is the time of year when many folks wade into the property market, looking to buy their first home. But don't be too quick to dismiss the virtues of continuing to rent.

True, you don't build up home equity when you rent. But you typically don't have to deal with the cost and effort of home maintenance and yard care. You also don't have to pay property taxes and insurance, except renter's insurance for your personal possessions.

In addition, if you move from one rental property to another, you don't have to worry about big transactions costs. Yes, you might pay moving costs and your new landlord may want the first and last month's rent upfront, plus a security deposit. But these expenses will almost always be less than the cost of buying and selling a home. Indeed, ease of moving is one of the key benefits of renting. And it isn't just for the young: Retirees might rent so they can give a new community a one-year trial before committing to purchase a home.

To be sure, as a tenant, you face the risk of rent increases. But if you owned your home, your bills for property taxes, homeowner's insurance and utilities would likely increase periodically as well. You also might face big bills for major home repairs and there is a risk your home's price could fall. There's another reason you might rent: Perhaps you can't currently afford the home you would be happy owning for the long haul. If you buy a home and quickly sell because you're dissatisfied, it could be a costly blunder.

Let's say you plan to buy a home eventually. By continuing to rent, you will have more time to save for a down payment. That may allow you to put down 20%, bypassing the need to take out private mortgage insurance. Also, while you're waiting to buy, you may see your income rise. That should also make it easier to afford the house you want.

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