Flexability of Renting?

[wtrfre]

Many people extol the flexibility of renting.  There are some places where you can end up in a month to month lease that I can see the flexibility in, but those seem to be the minority.  Most rentals want another signed lease of a time period most commonly a year.  What is the flexibility of renting that people always talk about? You can't just walk away from a lease at any time.

[Noodle]

Well, in the worst-case scenario, assuming you want to move out the day after you sign the lease, the longest you're committed is a year (contrast with people who got stuck with difficult-to-sell houses that are on the market for years). In practice, every landlord I've dealt with treated the lease as month-to-month after the first year; they're not legally required to, but you could look for that when apartment hunting. In the (very active) rental markets I've been in, there are plenty of renters and you can usually ask for more rent from a new tenant than a renewal so they haven't seemed to mind a departure whenever. You also don't have your capital tied up in your residence, or concerns about home-related emergencies that might drain the savings account coming out of nowhere. So part of it is about financial flexibility.

[Syonyk]

What is the flexibility of renting that people always talk about? You can't just walk away from a lease at any time.

In many cases, after a year's lease, if you ask nicely, you can go month-to-month with the landlord.  It varies, but I've had success with this.  Usually there's a 2-3 month notification time with that, but it can open up options.  You won't know if you don't ask.

And, worst case, you're paying rent two places for a defined period of time.  I've done this before - I moved for grad school as the place I was working was becoming intolerable (my stress levels were through the roof, and grad school was the best option).  I was able to find someone to take over my lease, but they couldn't afford the full rent, so I chipped in a few hundred a month (which was seriously challenging for me at the time) until the end of my current lease.

There's also an aspect of "financial certainty" in renting.  If the dryer (provided with my rental) fails, I call my landlord, it's a pain for a week while we work out details, and it gets fixed.  It's part of my rent.  Same for (as a non-inclusive list of examples) hot water heater failures, air conditioner failures, various other plumbing failures, leaking roofs, etc.  Not.  My.  Problem.

On the flip side, if you have a house, you're responsible for the mortgage until you pay it off or sell it.  Depending on where you live, it may be difficult to sell it, and if you move somewhere new, you're on the hook for an indefinite period of time.

But, even with year long leases, you can still move at the end of the lease.  If you have a reason to move, just plan it around that, and you can get away, free and clear.

[lostamonkey]

Renting: You give notice and maybe pay a lease termination fee.

Ownership: You pay 7% transaction costs, and if you have negative equity you have to repay the bank.

It's clearly cheaper to move at a moments notice when you are renting compared to when you own a place.

[Sibley]

Renting:

Don't have to sell a house to move.
Repairs and maintenance may be taken care of by the owner (depends on the situation, but you're not on the hook for a leaky roof)
Some utilities may be paid

My problem with renting however is that I have an owner's mindset. I want to paint, improve things, etc. When I'm renting, you either can't or it's not worth the money. Hate the ceiling fan? Deal.

I also have two cats, and many places don't like that I let them outside. There are carefully thought out reasons behind how I manage my cats, and I really don't like interference. We you rent, you don't have many options.

[Eric]

My last three leases have been for one year.  After that, they go month to month and my landlord didn't require another lease.  So I've only been under lease for 3 years out of the last 9 years.

But the flexibility is only one aspect.  In my case, it's way cheaper too, so that makes it a pretty easy decision.  It may or may not be advantageous for you to rent, depending on a number of factors.  I'd suggest running the NYT rent vs. buy calculator for your specific situation.

[Nothlit]

Whenever my lease is about to expire, my landlord (a large property management company) has always presented me with a 1-year lease renewal amendment and makes no mention of month-to-month being an option. I have a feeling that if I asked them, they would do it, but at a higher monthly rate. There is an option for early termination of the lease, but I'd be on the hook for continuing to pay the rent until they find a replacement tenant.

[mskyle]

Whenever my lease is about to expire, my landlord (a large property management company) has always presented me with a 1-year lease renewal amendment and makes no mention of month-to-month being an option. I have a feeling that if I asked them, they would do it, but at a higher monthly rate. There is an option for early termination of the lease, but I'd be on the hook for continuing to pay the rent until they find a replacement tenant.

Here's the secret about that type of lease: if the rental market is tight enough that you're willing to put up with that kind of nonsense (I certainly have), then finding a replacement tenant probably isn't going to be that difficult. And if it actually *is* difficult to find a replacement tenant, your landlord is motivated to offer you a month-to-month to get you to stay.

I guess I am also a renter with an owner's mindset, but I mostly just go ahead and do things. Replacing a showerhead or a light fixture (or ceiling fan) or a thermostat is no big deal, and I can change it back when I leave if anyone cares. I don't paint, but that's because I hate painting!

[Eric]

Whenever my lease is about to expire, my landlord (a large property management company) has always presented me with a 1-year lease renewal amendment and makes no mention of month-to-month being an option. I have a feeling that if I asked them, they would do it, but at a higher monthly rate. There is an option for early termination of the lease, but I'd be on the hook for continuing to pay the rent until they find a replacement tenant.

Here's the secret about that type of lease: if the rental market is tight enough that you're willing to put up with that kind of nonsense (I certainly have), then finding a replacement tenant probably isn't going to be that difficult. And if it actually *is* difficult to find a replacement tenant, your landlord is motivated to offer you a month-to-month to get you to stay.

Excellent point mskyle!

[dividendman]

Also, even if you signed a lease and then broke it the day after you moved in it's highly unlikely you would be required to pay the entire year.

In most places you simply have to pay the advertising costs the landlord incurs for finding a new tenant and any missed rent in the interim.

In reality the landlord is on the hook much more than you. You can just leave at any time and all they really have is your security deposit.

Can't do the same thing with buying a house - the penalties/real estate fees for just leaving it/selling it would be severe. You'd also have to stick around while selling it.

[I'm a red panda]

Even if you have to plan for a year, if you know you are likely to move, it seems more flexible than a house.

Yes, you can sell a house- but there are lots of costs associated.  That, to me, is where the flexibility of a lease could be handy.

[OSUBearCub]

I have been advised that unless you plan on staying put (in that city, in that neighborhood, on that street) for at least 7 years, home ownership doesn't shake-out in your favor.  (See also the NYT rent vs own calc Eric posted.)

For me though, I keep my housing costs *really* low because I know I'm not building any equity. But, I don't have to fuss with any of the BS homeowners have to deal with.  Also, if the living situation goes sour I only have to gut-it-out 12 months.

As a budding minimalist, it's starting to get easy for me to pull up stakes and hit the road for brighter job opportunities in more exciting cities.  My only anchor is my dwindling collection of personal items, not a house I need to sell. :-)

[AJ]

You can't just walk away from a lease at any time.

Sure you can! Absolute worst case scenario (assuming you have a huge tool of a landlord that wouldn't let you out in the ways other posters have mentioned) you'd be on the hook for rent for the remaining months. That's not great, but it's a limited expense. Contrast that with how long it could take to sell a house (during which time you still have to pay the mortgage, even if you aren't living there) plus transaction costs of selling, possibly taking a loss, plus possible damage from vandals if the house sits empty while on the market - the cost is a huge question mark.

I have been advised that unless you plan on staying put (in that city, in that neighborhood, on that street) for at least 7 years, home ownership doesn't shake-out in your favor.

Unless you want to turn your house into a rental when you leave, or plan to perform extensive renovations while you live there to improve the value when you sell, I would say the 7 year mark is pretty spot on.