I’m sure I speak for most people when I say that at some point in your life, you wonder whether it’s worth just simply renting as opposed to homeownership. Sure, there is the enjoyment of owning your own home and making changes to it without asking for permission – but the downside is that when something goes wrong and needs replacing, it comes out of your pocket.

The only time I have owned a home we lived in was just after my husband and I got married. We bought a one-bedroom, two-bathroom townhouse with a rooftop patio in downtown Calgary in Canada. We loved it – it was ours – and we changed the flooring, painted the walls and upgraded the bathrooms. However, we were the epitome of “house rich and cash poor”.

We did not make a lot of money, and a significant amount each month went towards our mortgage payment, condo fees and all the utilities. Plus, any free cash went into renovating it. We made a lot of sacrifices to buy our house: our holidays became camping trips, celebratory events became a meal out as opposed to a gift exchange, and we learnt to be handy, attending free Home Depot seminars to complete the renovations ourselves where possible.

If we ended up saving a $100 during the month, it was a huge deal and something we were really proud of. However, when things went wrong and needed to be replaced – which happened one fatal week when we had to replace four appliances (fridge, washing machine dryer stackable and cook top plates), it really made you think: is this worth it?

Fast forward to 2024. It’s been 18 years since we sold our place in Canada and moved to Bermuda, and since then we have been renting. It’s only been in the past few years that we’ve been in a position to buy a piece of the rock.

However, the question is this: with interest rates high, house prices continuing to increase, the rising cost of home improvement and the fact we live in a hurricane zone – does it really make any sense to buy at this point or should we continue to rent?

A 2024 Forbes magazine article highlighted four reasons why renting can be a great financial choice as opposed to buying, even when you can afford to buy a home:

1, You enjoy hobbies more than household chores

Pride is often noted as one of the main advantages of homeownership: being able to showcase your personality within your living space compared to renting. However, over 75 per cent of homeowners have dealt with unexpected repair issues within the first year which cost them significant expenses – moreover, significant time and money was spent throughout the year on the home. Would you rather deal with all of that, or do something you enjoy more?

2, You prefer city culture and amenity accessibility over suburban life

The top five American cities where it was cheaper to rent versus buy in 2023 were Austin, Texas; San Francisco; Seattle; Boston; and Portland, Oregon. Although not completely applicable to Bermuda, it does hold some merit with regards to renting versus owning a home when thinking about living in the City of Hamilton and the accessibility to great restaurants.

3, You want access to multiple investments

Being house rich and cash poor may seem fine if you own a million-dollar property, but that million dollars is only worth something when you actually sell it and get the cash from it. Diversification from a single asset is key, and although real estate is historically a good investment, it is not the only investment. Therefore, tying up your money into a single investment (a home) might not make sense, and instead, continuing to rent will allow you to continue to have the capital for further investing.

4, Freedom of choice

Renting gives you the freedom of choice – if you don’t like where you’re living, whether it’s the place or parish or even the country, then upon completion of your lease you can pack up and go. No waiting for a sale, no repairs to be made – simply clean the house, paint the walls, return the key, and get your deposit back. But if you’re an owner and you don’t like your neighbours – or your neighbourhood is changing and not to your liking – then you’re stuck waiting to sell the property.

As someone who has rented for a very long time, there are certain aspects I agree with for why renting might be a better option than owning. However, what the Forbes article fails to recognise is that an owner can switch the use of the property from owner to landlord and generate income, and so be somewhat immune from fluctuations of property prices until you choose to sell.

Furthermore, as an owner, you should benefit from capital appreciation on the property, so although there’s probably some sweat equity that you won’t receive in return, overall, you should be able to get appreciation from the property price over a period of time.

But as a tenant? Well, you’ll feel the brunt of market changes, especially when inventory for rentals are low, and although you won’t have to pay to replace appliances or maintain the property you’re renting, nonetheless the rent is actually paying for it per se – yet you receive nothing in return at the end of your lease.

In reality, I can see both sides of the coin. There are significant benefits of being a homeowner, not least of which is the pride of homeownership. However, as a tenant I recognise the benefit of the freedom of choice when you want to move on without all the headaches.

So before you put in an offer to rent or buy, think hard about what works for your overall lifestyle and what you want to get out of it.

References

Joy, B. (2024) Why Renting Can Be A Great Financial Choice For You. Available from: https://www.forbes.com/sites/bernadettejoy/2024/07/03/why-renting-can-be-a-great-financial-choice-for-you/ [Accessed September 4 2024].

• Carla Seely has 24 years of experience in the financial services, wealth management and insurance industries. Over the course of her career, she has obtained several investment licenses through the Canadian Securities Institute. She holds ACSI certification through the Chartered Institute for Securities and Investments, UK; QAFP through FP Canada; and AINS through the Institutes. She also has a master’s degree in business and management