What Does It Mean to Be a Forever Renter? Benefits and Drawbacks to Consider

Today, most talks of real estate center around when and whether renters can purchase their first home. But buying and owning property isn’t the only way to find secure housing and make a smart financial decision. In fact, many renters make intentional decisions not to buy a home.

“One of the most common misconceptions about ‘forever renters,’ especially among homeowners, is that they’re ‘throwing away’ their money on rent or that they’re paying their landlord’s mortgage rather than their own,” says Nick Pisano, a data writer for Clever Real Estate. “In reality, those who choose to rent have often made conscious decisions to embrace the benefits of the lifestyle, such as increased flexibility and lower upkeep requirements, trading the likely financial benefits of homeownership in the future for a more stress-free today.”

In fact, sky-high mortgage rates combined with inflated home prices and low inventory make renting the smart choice in many cities.

 “A recent analysis by Realtor.com found that it is more affordable to rent than to buy a home in all 50 of the largest U.S. metros,” says Hannah Jones, a senior economic research analyst with Realtor.com. “This means that in today’s market, households stand to save significantly by renting.”

Not only does the forever renter enjoy a certain lifestyle, but they can also make smart decisions to set themselves up for long-term savings. Here, we talk to real estate experts about the pros and cons of the lifestyle.

What Is a Forever Renter?

It’s common to begin renting as an adult while saving money for your first home purchase. But there’s also a trend in which renters choose to remain renters.

“‘Forever renters’ are those who’ve decided, either as a matter of preference, due to financial issues, or for other reasons, to forgo the idea of ever owning real estate and instead orient their lives toward renting instead,” Pisano says.

Some forever renters choose the lifestyle from the jump, while others have fallen into it after seeing how high the barrier to the housing market has become.

“Someone may choose to be a ‘forever renter’ because they live in a high-priced area in which they are unlikely to ever be able to afford homeownership, or because they enjoy the flexibility renting allows,” Jones says. “Lifestyle and finances are likely the two largest considerations for ‘forever renters’.”

Agent Robert E. Elson of Coldwell Banker Warburg says it’s not a bad thing to be a forever renter, even if that means you’re fundamentally opposed to homeownership.

“Many people like this lifestyle because it may give them options homeowners do not have—freedom to move around whenever and wherever they choose, skipping major financial obligations like bearing a mortgage, and not having to worry about home repairs and the maintenance of appliances,” he says.

Benefits of Renting Forever

Like any type of living arrangement, there are pros and cons. And while it’s easy to come up with the perks around homeownership, there are similar advantages for renters.

Flexibility

“What forever renters sacrifice in home equity, they get back in flexibility. Renting for the long term has both pros and cons,” Jones says. “It takes the pressure off of saving up for a housing purchase, it often means being able to afford to live in areas that would be out-of-budget for buying, and it allows renters to pick up and move as they wish, to some degree. Renters also often get to pawn off the maintenance and upkeep responsibilities to the owner, though likely with varying degrees of success.”

Many forever renters choose this lifestyle to avoid feeling tied down.

“There is a rather pervasive view that renting is ‘throwing away’ money. However, renting allows for flexibility that homeownership does not,” Jones says. “Renters are able to be nimble and adjust to changing life circumstances, such as losing a job or adding a new member to the family, without having to worry about selling/buying a new house.”

That doesn’t mean there aren’t consequences to moving frequently.

“Of course, lease terms vary and renters may face the financial consequences of breaking a lease, but generally this cost will be lower than costs associated with selling a home,” Jones adds. “Homeownership can offer peace of mind and stability, but it is much harder to course-correct than it is when renting.”

It’s also a great arrangement if you aren’t committed to living in one particular city.

“Additionally, not being the actual homeowner likely makes it easier to move and not be tied to a specific location,” says Ann Cooper, a real estate broker with RE/MAX of Boulder.

