thevicenarian.com

Renters : rejoice!

Posted by Tad Johnson - Feb 12th, 2008 at 17:02

During the carefree days of the early 00’s, it seemed that only a sucker would rent. With home prices going up at 10% or more per year and mortgages available to anyone with a pulse, who wouldn’t want to buy? Then, in the summer of 2007, reality made its way back onto the scene. Since then, house prices have dropped 10% in many markets and mortgage holders are facing foreclosure.

What’s a vicenarian to do in this climate? Rent!

Don’t buy into the hype that renting is “like throwing your money away”. It’s not. Renting is purchasing the service of a comfortable home for a fixed monthly fee. While it’s true that you’re not building any equity in a home, you’re also not forced to pony up a down payment and you’re free to move out whenever you please (more or less).

Another great part of renting is you carry virtually no risk. Once you purchase renter’s insurance (which is very inexpensive) to cover your belongings, you can rest easy at night knowing that when your pipes burst or your furnace dies, it’s your landlord who’s stuck with the bill. As anyone who’s replaced the roof on a house knows, a few major home improvements can quickly cancel out any gains in home value.

Instead of sinking a majority of your assets in a house, renting allows you to remain flexible with your investments. You can diversify to match your investment goals, and you can sell whenever you want–unlike a house that may stay on the market for a year or more. (And if you think homes are a good investment, you can buy a REIT!)

But don’t take my word for it. The New York Times has a handy tool that helps you compare renting vs. buying in different scenarios. For my current situation, it never makes sense for me to buy. Plug in your numbers and see what it says. And add your comments below!