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Not Ready to Buy? Some Benefits of Renting.

By Ben Levy


Renting versus Buying

In the current economy, low home prices provide significant incentive to buy a home. Today though, many banks are being more strict with checking applicants' credit and employment status, making it harder than it was 10 years ago for people to get mortgages. However, renting a home does not often require financing and is still possible with below average credit. In addition, depending on negotiations with the landlord, it is possible to sign a contract requiring the landlord to pay for some of the utilities. Finally, one of the largest savings in renting a home versus buying a home is that renters do not need to directly pay property taxes.

Renting a Home with Bad Credit

Many landlords are struggling with vacant property and are becoming desperate enough that they may choose to lower their credit standards. Often times, if you can show that your low credit score is due to a one-time incident and can prove that you have had good credit since, the landlord may excuse your bad credit. If you have a low credit score, it is also very important to show a strong enough income to cover the rent in addition to your other monthly bills. If the landlord does not feel that you will be able to consistently make the rent, they will not lease to you. A good rule of thumb is that your monthly income should be at least three times that of the cost of monthly rent.

Savings on Utilities

Depending on your landlord and the type of property you are renting (apartment, house, condominium, etc.) the landlord may choose to pay for some of the utilities such as heat and hot water, garbage pick-up, or cable. In the north, savings on the heating bill alone could add up to hundreds of dollars per month. In addition to financial savings, these utility bills are one less thing that you will have to worry about.

However, many people may not know why a landlord would want to pay for some of the utilities. Is it a scam? Are they overpricing the rent as a result? The short answer is no. Though part, if not all, of the price of the utilities will be included in the rent, it will rarely be a scam. Landlords choose to pay for heating, cable and other utilities because it is either easier for them that way (they pay for cable for the whole building and it would be difficult to subdivide the cost for each unit), or they are trying to maintain their property (it is cheaper to know that the heating bill has been paid than to have to pay to fix burst pipes).

Property Tax Savings

In the United States, property tax ranges between 0.2% and 4% of the property's value. This tax is broken up between the value of the home and the value of the land that is owned by the homeowner, if there is any. Tenants of rented homes do not directly pay for these taxes. Though the taxes are included in the rent, property value adjustments happen frequently and almost always adjust to the value higher. This increase in the property value will not be reflected in your rent if you have signed a fixed term lease, a contract in which rent is locked in for a certain period of time. This way, you will be saving on property taxes for the remainder of the lease.

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