Is renting a better investment than buying property? 5 reasons you shouldn’t despair if you can’t get on the property ladder 

For many of us Fearless Girls, we were raised with the expectation that we would get married, buy a house and raise a litter of adorable children in it. For our parents’ generation, where you could buy a house and maintain a family comfortably on one salary, this may have been a realistic expectation. 

Although I now live in the Middle East, I was born and raised in Ireland. As a child and young teenager, I always imagined that at some point in my twenties, I would buy a lovely 3-bedroom home in North Dublin (I also imagined that I would be married by 27, as anything later than that was simply ‘embarrassing’. How judgmental are the young).  

Buying a house in Ireland in 1984 would have set you back between 45,000 – 50,000 Irish punts, depending on the area you chose to live in. Taking into account the change in currency and rising cost-of-living, this is equivalent to approximately €145,000 – €160,000 in today’s money. The Central Statistics Office reports that 30 years later, the average house price is €320,000 – literally double what our parents would have paid. For that 3-bed house in North Dublin, the asking prices range from €450,000 to almost a million euro. This story is a common one, bonding Fearless Girls across the UK, the EU and the United States. 

For Fearless Girls, our societal and economic circumstances are changing at a rate that can feel like we are stuck in a never-ending cycle of renting, working, saving and watching the goalposts of property ownership move further away.

As homeownership, marriage and childbirth rates decline while women embrace new career trajectories, travel sabbaticals, DINK relationships or singledom, is the golden trifecta of marriage, house, baby outdated? Or is it that we are simply too squeezed by economic circumstance to really lay down roots as our parents did?  

Whichever side of the social debate you come down on, there’s actually a new question we should be asking ourselves – and it may take you by surprise. Is renting a better investment than buying property?  

Is renting a better investment than buying? 

Well, this depends on what you want. If you want the safety and security of your own home, where you can lay down roots, then buying could be a better option. Owning your home is an asset, and once the mortgage has been paid off, the home can form part of the legacy you leave for any dependents. However, there are huge financial benefits to renting that can be overlooked while we despair that we may never achieve the stable lifestyle we imagined as children.  

Renting frees up capital  

Renting can be a better investment than buying, as it frees up capital that can then be invested. For one thing, instead of a huge down payment and fees associated with stamp duty, surveyors and legal contracts, you’ll pay a deposit to your landlord, which, provided you treat your rental with respect, you will get back. As a renter, your emergency fund can be significantly smaller than a homeowner – any leaks, key renovations and repairs can all be passed on to your landlord. You also won’t be subject to annual property tax. So that money you need to put aside for home disasters? That can also be invested.  

Renting keeps you liquid 

Intuitively, we think that paying rent is signing away money we’ll never see again instead of investing in a property that acts as equity we can sell later on. And, to an extent, this is true. As a homeowner, you are asset rich, but you may leave yourself cash poor. As a renter with investments in the stock market, if you need to move your money, you can do so without the fear of affecting your living situation.  

Who really owns your home? 

Owning your home is a ‘leveraged investment’ which means that you take ownership of an asset while paying only a small percentage of the upfront costs. While this can help you to build wealth over time, through mortgage repayments and asset appreciation, if your circumstances change and you find yourself unable to make your mortgage repayments, your home may be repossessed and you find yourself with no equity and, even worse, no home. This is the worst case scenario, but it is something to think about when planning out your mortgage repayments for the next twenty years. 

Renting allows you to diversify 

One of the greatest mistakes that investors can make is to throw all of their money into one stock option, yet somehow we never seem to see it this way when it comes to investing in property. The capital that would be used as a down payment, along with the annual property tax and insurance costs, can all be used to diversify and spread your risk. At Fearless Girl Finance, we recommend a portfolio of ETFs and bonds, which takes the hard work out of diversification. 

Renting gives you the freedom to move fast 

Owning your home may give you a sense of stability, and as a renter you are subject to the whims of your landlord. But one absolutely enormous benefit of this ‘instability’ is the freedom to change your circumstances with relatively little stress. Bad breakup? Cancel your lease. Offered a transfer to an outpost of your company? Cancel your lease. Need to upsize as your family grows? Cancel your lease.  

As a homeowner, all of these things are considerably more difficult. You can absolutely rent out your property, but you will need to consider getting a management agency involved or be prepared to be an active landlord. You can sell your property, but it could be a move that takes months, rather than days.  

There is no right or wrong when it comes to the decision whether to rent or buy. Ultimately it comes down to your lifestyle and what you want to achieve – stability or flexibility. But with homeownership still being considered one of the greatest measures of financial stability, we want our Fearless Girls to know that you are not a failure if you rent. As long as you invest your money wisely, you could end up reaching financial freedom long before your peers who own their home. 

Unsure whether renting or buying is the right decision for you? Come back next week as we talk you through the 5 questions you need to ask yourself before you commit to buying.  

If you have been thinking about whether renting is a better investment than buying, leave a comment or tag us on Instagram @fearlessgirlfinance_