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The infinite debate – renting vs. owning.
Is renting your property instead of becoming a property owner really a complete waste?
We’ve all heard the “why pay the landlord’s mortgage when…” or “you’re throwing money away” by renting, but that’s a gross oversimplification.
Yes, owning real estate and being a real estate investor long-term is typically better for building wealth, but that’s simply not true for everyone and in every situation.
Here’s how renting is NOT a complete waste of money.
… JSEK Properties vision is to set the standard in property management by being the commercial real estate company of choice by providing excellent service & care to our clients.
There are three reasons that you should consider renting instead of buying:
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Flexibility.
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Lower Upfront Costs.
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Less Responsibility.
Flexibility
Renting real estate provides you with far more flexibility than ownership.
When you buy a property, your capital is tied up and is far less liquid than having cash or even holding other investment vehicles.
It’s essentially trapped equity.
Renting real estate, on the other hand, allows you to keep your capital liquid for use in other investments or in case of emergencies.
Since leases are often year to year, you can also move from an apartment to a home or from city to city without having to worry about renting out your old property or selling it.
For some, this flexibility can be the deciding factor to rent.
Lower Upfront Costs
Having to come up with a down payment, cover all of your due diligence, and pay for closing costs can often take purchasing real estate off the table for most would-be buyers.
Down payments, alone, are usually in the 3.5% to 20% range for residential and 10% to 35% for commercial, which can be a substantial amount of cash out of pocket depending on the specifics of property you’re buying.
Due diligence can also become fairly expensive if you need to get ALTA surveys, environmental and inspection reports, title searches, and more.
And closing costs can sneak up on you when you have to pay legal and financing fees.
When you rent real estate, you don’t have to come out of pocket for anything other than your security deposit (maybe) and first month’s rent, helping you keep your overall costs lower.
Less Responsibility
When you own the real estate, you are solely responsible for taking care of any and all maintenance and repairs.
That means that if the roof needs replacement you’ll only have to come out of pocket for all expenses, but it could also make your living arrangements uncomfortable (if it’s your home) or your returns could take a big hit (if it’s an investment).
One way around that, of course, is if you’ve assigned those responsibilities to the tenant, but you’ll still have to oversee the condition of the property to ensure that the work is being completed and performed properly.
When you rent real estate, the landlord is likely going to be responsible for making those repairs – unless you’ve signed a triple net commercial lease or something similar.
That means that when your dishwasher breaks, you can notify your landlord to fix it and go about your day without missing a beat. No finding a repairman, dealing with scheduling windows, and taking time out of your day to let them in your place.
Give JSEK PROPERTIES a call today to discuss your best option.
