Renting sometimes gets a bad reputation. Buying a home is often considered a sign of financial success or milestone, but for many of us, renting can actually be a more prudent choice based on our goals and current financial situation. 

In today’s podcast episode, we dig into when and why renting is better than buying a home and how you can maximize your money as a renter.

Have a financial question for us? Email  [email protected]. Don’t forget to subscribe on Apple¹, Spotify, or wherever you get your podcasts.

Here’s the recap of today’s 18-minute episode: 

• How Payactiv can help you save money for rent 
• Meet Matt Rogers, a homeowner and current renter, and learn about his renting journey
• Factors that impacted increased prices for homes
• The maintenance benefits of renting a home
• How you save by renting and the perks of being a part of a community
• How renting compares to home ownership financially, both in the short term and long term.

Listen below or read the transcript that follows. 

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Eric Rosenberg:

Hello. Welcome to the Good Cents by Payactiv Podcast. This is a friendly reminder that today’s episode is intended for education and informational purposes only and should not be considered legal or financial advice. Thank you.

Hello everyone. Welcome back to the Good Cents by Payactiv Podcast. As always, I am your host, Eric Rosenberg, and I am very excited about today’s episode. Today we’re talking with Mike Rogers, a personal finance blogger about reasons renting could be better than buying a home. If you haven’t listened to it yet, be sure to listen to our last episode where we sat down with a real estate agent to talk about why owning a home could be better and how to get on track for home ownership.

But today we wanted to flip that script and remind you that renting can sometimes be a better financial decision, and for many people it’s the best long-term deal. Also, remember that Payactiv is a fully featured financial wellness platform. So if you have rent due and you’re a little tight on cash, you can access our earned wage access¹ feature to get access to part of your paycheck that you’ve already earned. 

All right. Ladies and gentlemen, I am so excited to be here with today’s guest. So Mike told me before we got on that he has been a homeowner and a renter in the past, but lately he has moved definitely into team renter. So I want to find out why and learn what makes renting so much better. So Mike, would you start by telling us what is your story most recently of becoming a renter?

Mike Rogers:

So like everyone else, it seems like during the pandemic, we decided to move all the way across the country to be closer to family. So we had been in Alaska for 22 years, 5,000 miles away from everybody. We’d firmly been homeowners our entire married lives. So when we sold our place in Fairbanks and we moved here, we immediately started looking for a house. Well, what we had found in the 20 years we’d been gone, that home process here had exploded. Apparently in Johnson City, Tennessee, this area, it got mentioned in some magazines as great places to retire, and everybody and their brother moved here apparently.

So real estate prices, which were formerly very reasonable in this area, particularly compared to Fairbanks or that area, home prices were just shockingly high and homes were disappearing shockingly fast, and you frankly just had a lot of people making just awful decisions. They were making offers over listing. In some cases very aggressive offers over listing, waiving any fees, inspections, essentially doing away with anything that would remotely look like due diligence on the part of a buyer. And some of these folks were just getting burned horribly. So we took a look around that environment and said, “This is high pressure, high price, very expensive. Let’s just set this one out for a while. Let’s just see what happens.”

Eric Rosenberg:

Well, that makes a lot of sense. So especially with interest rates on the way up, I don’t know the exact date you moved, but as interest rates have crept up, making an above listing price offer, you might end up with this huge monthly payment. That could be a shock for anybody.

Mike Rogers:

Yeah. And in some cases, just for instance, in the area we’re in, the average median home price is about $280,000. And I know for a lot of the country that seems incredibly reasonable, but the median household income in this area is $48,000 a year, which that’s more than four or five times the income. That has a real pinch on affordability, particularly for folks that are making that median wage. So we decided, “Let’s set this market out and just see what happens.” So we ended up renting a place compared to what it would cost to own, we found a very nice apartment. We moved in, we got settled in here. I started my new job and after we were here for a while, we realized, this really isn’t so bad. The rent, for instance, we understand that that’s the most we’re going to pay. There’s no repairs. Where I’d been on team homeowner for most of my life, if the water heater blew up at two o’clock in the morning, that was on me. Now I just get on the app and send maintenance a text, and they show up and fix it.

Eric Rosenberg:

Just those maintenance issues alone is often a big reason to be on team renter over buyer. You mentioned hot water heaters. We actually had our blow up in our garage on New Year’s Day a few years ago, which is exactly what any homeowner wants. And of course that came right out of my pocket and we had to pay those inflated prices to get someone over right away. You wouldn’t have to do that as a renter. That also goes to your refrigerator, your dishwasher, your shower heads, anything in your apartment. If it breaks, it’s someone else’s problem to pay for it.

Mike Rogers:

Yeah. In our complex, they made it pretty clear when we moved in, the only thing you’re responsible for is light bulbs. Don’t fix anything else. If anything else breaks, call us and we’ll fix it. And they said, “You’re responsible for light bulbs, but if you don’t want to climb on a ladder, just get the light bulb and we’ll change it for you.”

