Numbeo.com recently released their cost-of-living index for January 2021 and San Francisco is the twenty-first most expensive city in the world. However, it should come as no surprise to residents that rent is higher here than anywhere else. It is more than 9% more expensive than New York, the next most expensive city to rent and the benchmark used.
Of course, this does not mean anything when it comes to deciding whether to rent or buy in San Francisco. While renting is incredibly expensive, buying a home here will set you back a median $1.4 million.
For many, the idea of renting rather than paying off a mortgage seems counterintuitive. You are spending a significant chunk of money every month anyway. Why not own what you are paying for.
However, there are some very convincing reasons renting is the smart move in 2021.
Invest your deposit
If you are thinking about buying a home in San Francisco, you will need to have capital to spend on the downpayment on your mortgage. While this is technically an investment, it is one that will not see returns for a very long time (unless you plan on renting the house out). On the contrary, as your mortgage accrues compound interest, you are committing to being in debt for a couple of decades.
Rather, invest this lump sum of money and let it earn interest. You can make some good money this way that can go straight into savings or be used to build something of your own. While you are not going to own the place you are renting, you wouldn’t really own your home for the foreseeable future either.
Renting is the new normal
In the past, the way the country was up was so as to benefit homeowners. Owning a home was seen as the ultimate goal, and any time spent renting was just in preparation until you reached a stage when you could afford to buy.
These days, renting is more popular than ever before, and the economy has evolved to support this. Now, instead of getting homeowners insurance, you can get renters insurance and be as secure in your rented home as you would in your mortgaged home.
Take a look at this coverage guide for renters insurance. In addition to this kind of innovation, renters are now afforded better protection by the state and federal governments, and long term renting is easy to facilitate.
Avoid the pressures of maintenance
One major benefit of renting over owning a home in San Francisco is that you get to avoid the major maintenance costs that every homeowner needs to shell out on a yearly basis. Until you have owned a home, you cannot know just how much it costs to keep it in good shape.
While landlords work maintenance costs into the price of rent, there is only so much they can put on the tenant and still charge a reasonable amount. Furthermore, it is one thing paying a little extra each month – having the money on hand in an emergency is far more difficult.
Maintenance and repairs are one of the main reasons people avoid buying homes. It is not just the costs, but also the pressure of keeping the property up to standard. Any homeowner will tell you that there is just one thing after another. Finding trustworthy service providers to take care of these issues is work in itself, as is facilitating the actual repairs.
As a renter, all you need to do is contact your landlord and let them take care of it.
The flexibility in and out of San Francisco
But one of the most significant reasons to rent in San Francisco instead of buying is that there is no guarantee you will want to live in SF in a few years time. We now live in an age in which the digital nomad lifestyle makes it possible to live anywhere. When you own a home, however, you will probably need to sell before you are able to move.
Renting provides you with true flexibility. Unless you are ready to commit to settling down in one place for the foreseeable future, renting is the smart option.