The Renter’s Dilemma

The Renter's Dilemma

Everyone has different life goals, but we all know the stereotypical American Dream. It involves a house in the suburbs with a white picket fence and 2.5 kids (don’t think too hard about that half a kid) and a backyard perfect for cookouts in the summer.
For most Americans today, however, that dream is much more like a fantasy. So we rent. And where does all that rent money go? Into someone else’s wallet. Meet “The Renter’s Dilemma.”

To rent or not to rent?

For most people, renting is probably considered the default option. It’s likely how you got your first place outside of a parent or guardian’s home, and there’s a good chance you’re renting right now, given current trends.

And it makes the most sense in many cases, as financial educator Maggie Germano (@MaggieGermano) explained: “We are often told that renting is a waste of money and that we should always aim to buy a home. That is the American dream, after all. However, sometimes buying a home just doesn’t make sense for everyone. You have to look at your current living and financial situation, as well as what your values and goals are. If you don’t want to stay in your current city for very long, it doesn’t make sense to buy a home. If you still have credit card debt or other financial priorities, saving up for a down payment might not even be feasible right now. You also have to consider that home ownership comes with a lot of added costs. If your water heater breaks, you can’t just call your landlord to fix it. You have to deal with it (and pay for it) yourself. Is that something you are financially and emotionally ready for right now? If the answer is yes, then go for it! But if the answer is no then buying a home might not be right for you at this time.”

So with these downsides in mind, you might be wondering why would anyone even consider buying a home?

Should you want to buy?

But of course, people do consider buying a home because it does have many advantages that renting doesn’t. We’ll let Heather McRae (@HeatherMcRae) of Chicago Financial Services explain some of the benefits of owning: “If one simply looks at the costs of renting a home versus owning then it certainly costs less to rent. Renting a home allows you to call the landlord when a repair needs to be made without having to outlay your own cash. However, simply looking at the costs of owning a home without taking into account the benefits is short-sighted.

“Regarding the upfront costs associated with purchasing, they can be comparable to the upfront security deposit required in many rental situations, depending on the price point. There are a plethora of down payment assistance programs that are available, which help alleviate much of the upfront costs associated with buying a home for the first time.

“Generally speaking, building equity in an asset will usually be a better option, but it isn’t always the right option for everyone. I suggest speaking with a tax professional to discuss the impact owning a home will have on your tax liability.

“Taking into account how long one plans to live in a particular area is a factor when determining which option is right for them. For example, if you anticipate a work transfer to another city within the next 12 months then buying a home may not be right for you. Renting the home instead of selling it is an option to consider but becoming a landlord comes with its own set of advantages and disadvantages.

“There was a time within the last ten years when property values were declining at a very quick pace. That is not the case in the current environment. Most metropolitan areas these days are appreciating in value. Overall I would say it is a good time to buy a home.”

Bringing it all home. 

“There are, however, times when renting a home makes more financial sense.”

So there you have it, there are advantages and disadvantages to both renting and buying. Brett Graff (@BrettGraff), author of “NOT BUYING IT: Raising Happier, Healthier, and More Successful Kids”, summed it up well: “Buying a home instead of renting one can be a good investment because not only do you build equity—ownership in property you can hopefully sell at a higher price one day—but also because you can deduct your mortgage interest from your taxes. There are, however, times when renting a home makes more financial sense. If passing up economic opportunities in another state will make you worse off, then renting keeps you mobile. Also, you only make money on a house if it sells for more than you paid, so if real estate prices are very high, you may want to rent a few months until they soften.”

So if you’re renting now, it may be because it’s your only financial option. But that doesn’t necessarily mean it’s a bad one!

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Maggie Germano is a Certified Financial Education Instructor and financial coach for women. Her mission is to give women the support and tools that they need to take control of their money, break the taboo of discussing debt and income, and achieve their goals and dreams. She does this through one-on-one financial coaching, monthly Money Circle gatherings, her weekly Money Monday newsletter, and speaking engagements. To learn more, or to schedule a free discovery call, visit

Brett Graff, has been seen writing and reporting on money and personal finance in The LA Times, Yahoo! Finance, Cosmopolitan, The New York Times and the Fiscal Policy Institute, to name a few. Brett also provides her insight in the column, The Home Economist, which is nationally syndicated and published in newspapers all over the country. Her book “NOT BUYING IT: Raising Happier, Healthier & More Successful Kids” is now available!

Heather McRae is a Senior Loan Officer with Chicago Financial Services.  She helps people get a mortgage when they want to purchase a new home or refinance a home they already own. Heather received her introduction to the Real Estate field in 2001 when she worked as a real estate broker and a real estate appraiser prior to beginning on the finance side in 2005. Heather has been named in publications such as U.S. News and World Report, Trulia, SelfLender and other Chicago area media outlets. Something most people don’t know about her is that she has two gold medals from U.S. Rowing Master’s Nationals in 2010.

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