You’ve lived in your rental unit for a while now, but your lease is coming due. Now’s the time to start thinking about whether or not to continue on with your current landlord and remain in the premises, or move onto something else.
So, should you renew your lease or let it expire in favor of another rental? Or should you even make the leap from “renter” to “homeowner?”
There’s a lot to think about, especially if buying a home is on your mind. Before you make the decision to renew your lease or not, be sure to factor the following into your decision.
Reasons to Renew Your Lease
There are many reasons why you might want to sign another lease with your current landlord.
If you’re content with the unit you live in, the neighborhood that it’s in, and the price you’re paying for rent, you might want to just continue on with what you’ve got. If you have a good thing going, that may be reason enough to stay put. And if your landlord respects your privacy and is easy to get along with, that may be even more reason to stick around.
You Like the Idea of Being Flexible
Renting offers flexibility that homeownership doesn’t. While you may be tied to your lease for its duration before you can cut loose and move on, there’s a lot more that goes into selling a home. Renting simply offers more flexibility than homeownership. If you’re not entirely sure about where you want to plant roots in terms of a home and a job, the thought of continuing to rent for a while might sound more appealing.
You’re Saving Money
Many rental situations are more affordable than homeownership. There are no maintenance costs to be concerned about since these fees are all taken care of by the landlord. Property taxes, homeowner’s insurance, and repairs will also be taken care of by your landlord, which can translate into significant cost savings for you. If you renew your lease for another few months, you could continue to enjoy such savings.
In fact, many people purposely choose to rent in order to free up money to invest, to spend on traveling, and so forth. Even though they may be able to afford to buy a home, they choose not to. By crunching the numbers, these people have discovered that they can free up a lot of money to be used for something other than paying for their homes.
However, it should be noted that rent prices are not always cheaper than mortgage payments. In fact, rent can often be more expensive than mortgage payments, depending on where you live, the price of a home in your area, interest rates, and how much money you would be able to put down on a mortgage. This is an important factor to consider when weighing the costs of renting versus buying.
Reasons to Break Your Lease and Move On
Just as there are many reasons why you might want to renew your lease, the following may be grounds for moving on.
Rent Prices Are Spiking in Your Area
In certain areas, rent prices may be on the rise. Many times these prices can surpass the increase in home sale prices. In cases like these, it might make more financial sense to buy. Right now, the median rental prices across California is approximately $2,600 a month, which is a lot more than what many residents can afford to pay.
Many renters originally started renting at affordable prices, but eventually saw their rentals spike over a relatively short period of time. In fact, the cost of renting in Southern California has doubled in 17 years and is increasing faster than inflation. If your landlord is hiking rents soon and the number being asked is more than your budget can handle, that might be a good reason to consider a move.
Your Landlord or Neighbors Are Causing Issues
In a perfect world, your landlord will leave you in peace and your neighbors will all be quiet and considerate. But there are plenty of renters out there who tolerate less-than-perfect landlords and neighbors. If your relationship with your landlord is not as it should be and the neighbors are driving you crazy with their noise and barking dogs, then perhaps you may want to consider packing it up.
You have little incentive to renew your lease in this case. Whether you choose to use this as a reason to start looking for a home to buy or simply want to find another rental that comes with fewer problems, foregoing a lease renewal may be best.
You Want to Start Building Home Equity
While renting typically comes with fewer financial responsibilities, you may want to consider buying a home in an effort to build equity and wealth over time. Real estate increases in value over time, despite slight dips and fluctuations here and there.
The price you pay today will likely be much less than what your home could be worth 10 years from now. By owning real estate, you can effectively build wealth without having to do much but sit back and allow the house to appreciate in value over the years.
You Want More Freedom With Your Home
As a renter, you don’t have as much freedom to do with your home as you would like. You don’t own the place, so you don’t have the final say about how to upgrade or remodel it. The most you may be able to do is paint the walls and nail in a few hooks to put up artwork. You can always ask to make certain changes, but your landlord will always have the final say.
If it’s total freedom and flexibility you want, then owning is the way to go. As an owner, you have much more liberty do what you want with your home. Of course, there may be certain exceptions, and you will likely have to obey laws in terms of building permits. Or, you may live in a condominium or planned community, in which case there will be HOA laws to follow.
That said, homeownership definitely offers a lot more freedom in terms of updating properties as you see fit.
The Bottom Line
Your decision to either renew your lease or start looking elsewhere depends on where things stand with you financially and emotionally. The perfect answer will differ from one person to the next, so there’s not one cookie-cutter response to this question. Be sure to take all factors into consideration before you make your final decision.