Eric Rosenberg:

That’s an extra nice perk to have someone to change your light bulbs. How many maintenance people does it take to change a light bulb? Other benefits, I know when you’re a homeowner, you have to think about dealing with all of your utility companies, your electricity, your water, your gas. What types of savings do you have on that side as a renter? I know it can change depending on where you live and your landlord, but do you have extra savings there as well?

Mike Rogers:

Yeah. And it’s probably a little bit shocking for me because I was used to the home we owned in Fairbanks, where tremendous heating bills, electricity is very expensive. I come here to our apartment and I think our electric bill is like 100 bucks a month, and that’s heat, air conditioning, lights, that’s basically everything. Internet’s included with the apartment, so that’s included with the rent.

Eric Rosenberg:

That’s another great savings.

Mike Rogers:

Trash service. So really our all-in utility cost, the water bill’s about five bucks a month, something like that. So we’re like 105. The middle of summer or the very middle of winter, it might go the 130, 140. Though compared to a single family home, it’s much, much cheaper.

Eric Rosenberg:

And you’re not watering a lawn. I know that can be expensive, especially in areas with those high water prices. You mentioned in Alaska, high electricity prices, those can be through the roof depending where you live, so that’s a good chunk of change you’re saving by being a renter.

Mike Rogers:

Yeah. It’s certainly really good. And the other thing is, and I know folks are very aspirational toward home ownership, but frankly, we’re here and we don’t know how long we’re going to be here. So normally that time horizon that you want to be in a home is five years. I’m not quite sure I’m going to be there or be here for five years. But now with interest rates on the increase and our real estate process here being extremely high compared to the local economy, it might be a 10 or 12 year breakeven cycle. And I’m almost absurdly not going to be here that long. I work in construction. I’m in one of those fields where I’m always working myself out of a job. So that’s something to definitely consider as people are approaching home ownership, particularly during this time.

Eric Rosenberg:

The option to be able to just pick up and move if you don’t like where you live, as a renter you just wait for your lease to expire and you’re pretty much good to go. With a home ownership, you have to find a real estate agent, you have to go through all the listing, you have to pay real estate agent fees, which are not cheap. You have to, maybe go through inspections and pay for repairs. Maybe you have to deal with staging. There’s a lot that it takes to sell a property, whether it’s a condo or a house or anything else. With renting, you have it pretty easy. You just have to hopefully not pay any damages and get your deposit back and you’re good to go.

Mike Rogers:

Yeah. I know on our complex and our lease, we signed a lease, but there’s a clause in it. It’s like, “Well, if you want to break this lease, it’s going to just cost you an extra month’s rent.” So it’s very flexible that if for some reason we need to move and go somewhere else, paying an extra month’s rent is certainly a lot cheaper than paying closing costs and inspections and repairs and all of those things that come along with owning real estate.

Eric Rosenberg:

Definitely. So let’s pretend you are at the end of a long workday. You’ve been on the job site, you decide to go get an adult beverage or a non-alcoholic beverage, whatever your preference is, and you’re sitting there with your construction buddies and they’re thinking about buying a house or renting a house and you think based on what you’re doing, you’ve been enjoying this rental experience. What would you tell those coworkers or those friends the perks of renting are compared to buying?

Mike Rogers:

So I think one of the biggest things, particularly from a financial perspective, is a rental short term agreement. You’re not really going to be held here for very long. Also, your rent represents the maximum budget you have to allocate for the month. So with a homeowner, your house payment is the least you’re going to spend in a month, and some of those unexpected repairs or maintenance or tax increases, they come back to you. If you’re a renter, you’re going to pay that obligated price and that’s the maximum out of pocket you’re looking at for the entire month. That is certainly one of the biggest perks is the flexibility. And then a lot of apartment complexes or rental situations, certainly not all of them, but a lot of them have amenities. In our complex, it’s fairly large. I get to enjoy a beautiful pool and patio that I don’t have to clean, so that’s a huge perk here.

Eric Rosenberg:

Yeah. There’s also sometimes you get a gym, sometimes you get a nice lawn and picnic areas where you could hang out outside and as long as you clean up your trash, you’re not paying anything else to use the place. It’s just included with where you live, all these nice perks and packages. You’re making me a little jealous that I don’t live somewhere with all that stuff in my house over here. That’s definitely a good set of things you get there. So what would you do and this one can be tricky sometimes, especially in certain markets, you could get a big rent increase. That could be a surprise. Have you had to renew a lease in the recent past?

Mike Rogers:

I did renew our last lease and they made no changes at all. I know-

Eric Rosenberg:

That’s a good situation.

Mike Rogers:

Yeah. I know during 2021, you would hear a lot of people talking about new large rental increases and things of that nature, but we renewed our lease in 2022 and we had no increase at all.

Eric Rosenberg:

That’s great. In my history of living, I’ve been on both sides. I’ve rented and owned multiple times. And one time when I was a renter back in Denver where I grew up, I had an apartment and they wanted to give me this pretty sizable increase in my rental cost moving on to the next year, and I’d been, in my mind, a perfect tenant. I’d never caused any damage. I’d always paid on time or a little early and something that I did that a lot of people don’t know you can do, I actually went down to the leasing office and I said, “Hey, this is a pretty sizeable increase and I’ve been a pretty good tenant and I was thinking about staying, but I’m on the fence with this increase. Are you willing to negotiate?” And they absolutely were willing to negotiate. They actually dropped the increase by about $200 a month. They were going to raise my rent by about 300 a month, and after we talked, they only raised it by 100.

