It is a hot market for renting, buying, and selling. Ask anyone in the housing industry what the temperature of the market is and you will get a different answer depending on the time of day, the person you ask, and even which side of the industry they serve. Is it time to buy? Or should you hold and find a rental? Here, we share some insights on renting versus purchasing.
There is no doubt that the last year has been a seller’s market. There are times when it is beneficial to buy and times when it is better to rent. Those lines are more defined and bolder lines now that the housing market has exploded and left homebuyers often in a bidding war paying over the asking price in many cases.
Let’s look at some reasons renting may make sense.
Reasons for Renting.
- A bigger picture. You have a long-term plan in play to purchase a home. A home purchase is a long-term commitment and as with any commitment, you want to be sure when you find “the one” it checks all the boxes of wants and needs. If you are moving into a new stage of life whether it be college graduation, a new job, or even marriage, a smart play would be to take the time to research, investigate, and prep your finances for the next big step.
- Building financial stability. Before lenders will consider handing over a loan for your dream home, they will look at your debt to income ratio. If you have student loans, high-interest car loans, or credit card debt, it would be wise to find a rental that will allow you to knock out a significant amount of your debt. This will make you much more appealing to lenders when the time comes to purchase a home.
- A transient career. If you have a career that will require you to relocate multiple times in a 5-year time span, it would be wiser to find a rental that fits your needs and specifications. It may be that you are in a military family or are new to the area. Regardless of the reason for the move, take the time to stay in a rental to ensure the area you are in is where you can see yourself long-term when the time is right.
Renting over purchasing for the majority of the population might feel counterintuitive. It is in fact, not a backward step, but a safe step toward a big picture plan to purchase a home when the time fits you. Let’s look at some real and tangible pros to renting.
Pros for Renting
- It gives you the chance to test the waters in an area before you have a 30-year commitment.
- No real estate taxes to pay or worry about when the tax values increase.
- Maintenance cost falls on the landlord, not you.
- Renter’s insurance is cheaper than homeowner’s policies
If you have made it this far and realized that renting is the best option for you. Let’s take a moment to understand the importance of renter’s insurance.
What is Renter’s Insurance?
Renters’ insurance is about the protection of the renter. Landlords and the owners of the rental must carry insurance, but that will not protect you, the renter. A rental policy is a separate policy purchased by the renter and will protect your personal property and cover you in the event of certain liabilities.
A renters’ policy is a smart play regardless of your financial situation. Your personal property and certain liabilities are NOT covered under your landlord’s policies. While their policy will cover structural issues due to situations such as fire or water damage, your possessions are not. In short, the landlord’s policy covers the building but not your stuff. People far underestimate the value of belonging in terms of having to replace or repair due to loss or damage. Think about the electronics in your home. If you had to replace every piece, it wouldn’t take long for the cost to be thousands of dollars. A rental policy will help to mitigate the overage that would come out of pocket without a policy.
A lesser-known benefit of a rental policy is liability coverage. In a litigious world, you run the risk of a potential lawsuit if someone is injured in your home. A good policy will offer protection and assurance that an accident in your home won’t leave you financially desolate.
Less than 50% of renters have a rental policy in place to cover loss and liability.
Most renters have an average of 20 thousand, yes $20,000+, in property and belongings. If there is damage to personal property due to a structural issue, that is a large amount to put out to replace property. The landlord or property owner’s policy will cover the repair of the dwelling, but not your personal possessions.
Reasons Why You Need Renter’s Insurance
- Protection of personal possessions.
- Covers liability due to accidents.
- Often required term of the lease from the landlord.
- Provides additional security in event of having to vacate rental due to structural issues.
- It is affordable and cost-effective.
What can you expect with a rental policy in place?
Here are some key things to discuss with your agent as you determine your coverage needs:
- Make sure your agent clearly explains what your policy covers.
- Learn the deductibles and coverage limits of your policy.
- Ask about policy discounts for combining with auto policies.
- Know if your policy provides replacement cost coverage (RCC) or actual cost value (ACV).
- RCC will have a higher premium but will replace a five-year-old TV with a new one while the ACV. will pay out the current value of the five-year-old TV.
- Discuss the best fit with your agent for your particular situation.
It is better to have it and not need it than to need it and not have it. With regards to a rental insurance policy, the old adage rings true. Most of the population do not have the financial means to replace personal property due to things like fire, water damage, or other reasons that might cause loss of personal property. A good and strong rental policy will provide peace of mind and ample coverage if the time ever comes that you need it. Do you need an agent? Check out: Justin Ray with Farm Bureau
If you are looking for a rental to fit your lifestyle and family, Milton Realty Group is a great place to start. They work diligently to find the perfect fit. Check them out today.