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Why Renting is NOT Dead Money - Essential Living

Why Renting is NOT Dead Money

Blog Guide to Renting
03.09.19

The UK is obsessed with homeownership. For decades now, homeownership has been seen as the only acceptable end game for your living arrangements.

But with soaring property prices, buying that home has become a mountain to climb for most millennials. So instead, they’re living at home with their parents for longer, saving up for years for that chunky deposit, before they can finally move into a place of their own.

But throughout all this, why isn’t renting seen as a viable solution?

Renting is surrounded by the stigma of being ‘dead money’, purely because the renter doesn’t own the deeds to the property.

Yes, your landlord does take a lot of money from you each month. And yes, that money will go to paying their mortgage and leave them some profit on top. But that doesn’t mean that the money you pay is dead money, as renters actually get a lot of benefits that seem to be overlooked.

Benefits of renting & drawbacks of ownership

— Flexibility

First and foremost, by renting you’re buying flexibility. You’re buying the freedom to choose, swap, trade up, trade down, change your mind and walk away at a rate that a homeowner could never do.

You can sample different areas of a city to find the one that’s right for you. You can trade up and trade down to find the size of home that’s perfect for you. And you can even hand in your notice and head off travelling for 6 months without the worry, cost and responsibility of a home weighing you down.

A homeowner doesn’t get this flexibility. They’re tied into a mortgage that severely limits them from moving regularly. There are hefty early cancellation fees within the initial fixed rate period of a mortgage, and buying a new property comes with a colossal stamp duty fee. This makes moving a very expensive process (with a lot of dead money to fork out).

On top of this, a homeowner wouldn’t have the experience that a renter would get from moving around often. If they moved into a bought home straight from their parents’ house then how do they know which area is right for them, what size home they need or the finer preferences they might have for a home that only comes through experiencing living in different places?

The flexibility of renting can’t be undervalued.

 

— A lifestyle you couldn’t afford to buy

And similarly to this, renting also gives you access to a lifestyle you couldn’t afford to buy.

Most renters in London wouldn’t have much trouble finding a place within their budget in Zone 2 and 3. And the thriftiest (or flushest) among us can even nab a flat share in Zone 1. But try to buy a property outright in either of these zones and you’ll find yourself turned around and heading out to Zones 4 and 5 instead…

This opens up the more central areas of London for renters. By renting, you can afford to live in sought-after areas close to the centre of the action.

And we should also mention that renters can benefit from the build-to-rent lifestyle that’s growing across London, with buildings offering high quality apartments, 24-hour on-site building management and a range of shared social areas that can be used to work, chill, play, exercise or connect with your neighbours and make new friends.

 

— Gain independence

Renting also gives you your own space. Or at least, you get your own space sooner than you would if you were living with your parents and saving a deposit.

It’s not uncommon for young people to hang around at home well into their late twenties or even thirties these days, in order to save for that big purchase. But for this whole time you could have enjoyed a lot more freedom if you were renting.

The freedom to throw parties, to stay up watching Netflix to whatever hour you please, to make a lot of noise, to decorate how you wanted, to have friends over, to have other friends over… All the normal things young people want to be doing at this age. All of this freedom could well be stifled if you’re living under someone else’s roof.

Some may see this social and financial independence as not the most efficient use of their cash, but it’s the best use of your precious time and a great way to live the lifestyle you want to live.

 

— Avoid property maintenance bills

This is perhaps the most overlooked benefit when it comes to renting.

The whole idea of renting being dead money completely overlooks the fact that homeownership has a whole lot of cost to it that could just as easily be seen as ‘dead money’.

Maintaining a property can be costly. Very costly.

If you’re renting and your boiler breaks down, you phone the landlord. If they’re good (like Essential Living) they’ll get on it straight away and get an engineer out to replace it. At their cost.

If you’re the homeowner, that’s your cost and your problem to solve. Cue phoning around several plumbers to find a local one who’s available and able to do it at a reasonable price. That reasonable price, according to Which?, being somewhere in the region of £2,500.

And the maintenance costs don’t stop here. Replacing boilers is one cost, but you’ll also be responsible for dealing with leaks, repairing the roof, re-wiring the electrics, fixing subsidence and keeping up with the general wear and tear in the property.

A renter wouldn’t need to worry about any of this.

 

— No risk of getting stuck

An often-overlooked factor with homeownership is the risk of getting stuck with your property when you want to sell it and move on.

We’ve been living in an age of soaring house prices, but house values can go down too. And what then? You’ve bought a house for a lot of money and locked yourself into a 30-year mortgage, and now it’s worth less…

The answer is ‘negative equity’, which means that — if you want to move — you can either kiss goodbye to a chunk of that hard-earned deposit you invested, or worse, you simply can’t sell the property.

 

Why renting is NOT dead money

So the rent you pay actually has a lot of value, even if that value isn’t the deeds to the property.

Ultimately, the national dream of home ownership at all costs is an outdated dream. It was conjured up decades ago when there wasn’t such a large gulf between earnings and the average price of a home; and saving for a deposit could take one year rather than ten.

So today, we should embrace renting for all its benefits. Gain independence, avoid the risk of homeownership, live flexibly, try different things and experience a variety of lifestyles.

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