Updated September 13, 2018

23 Scientific Reasons Why Renting is Better


Not sure if homeownership is right for you? Here are 23 financial and personal benefits as to why you may be better off renting.

Homeownership has long been considered the culmination of a person's adult life, a moment when they've finally achieved the American Dream. However, more and more Americans are foregoing the 30-year mortgage and opting to rent instead.

Homeownership isn't for everyone, and people who want the flexibility, financial freedom, and perks that renting provides are opting out of the homeownership myth and forging their own path. After looking at the numbers, you might realize that they have the right idea. If you're sitting on the fence about whether you should rent or buy, read our list of the 23 reasons why renting is better than owning.

1. You can have a bigger net worth than homeowners.

Everybody knows that buying a home is an effective way to build one's net worth, but it's definitely not the only way. Some homeowners can even lose money, like in the case of the millions of homeowners who lost their homes in 2008. Some experts argue that although many homes appreciate in value over time, so do other assets like investments in the stock market or a small business.

Other experts believe that investments in the stock market can increase one's net worth even more than home equity. An article in the Wall Street Journal points out that over a 30-year period, the value of an average, single-family home grew 3.6% annually, but the compound annual return on the S&P 500 for the same time period was 11.1%. In a survey from the Macarthur Foundation, 61% of respondents believe that renters can be just as successful as homeowners in achieving the American Dream, with or without their own home. Homeownership isn't the only road to wealth, but renters need to be consistent in investing money where it can grow and contribute to their net worth.

2. No homeowners insurance or property taxes.

Homeownership comes with a lot of extra expenses that can catch new homeowners by surprise. Homeowner's insurance protects property from damage that's caused by fire or vandalism, for example, and the annual fee can cost anywhere from $538 (the average cost in Idaho) to $2,084 (the average cost in Florida). The Insurance Information Institute estimates that nationwide, the average homeowner's insurance premium cost around $1,034 in 2012.

Homeowners also have to pay property taxes every year, and data from the Tax Foundation shows that the median cost of property taxes nationwide was $2,043 in 2010. Homeowners may have a house to their name, but they also deal with costs that renters don't have to worry about.

Tip: You might want to consider renters insurance. Read this article on how much renters insurance you need. You may be surprised at how much valuables you have.

3. In some metropolitan areas, renting is cheaper.

An October 2014 study by real estate website Trulia showed that homeownership is cheaper in the long-term than renting in many U.S. cities. The calculations were based on a traditional 20% down payment and the assumption that the homeowner would stay at least 7 years and itemize deductions on their taxes. However, they were quick to note that for young people who don't have savings, rely on a Federal Housing Administration insured loan, don't itemize their tax deductions, and only stay in their home for 5 years, renting is cheaper than buying in 27 of the 100 largest metropolitan cities.

A separate study by Deutsche Bank for the Wall Street Journal in May 2014 shows differing numbers. Cities like Sacramento, Phoenix, San Bernardino, Riverside, and Austin were among the cities where it was cheaper to buy according to the Trulia study, but they were found to be cheaper to rent just a few months earlier in the Wall Street Journal study. In short, prices can fluctuate in a matter of months. The takeaway message from both studies is that although homeownership can be beneficial for some, young renters who are short on cash and plan to move in the near future may find renting to be a cheaper option.

For instance, a 2018 report by Onerent found renting was better in Los Angeles for those renting a home for around a year or two.

4. You don't lose money if your home depreciates in value.

A home is an investment, and like most investors, homeowners hope their investment will appreciate in value over time. Every homeowner expects that they'll be able to sell their home for more than they bought it for, but homeownership doesn't always have a happy ending. Factors like crime, traffic, unemployment, or a surplus in homes can cause a home to depreciate in value. According to Kiplinger, a business and personal finance magazine, one of the worst cities for home appreciation is Fayetteville, North Carolina, where home prices dropped 4% in the last year. They cite a surplus of new homes that were built for military families as the reason for the dramatic drop in home prices. Although renters may have their own share of problems, a depreciating investment is not something they have to worry about.

5. You don't have to save for a 20% down payment.

Buying your own home isn't cheap, and even if you qualify for a loan, you'll still need to come up with the down payment on your own. A traditional down payment is 20% of the property's purchase price, so on a house that costs $275,000, your down payment would be $55,000. That's basically the cost of tuition for one year at a private university, a luxury car, or a crocodile skin Louis Vuitton handbag! In contrast, a landlord might charge you the first month's rent, the last month's rent, and a security deposit, which varies from state to state, but is typically around 1 to 2 month's rent.

