Why Does Renting Get a Bad Rap?
By Weston Manley
February 4, 2020
The question of buying vs renting comes up a lot with people finishing training. In the many conversations I’ve had with clients on the subject, usually the biggest pushback on renting is that you receive nothing at the end, it’s just throwing away money. That is one way to look at it, however, renting comes with many benefits and owning a home isn’t always all it’s cracked up to be.
Let’s start with buying a home. While I believe over the long term this is probably the best route to go, it may not make the most sense straight out of training.
Some questions to ask yourself:
- Am I living in a new city or moving back to a hometown? AND what if I don’t like my job or the people I work with?
- Do I want the responsibility of fixing things that go wrong? What about doing yard work?
- Do I want a starter home or something I can live in for 10 years?
- Are physician loans offered in the area’s I’m looking? Will I have to make a down payment and how much can I realistically afford?
Buying and owning a home is expensive. Most people just think about the principal and interest payment and fail to consider the cost of taxes and insurance. Further, in the early years of a loan, you’re paying mostly interest vs. principal so you’re not building much equity. Then, don’t forget when you go to sell the house, you only get to keep 94% of the proceeds as the other 6% is split by the real estate agents. And then there is home maintenance.
Quick story on home maintenance —
My wife and I purchased our first home 3 years ago after both renting for almost 8 years out of college. The home we purchased was a fully rehabbed home, so almost everything was fresh out of the box. Early last year, we noticed a foul smell in our basement (which is finished). It would come and go and we couldn’t figure out the cause even after paying a few people to look at it. About a month ago, we had another issue in our basement, our sump pump was running constantly. We called a plumber and figured out both the smell and sump pump were being caused by the same issue…..a crack in the sink drain pipe under the foundation. $5,000 later our basement smells great! And then our water heater goes out and a new one costs $2,000. Now we have just spent $7,000 on maintenance which is purely an expense and doesn’t add any value to the home.
Owning a home does have its advantages. You can customize it to your liking, you are building equity (which is like forced savings), don’t have to deal with paper thin walls and neighbors, and have something to call your own.
On to renting. Ultimately, the biggest advantage of renting is flexibility. Typically, you don’t have maintenance cost and you can call someone to fix any issues, there is no long term commitment beyond a year or so, and it gives you time to figure out if this is truly where you want to work and live.
The choice of buying vs renting is a personal decision based on a unique set of circumstances which will also change over time.
WM
Weston is a Certified Public Accountant, Certified Financial Planner TM, and holds the Chartered Financial Analyst designation. In addition, Weston earned his master’s degree in accountancy from the University of Missouri – Columbia. Weston is active in the St. Louis community and board member of the Anti-Defamation League.