So if you’re a renter and you do run into a landlord increasing your rent, don’t feel like you’re out of options because you still have an opportunity to negotiate. And it’s a lot cheaper for a landlord to keep a good tenant than it is to flip a unit and find a new tenant because they often have to do paint and fix the carpets and advertise it. There’s so much work for that. So that’s a tip I’d like to throw out there for renters. You can always negotiate. That’s something that’s always on the table.

Mike Rogers:

Yeah. And I think one of the key things when it comes to negotiating, particularly with landlords, is you have to look at things from the perspective of a landlord. The thing that every landlord fears is getting a dud tenant. That doesn’t pay their rent, gets behind, damages the property, sometimes to the tune of tens of thousands of dollars. If you’re a good tenant, you take good care of your unit or good care of your place, you pay your rent on time, you represent an extremely low risk tenant to that landlord. And if they’re going to jack your rent up a couple of hundred bucks and you go down to them and say, “Hey, I’m a great tenant and I’d like to negotiate that.”

They’re going to do the calculus real quick of I may lose a great tenant who pays their bills and takes care of my property, and then I’m going to roll the dice. And if you owned the 20 unit apartment complex, for instance, it only takes one really dud tenant to wipe out all of the profit from everybody else. So a lot of them become very willing to negotiate fairly quickly if you’re a good tenant.

Eric Rosenberg:

That’s such a useful thing for everyone to keep in their back pocket as good life information. You can negotiate a lot of things you might not realize.

Mike Rogers:

Yeah.

Eric Rosenberg:

So guess one last question. We’ve talked about a lot of these big ups and downs, but when it comes down to the numbers, what are the biggest things you think someone should consider when deciding whether or not they should try to save that down payment and become a buyer, or if they should stick with the route of being a renter?

Mike Rogers:

So I think one of the big things people have got to look at, just how big of a chunk of your financial future are you committing into real estate? I know real estate’s a very emotionally charged subject, and I think JL Collins wrote in his book that home ownership is an American religion, that it we’re very wired in the United States for that, but you have to look at the numbers. You have to run the numbers. And when I run the numbers for myself, it’s like I live in an extremely nice apartment complex for the same amount of money. I can buy a 30-year-old split foyer out of the burbs that’s been beat to death. And it’s just, when you look at the value for money, it’s just no comparison. You certainly want to be looking at your budget, what you can afford.

And I know a lot of people really want to stretch to buy a house, and when you think, well, home ownership’s a long term proposition. That first year might pinch, but every year after that’s going to be the same. So you want to keep it under that block. 25% of your income, ideally less if you can find it, which I know everybody laughs at that right now. But if you become house poor where you’re committing way too much of your income to housing, you’re going to suffer. Anything that’s going to happen is going to throw you off course. You can become financially independent as a renter. You don’t have to own a house to become financially independent, but you can certainly become poor as a homeowner and that’s a fact.

Eric Rosenberg:

Yeah. There’s definitely ups and downs to both and it’s really important to consider. Well, a lot of people say home ownership is “part of the American dream.” It’s definitely not part of everyone’s American dream. I even know some very financially successful people who have sworn off of owning a property, they say they don’t ever want to deal with all those things we were talking about. They don’t want to deal with increasing property taxes and broken appliances and all the other ins and outs. So that’s just a really great thing to keep in mind and stay positive about renting. Just because you’re renting, it’s not a bad thing. It can be a great thing for a lot of people. So thank you so much for taking the time to chat with us today. If anyone wants to connect with you and learn more, where should they go?

Mike Rogers:

I’ve got a blog at forget-payday.com, and I’ve started doing some writing there. I’m fairly new into the freelancing world, dealing with personal finance. It’s a topic that’s been interesting to me for a very long time. I primarily write for the messy middle, not necessarily the early career folks just figuring things out or the folks that are on the cusp of retirement, but a lot of the folks in their thirties and forties just trying to figure out how to live life with everybody trying to reach into their back pocket.

Eric Rosenberg:

Well, that sounds familiar. Being in my thirties or forties right now. Thank you so much for taking the time to chat today. We’ll hope to talk to you again soon. Thank you so much.

Mike Rogers:

All right. Thank you, Eric.

Eric Rosenberg:

Wow, that was a really fun conversation. Remember, if you haven’t already, download the Payactiv app¹ from your favorite app store, just like it’s spelled on the podcast you’re looking at right now. Also, if you haven’t already, be sure to hit subscribe wherever you listen to podcasts, and if you think this could be useful for someone else, definitely share it with a friend. That’s the best way you could help this show grow and you might be able to help your friend get a little bit better with their finances along the way. That’s all we have for today’s show, so make sure you’ve subscribed so you don’t miss next time. Enjoy the rest of your day as you live the life you’ve earned. Thank you. Bye-bye.

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