For many, homeownership is an essential part of the American dream. That doesn’t mean it has to be your dream too.
Maybe you don’t need a space or a backyard for your dog. Maybe you don’t think real estate is the best investment out there.
Or maybe you just don’t know how to afford a mortgage.
Either way, people will tell you that renting is like burning your money – but in reality being a renter can be to your financial advantage. Here are five ways to thrive.
1. Benefit from reduced rents in the event of a pandemic
At the start of the pandemic, rents in expensive cities like New York and Seattle plummeted. While prices in most areas have recovered, they are probably lower than they would have been without the crash.
In addition, the real estate data site Apartment List indicates that there are still five major cities where rents are below pre-pandemic levels: San Francisco, Oakland, San Jose, Minneapolis and Washington, DC
As a tenant, you can use it to your advantage. Working from home is sure to remain the norm for a while, and people are flocking to mid-sized markets and small towns for more space.
If you want to continue renting in the city, now is the time to enter into a low cost lease. You may even be able to negotiate with your current landlord for an even better rate.
2. Find better investments than home ownership
Many people think that owning a home is a good investment, but that is not necessarily true.
A 2010 Federal Reserve report titled “American Dream or American Obsession?” showed that the real rate of return on US real estate between 1975 and 2009 was less than 0%.
Meanwhile, the average annual stock market return between 1975 and 2009 was 3.375%, after taxes and inflation, according to the Fed study.
Today, it’s never been easier to put money on the market – all you need is a smartphone app.
3. Use the money saved to pay off your debts
Owning a home involves a number of sunk costs such as mortgage insurance, home insurance, interest, and property taxes. And when something breaks, you have to fix it yourself instead of just calling the owner.
When you save all the money as a tenant, you can take it and spend it on consolidating your debt.
If you’ve been relying on your credit cards during the pandemic, you’re probably already racking up a lot of expensive interest. By depositing all of your balances into one low interest debt consolidation loan, you can make your debt management easier and even pay it off sooner.
4. Invest in yourself
It is never a bad idea to improve your marketable skills by going back to school.
If you don’t have all the cash up front for a college program, taking out a competitive student loan rate can help make your dream come true without costing you all of your savings.
But that assumes that you haven’t already been drowned in student loan debt since the first time you went to college. If this is your case, you may want to consider refinancing your student loans to take advantage of today’s record refinancing rates.
5. Shop around for offers
The premise that it’s better to own than to rent also assumes that homeownership is your # 1 priority, regardless of any other goals you might have for spending your money or what you would like to do with your life. .
As a tenant who doesn’t have to worry about the costs of owning a home, you have more money for the things you really care about. Your standard of living will be higher overall.
If, for example, you like to shop online, you can download a free browser extension that will instantly find you the best deals and coupons.
“But owning a house is my dream”
If you are passionate about owning a home, you are not necessarily destined to become poor.
Just be sure to follow these tips to get yourself in the best financial position:
Get the lowest possible rate on your loan. The best way to save on your mortgage is to shop around for the lowest mortgage rate. Numerous studies have shown that borrowers who review five or more rate offers save thousands of dollars over time, compared to those who get the first loan they see.
Find the best price on home insurance. Home insurance is essential, but not too expensive. By shopping around for your coverage, you can pay hundreds of dollars less in home insurance each year.
Save a respectable down payment. Making a larger down payment can get you a lower mortgage rate. Save big bucks by using a popular app that lets you invest your “spare currency” and make your money grow in the record stock market.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.