Rent or Own principal residence in ER?

[Retire2013]

I currently own and have no mortgage. I live in Orange County, one of the beach cities, and real estate, in my opinion, is overpriced. Sometimes I am tempted to sell my house and rent for psychological reasons. I think I would feel more carefree if I don't have to worry about maintaining, repairing my house and yard. I am a woman and not good with household repairs nor yard work so I have to hire a handyman and a lawn guy for pretty much everything.

I am curious if anyone out there in ER is enjoying being a renter? If you are renting do you sometimes wish you owned your principal residence? Is the grass always greener on the other side? And for those who own, do you like me, sometimes fantasize about being a carefree renter?

Of course, rent is also high in my town but I don't have to worry about repairs and maintenance. And I'd have the freedom to move whenever I want to without having to prep the house to put it on the market.

Please share your thoughts on this topic. Thank you in advance. I've always enjoyed reading everyone's discussions on various topic. Have a great weekend All!

 

[W2R]

Rent or own, mortgage or no mortgage... these are questions that come up frequently, and there are good arguments on both sides of each of them.

I own my own home, with no mortgage. That makes the most sense for me, with my lifestyle, and seemingly infinite need for security, a "nest", and so on. Besides, my spreadsheets concur.

But if I was a frequent traveler, I think I'd rent a lock'n'leave apartment somewhere. Or, if I was an eternal traveler then maybe I'd sell most of my stuff, put the rest in a storage unit and just live out of a suitcase. That's not me, though.

I must admit that living in a location where the median home value is somewhere around $231K, it's a lot easier decision to have no mortgage than it would be if I lived in Manhattan ($1,450,300) or SF ($1,236,700). Median home prices all from Zillow.

When I was a renter (before 2002), I longed for my very own home, a place that belonged to me where nobody could raise the rent, kick me out, come in unannounced to "spray for bugs, what didn't you get our message?", or scold me for a nailhole in the wall. Now that I am a home owner, I think this is a good lifestyle for me and I do not want to rent.

 

[Huston55]

I’m in the “rent” camp. That’s what we currently do, and have done for the past several years. We also live in a HCOL region - The SF Bay Area. We’ve bought/sold several houses over the years but, approached our FIRE move largely from a financial viewpoint: we decided where we wanted to live, then evaluated the rent-vs-buy options here, and the clear choice financially was to rent.

There are several good rent/buy evaluation tools, from simple to complex. I’ve posted a couple below; one simple (JLCollins) and one complex (NYTimes). Personally, I prefer JLCollins simple approach. But, also remember that there is a significant ‘emotional’ aspect to this decision so, factor that into your evaluation as well.

Rent v. Owning Your Home, opportunity cost and running some numbers

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

 

[Retire2013]

Thank you, W2R. Great thoughts!

 

[Music Lover]

I'm in W2R's camp...I own my own home and love it. But, it's really a lifestyle choice and not for everyone. I'm pretty handy and enjoy doing most maintenance and want a "home base", so it makes sense for me. But, for those who don't like doing or paying for maintenance or simply don't want to own maybe should find another option that's better suited.

Only you can make that decision.

 

[bw5972]

....Sometimes I am tempted to sell my house and rent for psychological reasons. I think I would feel more carefree if I don't have to worry about maintaining, repairing my house and yard. I am a woman and not good with household repairs nor yard work so I have to hire a handyman and a lawn guy for pretty much everything....

Trying to get a better handle on the source of your worries. I am a man but like you have no repair or lawn care aptitude. My worries are low overall and are based on:

Cost => Low worry : I budget for both regular items like lawn service and lumpy items like HVAC or roof replacement

Appearance => Low worry : My "keep up with the Jones" factor is low and when the HOA dinged me for minor items last year, I joined the HOA board and lowered the nitpick factor from the inside.

Knowledge => Medium worry : As a previous long time renter, I don't know all the things I should be doing as a home owner but feel I'll just have to roll with punches if and when they come.

 

[ShokWaveRider]

Is that Orange County California? I cannot find a beach city in OC Virginia.

I used to live on OC,CA. If your home is worth more than $1m it may be better to sell and rent some place cheaper. If you want the same locale, then renting will be a lot more than what it takes to run the house.

I have struggled with this question many time. Even done some sums. Our home is worth around ~$850k ish. Probably more. It cost $12k to run. I would have to pay $4kpm to get anything close.

 

[W2R]

Trying to get a better handle on the source of your worries. I am a man but like you have no repair or lawn care aptitude. My worries are low overall and are based on:

Cost => Low worry : I budget for both regular items like lawn service and lumpy items like HVAC or roof replacement

I do this too, just like you. I hate yard work and fixing things. At first, I was nervous about tackling the responsibilities of home ownership. Then I discovered that it was not that tough.