In a Fannie Mae survey, around half of young renters stated that the biggest obstacle to buying a home is being able to afford the down payment and closing costs. If you're a renter and can't save $1 to save your life, don't stress - you won't need to save up for a down payment if you continue to rent. And if you're a renter with money sitting in the bank but no plans to buy a home, you can spend that hard-earned cash elsewhere.

6. You can live within your budget (even if it changes).

So you don't make six figures and don't think you'll get a 150% raise anytime soon. At least if you're a renter, you don't have to save for a down payment and can adjust your living standards to what you can afford. When homeowners close on their new homes, they usually agree on a monthly mortgage payment with the assumption that their financial circumstances won't change. Unfortunately, job losses, major illnesses, and other unexpected life events can happen to anyone, and homeowners don't always have the flexibility to change their living arrangements quickly.

A Trulia study shows that renters are more likely to adjust to financial hardships by moving to a smaller home, finding a roommate, or even living out of their car! A report published by the Joint Center for Housing Studies reveals that 54% of renters prefer to rent because they can stick to their budget. Nobody should have to live in their car, but at least renters are able to find creative ways to live within their budget.

7. You won't have mortgage debt.

There's good debt and bad debt, and some argue that mortgage debt is the good kind. However, if you're the type of person whose blood pressure rises at the thought of taking on more than $100 in debt, then homeownership probably isn't for you. According to the Federal Reserve, the amount of outstanding mortgage debt in the U.S. is around $13.4 billion. Given that most homeowners opt for a traditional 30-year mortgage, it's no wonder that so many Americans haven't paid off their mortgage quite yet.

If you buy a home at age 35 and stay there without taking out a second mortgage, for example, you can expect to be mortgage-free by the time you hit 65. The 2013 American Community Survey reveals that only 32% of owner-occupied housing units have paid off their mortgage. If you're a renter without student debt or credit card debt, then you have the privilege of living debt-free.

8. Your money isn't tied up in a house.

Some homeowners view their house as an emergency fund, and while it's true that they can use their home equity when an emergency strikes, a house isn't a liquid asset. Between the time it takes to find a listing estate agent and stage your home for sale, it can be months until a homeowner can list their house on the market. Once it's listed, it takes the average homeowner between 26 to 34 days to sell their home, according to data compiled by the Redfin Research Center, but depending on the season or local housing market, it can sometimes take 6 months or more.

Taking out a second mortgage on a home isn't an easy task either, and it comes with a lot of financial risk. Renters with money saved can use it at the drop of a hat, which is a luxury that many homeowners don't have.

9. You can be flexible about where you live

Last year you wanted to live near the coast. This year you decided to live in the city. And next year, you might be in the mood to live closer to nature. As a renter, you can be flexible about where you live from year to year, or even month to month. With a short-term lease and no mortgage to pay, you can pick up and leave whenever the mood strikes you.

In a survey conducted by mortgage loan company Freddie Mac, 68% of renters agree that renting gives them flexibility over where they can live. Another study published in the Joint Center for Housing Studies reported 41% of survey respondents believed that renting also gives them flexibility with respect to their future. Instead of their location determining their life decisions, renters can choose to move for work, love, or simply because they want to.

10. You can relocate for your dream job.

Americans want the whole package — a beautiful home, a bustling social life, and a great job, but there's no use owning a home if you don't have a great job to help you pay for it. The beauty of renting is that you can easily move to the next city, the next state, or even across the country, for your dream job. Homeowners, on the other hand, are stuck where they are until they sell their home.

Some experts believe that homeownership is actually a hindrance to the labor market because homeowners don't have the flexibility to move to pursue better economic opportunities. A study by economists David Blanchflower and Andrew Oswald shows that countries that experience an increase in homeownership usually see an increase in unemployment rates within 5 years, because homeowners can't relocate for work.

The Pew Research Center, a nonpartisan research think tank, looked at U.S. Census data to determine moving trends in the U.S. They found that six in ten Americans have moved at least once in their life, with most citing economic opportunity as their reasons for moving. When the researchers broke down the data by income, they noted that the most affluent Americans are the more likely group to have moved at least once. In this case, renting may give people the flexibility to find bigger and better job opportunities, wherever they may be.

11. You can follow your heart.

Have you ever given long distance love a try? According to statistics compiled by the Center for the Study of Long Distance Relationships, it is estimated that 14 million Americans are currently in a long distance relationship. The Internet has made long distance romances easier for couples to meet and keep in touch, but it's estimated that relationships begin to suffer after the 4.5 month mark. At some point, couples probably feel the need to bridge the physical distance in order for the relationship to last. If you're a homeowner in a long-distance relationship, selling your home and moving in the name of love might sound absurd. Renters, on the other hand, have the flexibility to move wherever their heart leads them.

