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Does Renting Still Save Money?


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The economy has turned the housing market into a renters market. For more and more would be first time buyers are now historically more likely to hold off on buying property as renting has become a much longer lasting trend. Due to this new increase in demand for rented properties, access to those properties within an easy distance to public transportation is seeing a raise in monthly rates. Now the newest trend to hit this generation already battered by the economy and job market is where to live and how to afford it.

Why rent?

The economy is only recently starting to recover and those feeling it are even less than those who believe that we’re on some sort of recovery. Sometimes long term commitment is a bad thing. While the tax incentives are often present for those looking to settle down on a long term investment, it is often cheaper to rent. The reason being that you are only responsible to what you are using such as space and utilities. Even with rates rising, you aren’t subject to the taxes that will also raise with the property value. In essence, the location you are in may rise in value thus furthering the demand for your rental, but long term, you are saving more money than you would be spending if you had bought. If something goes wrong or breaks, it’s the landlord’s responsibility to fix which means there is no out of pocket cost for you. Even renter’s insurance is cheaper per month than that of a homeowners insurance package, with roughly the same coverage and ability to combine packages for discounts.

The Cost of Rentingrenting 1

Traditionally the cost of renting was always less than investing one’s money into a long term 30 year mortgage on a piece of property. But with that 30 year mortgage came interest deductions and incentives by the government to buy over renting; plus you were gaining equity on the back end of it. In recent years the cost of buying has outweighed the incentives to do so. With the job market increasingly getting worse and the economy continuing to tank, renting has become the newest long term trend. Those who can still afford to buy will continue, but banks and mortgage companies have made it increasingly harder for would be first time buyers to acquire loans. That being said, more and more people are looking to save as much money as possible month to month. Instead of paying for property taxes, mortgage costs, and compounding interests, the younger generation has allocated its monthly expenses towards savings and cheaper rent. Even those more established, career and family wise are moving away from the purchasing housing trend and looking at saving more of their money by renting.

Income versus cost has taken on a new face for people. The financial difference between those people that are buying and those that are renting are seeing that as rates rise so too will the cost of where they intend to live. Zillow conducted a study analyzing regional differences of cost of living via renting and comparison to what the average median income for those regions were. What the study found was that roughly 30% of all household incomes regardless of where they were located, were being spent solely on rent. While many are looking to rent, renting alone is near budget suicide. Years ago many couples were notorious for getting married early just to reap the tax benefits. The same as far as renting is being applied today. Many people are renting bigger housing or apartments in order to subsidize the cost of rent. By having multiple incomes feed the higher rent costs, people are able to live where they want at a lower cost.

renting 2For many lower and middle class families, more than 30% of their monthly total household income is being spent towards making rent or mortgage payments. Slightly less than that is being spent on food, clothing, and medical expenses. The most staggering information taken from the Zillow study was that the rise in rates isn’t only skyrocketing around the more major economic hubs such as Miami, New York City, Philadelphia, Atlanta, and so on. In fact it is all over; just about anywhere there is a boost in income or economic wealth is seeing a raise in renting rates as well as the cost of living.

Choosing to rent over buying is still one of the most logical choices if you are looking to save money. Still the best way to save money month to month is to watch how you are spending and increase how you are saving. When it comes to renting, research on the area as well as what the rates are like is the best way to put money back into your pocket, and allow what you are spending to work best for you.

 

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