The 3 Biggest Pros and Cons of Renting, According to Dave Ramsey

You should read this if you're trying to decide whether to buy or rent.

Renting a home is an alternative to getting a mortgage and buying your own place. Many people are eager to purchase a property, but sometimes being a homeowner isn't all it's cracked up to be. In fact, there are pros and cons to both that are worth considering.

Not sure what the biggest benefits and downsides of being a renter are? Finance expert Dave Ramsey weighed in on this issue and here's what he had to say.

Ramsey says these are the three biggest pros of renting

According to Ramsey, the three biggest benefits of remaining a renter include more flexibility if you want to move, not having to pay for home maintenance, and the fact that you won't have to spend as much money in the short term. 

If you own a home, moving is a hassle and a huge expense. You'll have to find a buyer for your house -- which usually means paying a commission to both your real estate agent and the agent representing the buyer. This commission could add up to 6%. And you'll also have other closing costs on top of that. 

As a renter, though, this won't be an issue for you. "When you rent, you don’t have to stay in the same location," Ramsey said. "Plus, it’s much easier to get out of a lease than a mortgage."

As for home maintenance, making fixes becomes your responsibility as an owner but is something a landlord takes care of when you rent. "If the stove goes kaput and the faucet pipes burst, you don’t have to call the plumber or make a trip to the appliance store," The Ramsey Solutions blog reads. "You call the landlord. One of the biggest perks of renting is that you never have to worry about surprise repair costs."

Finally, Ramsey explains that it is cheaper to be a renter in the short term since you only need to come up with a security deposit and since your renter's insurance will cost less than homeowners insurance. You also don't get stuck with private mortgage insurance or homeowner’s costs. Of course, the downside is, you have to pay rent forever while eventually you could repay your mortgage in full if you owned your own place. 

These are the three biggest downsides of renting

Ramsey also highlighted three big downsides of renting a property rather than becoming a home buyer. These downsides included likely future rent increases, a lack of financial incentives, and less freedom to make the space your own. 

When you own a home and have a fixed-rate mortgage, your loan payments won't change for the life of your loan so housing costs only go up a little in circumstances where your property taxes or insurance increase. But many renters can't count on this much stability in their housing costs. "Even if you found a killer deal in a hot area, inflation, competition and rising property values will cause your rent to go up year after year," Ramsey warned. 

As far as financial incentives, Ramsey pointed out that renters do not get a tax deduction for rent payments while owners get to deduct mortgage interest. And as Ramsey explained, property owners build equity and benefit from property appreciation which increases their net worth. This doesn't happen for renters.

Finally, Ramsey cautioned that renters don't get to make their space their own like owners do. "You have little say in what your place looks like," he warned. 

Ultimately, you'll need to decide whether the pros outweigh the cons for you. But Ramsey clearly lays out both the advantages and disadvantages and his advice here is definitely worth listening to.