Tip: It can often be difficult for students to find off-campus housing for school. ABODO can help. Founded in 2012, ABODO targets the college campus market. Today, they're the leading college and young professional apartment listing search engine out there, with rent reports for different cities.

12. Most rentals are closer to metropolitan areas.

When you're young and looking for new experiences, the glamour of the big city always beckons, whether you're from the High Plains of Nebraska or the bayou of Louisiana. Bigger cities just have more to offer than the suburbs — an exciting nightlife, diverse neighborhoods, interesting people, and international cuisine. Unfortunately, big city amenities come with a price tag. When the average price of a condo in Manhattan is $1.68 million, it's easy to see why so many people choose to rent instead of own in New York City.

A recent study from New York University's Furman Center found that renters make up the majority of residents in 9 of the 11 biggest cities in the U.S., which includes Miami, New York, Los Angeles, and Chicago. In a study from the Joint Center for Housing Studies, 41% of survey respondents said that they preferred renting because they could live in a convenient location. If you've ever wanted to live in the center of it all, renting is probably the most affordable option.

13. You can meet new people if you have a roommate.

Owning a home may give you privacy, but renting can be a way for you to meet new people, gain new experiences, and maybe even make a life-long friend. Roommates are like built-in friends — you can rehash a bad date with them, share a meal, and split the cost of your cable bill. Renting with a roommate isn't just for college students either. A recent Wall Street Journal article reported that around 20% of New York City's roommate population is over 40. If you're worried about getting stuck with a nightmare roommate, apps like Zumper, Roomhunt, and Roommates help people search for roommates with similar lifestyles within their social network.

14. You don't have to pay for maintenance on your rental.

When your refrigerator stops working in your rental unit, what do you do? Call your landlord. When one of your kitchen cabinets comes off its hinges, what do you do? Call your landlord. When you discover termites under your floorboards, what do you do? Call your landlord. As a renter, you don't have to lift a finger or spend a dime to fix the maintenance problems that arise in your rental unit.

If you encountered the above problems in your home as a homeowner, however, you would either be doing the repairs yourself or paying somebody else. On average, homeowners spend around 1-2% of their home's value on home maintenance each year, according to a study from the University of Illinois Extension. So for that $275,000 house, we'd have to pay at least $2,750 annually on upkeep. While most maintenance issues are relatively simple, some can be more than many homeowners bargain for. In a study conducted by real estate website Zillow, 38% of new homeowners were surprised by the costs of maintaining their new home. If you're a renter and are having maintenance issues with your rental unit, count your lucky stars that the maintenance costs are on someone else's dime, not yours.

15. You don't have homeowner stress.

With all this talk of property taxes, home depreciation, and costly maintenance, it's no wonder that many new homeowners report being stressed about their homes. The Holmes-Rahe Stress Scale is an inventory of stressful life events that psychiatrists Thomas Holmes and Richard Rahe found to contribute to physical illness. The 43 life events that make up the list include events associated with homeownership, like taking on a mortgage, major changes in living conditions, changes in residence, and taking on a loan. Around 52% of renters in the study from the Joint Center for Housing Studies believe that renting is better because they don't have to deal with the stress that comes with owning a home.

16. You can have access to extra amenities.

Sure, homeownership might seem like a dream come true if you want privacy, but in some cases, renting can be a sweeter deal. Wouldn't it be great to have a pool? Or a gym in your basement? Or maybe a Jacuzzi to relax in after a long day at work? Or somebody to landscape your entire backyard? If you're a homeowner, you'd have to pay some serious cash to have all those things, but some rental units offer all that and more to their residents.

A survey by the National Multifamily Housing Council shows that high-speed Internet, outdoor space, and a washer and dryer are the most popular amenities to renters. The website ForRent.com estimates that an in-suite washer and dryer can save renters money at the laundromat, not to mention the gas money it takes to get there. Fitness centers can also save residents money in the long run, especially if they don't use their gym membership regularly. Renting can sometimes give you access to amenities that you could never dream of having as a homeowner.

17. You have more leisure time.

Owning a home can sometimes take a lot of time and energy, which leaves little time for homeowners to enjoy the simple pleasures in life. Researcher Grace Wong Bucchianeri conducted a study about the effects of homeownership on women's happiness and personal life, and found that homeowners aren't any happier than renters and actually derive more pain from owning a home. They're found to be 12 pounds heavier than the average person, and spend 3% less time on leisure activities. They also report feeling less satisfaction from romantic relationships, time with friends, and social activities. The next time you feel envious of a homeowner's newly remodeled kitchen, just remember that when they're mowing their lawn on the weekends, you're reading a book or eating brunch with friends (and enjoying it!) instead.

