5 Reasons To Rent

     There is no denying that home ownership can have its advantages: It helps build wealth through accumulated home equity and appreciation, provides tax benefits and offers a sense of autonomy. But sometimes remaining a renter—and roughly 30% of American households fall into this group—makes more sense, especially if you fit one or more of these categories:

 1. Your finances are a little shaky. 

     Buying a home means handling sizable expenses up front—such as the down payment and closing costs—e ven before you start making mortgage payments. And other costs—including maintenance, insurance and property taxes—can rise sharply each year. Many couples, like Krystyna Hall and her fiancé, John Pettengill, of Tarrytown, N.Y., have decided to temporarily put off buying while they save up. “We want to have a decent down payment,” says Hall, 34, vice president of a public relations firm. This strategy might position them for a more favorable mortgage when they do buy.  
2. Housing prices are rising much faster than rents in your area.

     When you factor in the after-tax costs of ownership, “in some places it is better to rent than to buy,” notes Mark Obrinsky, chief economist for the
National Multi Housing Council.

     Although the gap is narrowing in most parts of the country, rents experienced slow growth compared to  housing prices during the last several years. In many high-priced areas, it was far less expensive to rent than to buy the same single-family home after calculating average monthly payments.

     In Phoenix, rents actually declined from 2002 to 2004 as housing prices there soared, says David Lereah of  the National Association of Realtors, although he cautions that rents have been moving up again.

3. You don’t plan to stay long in one place.

     “If you’re likely to be peripatetic and moving within five years, you shouldn’t buy a house unless, maybe, your company pays for the move,” says Jonathan Pond, a money manager from Newton, Mass. Five years is the minimum amount of time typically needed to recoup the initial purchasing costs and deal with housing-market fluctuations.

4. Your main motive for buying is long-term gain.

     If you’re looking for the best return, you’re often better off investing on Wall Street than Main Street. A study by the Fidelity Research Institute found that real estate produced returns above inflation of just 1.35% a year vs. 5.95% for stocks from the fourth quarter of 1963 through the third quarter of 2006.

     Renters can still invest in real estate without buying a home. There are real estate-related stocks and mutual funds, and real estate investment trusts (REITs), which are publicly traded companies with portfolios of commercial property.

5. You’d rather be traveling than fixing your toilet. 

     Being king of the castle means added responsibilities that cut into free time. Most renters need only call their landlords if they have problems with leaky plumbing or broken furnaces, saving themselves  time and money. “A lot of us don’t want to spend our time fixing toilets,” says Jonathan Pond.