Renting can be smart money management

On the list of "must-do" things in order to be considered a "real" adult are marriage, home, and children. All of which cost a lot of money. My focus today is on owning a home, which seems to be one important measure of whether or not you've "made it" or "grown up." It's just the socially acceptable thing to do. Buy a home and prove you're an adult.

Yet it can make a lot of sense to rent an apartment. Especially during turbulent times in the real estate market. But even if we were still in the housing bubble, renting would make sense for plenty of people. Here's why...

With home ownership, you theoretically are better off because you're building equity, so all the money you're paying to be in that home theoretically leaves you owning something in the end. Yet the cost of ownership is very expensive when you figure in mortgage payments, mortgage insurance, property taxes, association dues (if you have them), repairs, property insurance, and general upkeep. And some people aren't even building any equity because they went into "interest only" mortgages or otherwise bought houses which they can't afford.

It also takes a fair amount of cash just to get into a house. When you figure in the down payment and the closing costs, there is a lot of money paid up front to live in a house. And that can be painful on the pocketbook. All in all, plenty of homeowners find out quickly that the cost to own is much higher than they planned.

With a rental you have a fixed monthly cost. There are no unknowns. You can either afford the place, or not. You don't have to fix anything. Something breaks and you call the landlord. You are generally immune to ups and downs in the real estate market. Sure, you've got neighbors close by and the accommodations don't always fell like home, but those are really just minor drawbacks in the scheme of life.

Probably the single best reason to rent is the flexibility it gives you. Need to move for a job? No house to sell. Need to upsize or downsize? Find a new place when your lease is up. Tired of the neighborhood? Move out and don't look back. In a money crunch? Find a more economical place for a while.

I rented for a long time, and I hated the implication that somehow I wasn't "settled" in my life or that I wasn't being a responsible adult. For me, renting worked, and that's why I did it for so long. I loved the options I had by renting, and when I was finally interested in buying a house, I was also financially ready for the responsibility... something I wouldn't have been only five years earlier.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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