For most tenants, renting is only temporary – with homeownership being the goal. If you share the same thought, then you should be careful about the money you spend on your monthly rent. After all, there is no equity, significant tax advantages or real benefit from paying rent – other than the fact that you don’t have to pay for the taxes and insurance and your payment may be less than a mortgage which gives you instant expendable cash.
The point of this section is to remind you (unless it’s your destiny to rent for the rest of your life) that cash management is critical in order to accumulate a significant savings account. Before you move into the three-bedroom unit (when you only need two) or pay the extra premium for the view of a reservoir pond, ask yourself if the additional expense is really necessary.
If you’re new to renting, you may not appreciate the cash management aspect of this section until you’ve rented for 20 years and then realize that you’ve spent thousands (if not hundreds of thousands) of dollars and have nothing to show for it except for time spent living in a place that is not yours to keep.
This is why functional outweighs fanciful. Find a modest place to rent that provides the security and comfort you need while transition into a home that you own. And for the few of you that prefer to rent (or the many that cannot afford to buy) in the area where you prefer to live – like southern California residents – then cope as best as you can.
Southern California is a good example, because along the coastline is the greatest weather in the world. As soon as you begin to move inland, the climate dries up and heats up. Unfortunately, the closer you get to the coastline (such as Venice Beach), the more expensive real estate becomes; a 900-square foot two-bedroom house with enough land around it to barely keep the ants happy sold for about $550,000 in 2007. By the way, that’s with only one bathroom, no air conditioning and built 40+ years ago. So you can see why some may be inclined to rent instead. The same type of unit could be rented for only $1,500 per month, which is a breath of fresh air as opposed to trying to manage a $3,500 mortgage payment.
Obviously, your local circumstances will dictate what you do. With the current state of the U.S. economy, you should consider making better use of any extra money you may have instead of giving it to your landlord.