Less Time Spent on Upkeep

If you’re someone who travels often or despises yardwork, renting an apartment or a home which the landlord maintains can be ideal.

“Even if you’re not a traveling salesperson, there are reasons to rent for the long term,” says agent Michael C. Weiner of Coldwell Banker Warburg. “Some jobs require a lot of changes—think U.S. military personnel—while some people simply like to have a variety of homes in different locations over time​.”

Fewer Expenses

And even though homeownership is considered an easy way to build equity and wealth, it’s not always smooth sailing, and that’s where renting can be advantageous.

“Financially, people typically assume that it’s better to own than rent,” Weiner says. “But, buying in a hot market can lead to much less gain over time, and expenses of ownership, including taxes and maintenance, can impair gains further.”

Drawbacks of Renting Forever

Less Stability

Perhaps the biggest drawback of renting is the fact that your housing situation is less reliable than if you were to own.

“Should the owner decide to sell their property or move back in, there is nothing a renter can do, assuming the homeowner is honoring the full term of the lease agreement,” Jones says. “Rental term norms vary greatly across the U.S., but if a renter feels pretty confident they want to stay put for the medium-term, they can try to negotiate a longer lease with their landlord.”

Subject to Landlord

In addition, your relationship with your landlord has the potential to dictate a lot of the comfortability of your living situation either by imposing strict rules or springing sudden rent hikes on you.

“Communication with your landlord upfront is essential, as is having a contract that protects both the renter and the landlord,” Cooper says. “There’s always a risk that a landlord will increase rent or decide to sell, but having a good relationship with your landlord makes these kinds of changes less of a surprise and more amicable.”

Pisano also warns that a sudden financial disaster could be more devastating for a renter than a homeowner. “Oftentimes, it can be far easier and faster to evict a renter than foreclose on a homeowner,” he says. “That means it’s even more critical to have an emergency fund that can pay the rent for several months or more in the event of a job loss or other severe financial problems.”

If you plan to move frequently, be sure to review local laws regarding renting in your area and keep an expert on hand to review unique leasing agreements.

“As life can be unpredictable, you should also review the process and penalties if you need to break your lease in the future,” Pisano adds.

One of the most common ways for Americans to build their wealth is to own a property that appreciates in value over time. Without a property, forever renters will have to be more diligent about how they save and prepare for their financial futures.

“Those who choose to rent indefinitely need to be more deliberate in their efforts to grow their wealth. That includes setting up investments that should be just as automatic, like 401k paycheck deductions or scheduled deposits into a savings or brokerage account,” Pisano says. “They can even take advantage of some of the financial benefits of owning real estate without changing their living situation or dealing with the downsides of owning property through real estate investment trusts (REITs), a type of investment fund that owns real estate and distributes the gains to shareholders.”

Cooper agrees there are ways renters can actually save money compared to homeowners.

“While I clearly favor homeownership and feel that real estate is one of the surest ways to build personal wealth, there is a misconception that renting is just ‘throwing your money away,’” Cooper says. “While renting does not allow a person to build equity, they are able to avoid some of the upfront costs of homeownership, like down payments and closing costs.”

Plus, you can still make smart money choices for the long haul.

“It is possible to build wealth through other avenues besides homeownership,” Jones says. “Over time, many strategies, such as investing in low-cost index funds, may yield similar returns as home ownership.”

Finally, if you’re choosing to be a forever renter, be sure to develop and maintain a good relationship with your landlord and neighbors.

“Take cues from your landlord; some want to get to know their tenants, while others are more than happy to keep their distance as long as the rent checks keep coming,” Pisano says. “A friendly, or at least cordial, relationship can come in handy if you ever need a favor and can make it less awkward if you have to assert your rights, such as those surrounding renewals or notices of inspections.”

The best part is that you can change your mind at any point and opt to save up and purchase a home instead. Choosing to rent for right now can be a savvy choice when market conditions, your lifestyle, or your personal financial situation is not ideal for homeownership.