Ok, so I am a mortgage broker and I am writing about when renting is a good thing. You would think that since I make money when people buy, I would be encouraging people to buy. I generally do for many reasons beyond the fact that I can earn a commission. There are times however when renting is actually a smart move. I want to talk about those times.

Renting is a good way to downsize

If you want to truly downsize moving into a condo, townhome or apartment may be a good move. Many people live alone in a big house. The kids moved out or a spouse passed. Your 2,500 square foot house may seem a bit too big and too much to care for. You could buy a condo or townhome but you are not sure where you want to be geographical.

Perhaps in the above scenario, it’s a good move to rent a smaller space in an area that you are interested in before you buy. Renting in a new area before you buy is not a bad idea particularly if you are unfamiliar with the various neighborhoods. You may decide that you are happy living in a rental property and have no need to buy.

Starting a new job, not sure

Young people who are just getting started in their new job may find that buying at this point in their career and life is not the best move. Given the frequency with which people today change jobs, buying in one area may be inconvenient if you have to move for another job. Buying a home requires a commitment. It usually means you will be staying in an area for a while. Considering the closing costs of buying and selling, short-term residencies may not be financially advantageous when you can rent.

Older people may need social aspects of renting

As people age, they will arrive at a point where they will not be able to care for themselves. If they own a home, it may be time to sell and move to a rental apartment or condo. This is a good way to cash out of the home and spend the equity in future years. This is a very common scenario and perhaps one of the best reasons to rent from an economic and social perspective. Living in a suburban home alone may make socializing difficult in later years. Living in a closed community such as a condo development may lead to a better social life.

Your home is where you make it. There is no requirement to own the property you live in. While it is the American dream, it is not a requirement. I will say at this point that while there are excellent times when renting is the way to go, there are times when renting is not the best move.

Owning a home is the largest wealth creator

Owning a home is the largest wealth creator in the country. It’s the home equity that permits people in later years to enjoy retirement. Either they have paid off the loan or they have used money in the home to offset living expenses. I almost always recommend homeownership to younger people. The primary reason is that it takes time to build equity (in normal times). The sooner you start the better as long as you plan to be in the same place for at least three years.

For all of my readers who do not plan to stay in one place for a while, you should consider renting until you have workout your domestic and financial affairs. Get your credit in good shape, no need to jump from a rental into a house with a low credit score. Remember, your mortgage interest rate depends upon your credit report.

In some cases, you may own a home and need to move. You may not be best served by selling the house because there could be better options such as renting it. Many people are renting at their primary residence and have rented out their previous residence.

Rent while you save to buy

Perhaps you do not have enough saved to buy a house or condo. Rent until you do, there is no rush. The housing market works in cycles. Up, down and up again. You may miss the down cycle to buy this time but there may be another later. You should discuss your living situation with your financial adviser. if you own a house and want to move to a rental apartment, there are good times to sell and buy. If there is no rush, your adviser can tell you when to make the move.

Taxes are the main trigger for buying or selling. A couple can earn up to $500,000 tax-free from the sale of their home if they meet the IRS test. If you sell a house and earn, for example, $700,000 and move to a rental apartment, timing may mean everything on the transaction.

Unless there is a good reason (perhaps one discuss above) to rent, don’t. Owing your primary residence is as mentioned above, is one of the best ways to build wealth.

Thank you for visiting Logan-Anderson, Gulf Coastal Realtors. Please read some of our other articles about this and all topics real estate. If you have questions please call 228-215-0031. Press 1 for Sean and 2 for Bill.