18. You won't suffer from buyer's remorse

If you think house hunting as a renter is brutal, you should try house hunting as a potential homeowner. After searching high and low for the perfect house (or at least one that's good enough), many homeowners' judgment can get clouded and cause them to jump at the first opportunity that comes their way. A survey conducted by HSH Associates, a mortgage and consumer loan website, found that 80% of new homeowners have at least one regret when it comes to their new home. Their regrets run the gamut from the size of the house to the high maintenance costs. While most can overlook the deficiencies of their new home, 37% report that they think about their regret frequently, and 22% think about it every day! Renters may sometimes find themselves wishing they had put more time into their housing search, but at least their feelings of discontent only last as long as their lease.

19. You can keep looking for your dream home.

Even if potential homeowners do their research before committing to buy, they never really know what their home is like until they move in. What may seem like a picture-perfect home from a Thomas Kinkade painting can turn out to be a disappointment when they realize that their dining set doesn't fit in the dining room or the master bedroom leaves something to be desired.

In a Zillow.com survey, 62% of homeowners with regrets stated that they wished their home were bigger or had a different layout. Renters probably have the same experience - what may have seemed like a spacious studio can end up feeling cramped after a few months. Luckily, renters have the luxury of moving until they find a place that suits them best. Homeowners have to either cough up more money for a remodel or learn to love their home the way it is.

20. You're not stuck with bad neighbors.

Your new home may be the house of your dreams, but the surrounding neighborhood and people can make your life a breeze or a nightmare. Imagine hoping to catch some shut-eye early on a Monday night, but waking up to the booming sounds of techno from your college-student neighbors. Or maybe you hope to throw a mellow housewarming party, but your plans are thwarted by a noise complaint from another neighbor.

Both the HSH survey and Zillow survey found that 25% of homeowners with regrets are displeased with their neighborhood and wish that they had researched more about their community and future neighbors. When you're renting, the solution to bad neighbors is simple - just move. Unfortunately, homeowners are in it for the long run, and it's in their best interest to keep the peace.

21. You can live a minimalist lifestyle.

Ever seen the show Hoarders? Sometimes long-time homeowners can find themselves in similar situations when they fill their living space with unnecessary things for a long period of time. A 2012 UCLA study reveals that many middle-class homeowners deal with clutter on a daily basis, and only 25% of homeowners have a functional garage because they use it for storage space.

A hidden perk of renting is that moving helps you identify the possessions you really need and minimize clutter. Around 24.5% of people living in rental units in 2014 lived elsewhere in 2013, according to Geographical Mobility data from the U.S. Census, and those who moved got to do a thorough inventory of what they need and don't need. If minimalism is your thing, renting is the way to go.

22. You can adjust more easily to family changes.

You didn't count on your sister losing her job and moving in with you until she gets back on her feet. You also didn't anticipate your father's illness, which meant that you had to move closer to your hometown to take care of him. And you never thought your son would decide to go to college halfway across the country instead of staying local. Family circumstances are unpredictable, and sometimes the house that seemed to fit you and your family just right can become too small (or even too big).

Data about changes in homeowners' and renters' family life is limited, but a report published by the U.S. Census indicates that 12.4 million children underwent a change in their family structure in 2013, which could be anything from divorce to a new addition to the family. If you're a renter, it's easier to downgrade or upgrade to another residence to adjust to life changes. If you're a homeowner, moving to another residence may be out of the question, which means most homeowners have to find a compromise.

In a study conducted by the Macarthur Foundation, 45% of current homeowners admit that they would consider renting again in the future when their home becomes too much work for them in their old age. In cases of major changes in one's family structure, renting offers more flexibility.

23. You can travel freely.

Buying a home is a huge financial obligation, which is why many millennials are putting it off until they're absolutely ready to stay in one place. They know that once they close on a new home, they probably won't have the time, money, or flexibility to jet set to the Edinburgh Music Festival at a moment's notice or backpack through Southeast Asia for 3 months. Furthermore, some millennials are redefining what the American Dream really is, and homeownership isn't necessarily a part of it.

A poll from MassMutual, the mutual life insurance company, shows that 38% of millennials consider travel a part of the American Dream. In a survey from the travel marketing firm MMGY Global, 60% of millennials state that they would rather spend their money on experiences rather than on things. If a beach in Curacao appeals to you more than a mortgage, save your money for a plane ticket rather than a down payment.

More from CreditDonkey:


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Big House, Little House

Is the Middle Class Doomed


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