I re-did my yard so it is a very low maintenance yard for this area, and with a lawn guy ($35/mow) I have not had to spend one minute on the yard. I already had to replace the HVAC, and it should last longer than I do. The roof and hot water heater will eventually need to be replaced so I keep that in mind.

As for maintenance, I have a great handyman and that costs less than the lawn guy.

Appearance => Low worry : My "keep up with the Jones" factor is low and when the HOA dinged me for minor items last year, I joined the HOA board and lowered the nitpick factor from the inside.

I don't want my house to look blighted, so I do keep the lawn cut and everything tidy. No HOA, but also no junk cars on my lawn. I'm not one of those women that puts out little seasonal flags and decorations all the time, or puts up Christmas decorations, either. I feel like I am not keeping up with the Joneses, so much as one of the Joneses - - they don't put out those dumb little flags and decorations either, on my block, since most of my neighbors are quite elderly. I hope to be the oldest one on the block some day.

Knowledge => Medium worry : As a previous long time renter, I don't know all the things I should be doing as a home owner but feel I'll just have to roll with punches if and when they come.

Really there isn't much. Pay the property taxes, pay for insurance, pay the termite inspector, call the handyman if anything breaks, and that's about it. I leave people alone, and they leave me alone. My house looks like all the rest and blends in. Nobody but me could possibly know that it is W2R's Magnificent Wonderful Best-Ever Dream Home (at least in my opinion).

 

[Onward]

Renting suits my nature better. I feel it has allowed me to be freer, and sped my journey to FIRE.

 

[Bamaman]

We live in a sry low COL area. And because my wife is disabled led, we have no property taxes on our main residence. Just about every person over 30 years old owns there home here.

I am always appalled looking at home repair and house flipping television shows and seeing them pay $600k for a dump of a house I wouldn't live in.

For $4,500 a month here, you could be living in a 8,000 square foot modern home with a waterfront lot with a 6 mile sunset view.

 

[SheitlQueen]

I currently own and will probably stay here for a few years longer. Mortgage free and inexpensive taxes. But I have 7.5 acres and I find it harder to manage it each year.
I live in the hills so the winters can be a pain travel wise.
I know I will eventually have to leave, I just don't know when.
At that point in time I will have to decide about buying another place, or renting.
Right now I am leaning towards renting so I won't be responsible for any maintenance and I can travel when I want.

 

[ziggy29]

No one right answer. It depends on your lifestyle, and possibly (in some cases) what you want to leave to your estate and your heirs.

 

[rodi]

I'm also in a HCOL area (San Diego). We own our home (mortgage free) and for now that suits us... but we're unusual in that we're retired with minor age kids under roof... and I can't imagine a smaller space with teenagers under roof. But they'll be going away someday soon...

When they are launched we're seriously looking at downsizing to a condo. Is that something that could work for you? No outdoor maintenance, can work as a lock and go for travel... We'd gain HOA fees... but would likely get things like a shared pool for the fees.

 

[Huston55]

I have struggled with this question many time. Even done some sums. Our home is worth around ~$850k ish. Probably more. It cost $12k to run. I would have to pay $4kpm to get anything close.

Can you clarify this? Are you saying your current “owned” home costs $12k/yr but, it would cost you $48k/yr ($4k/m x 12mo) to rent an equivalent home?

 

[RobbieB]

I'm an owner and will be for life. I like my own home, I know where everything is. I'm spiffing it up nice too, just the way I want it. I'll probably spend 50 to 60 grand on making it our castle.

60 grand would be what I would pay in rent for 3 years for something the same size in a not so good location right here in the same town that I couldn't modify at all.

 

[gayl]

I'd pay 3.5-4k a month to rent in my town if I could find a rental. Aren't many. Plus I use Home Adviser for repairs, gardener's only 130 month, property taxes are 3k a year (Prop 13 based on 1979 value) so it's a no brainer for me

Kids also live in this town so I'm not leaving

 

[Meadbh]

I haven’t rented in about 26 years. I owned a SFH for much of that time. I now own a condo, without a mortgage. Less than 8% of my NW is tied up in my condo. Rental vacancy rates in my area are <1%. My condo would rent for $1600 - $1800 per month in today’s market. My total expenses of home ownership are less than a third of that. I like having my own place and maintenance is not a burden as the strata, which is well managed, takes care of everything outside my suite. It’s easy to lock and leave when I travel. I don’t have to worry about rent increases or eviction. I definitely prefer to own my own home in ER. There was a time and place to rent, but for me that was when I was moving constantly from pillar to post for my career.

 

[Alan]

No right answer.

We sold our house shortly before we retired and traveled extensively for 7 years. Really useful to be able to lock and leave, leave the maintenance of the apartment to the front office. This year we have moved permanently, settled down and bought a house again.

 

[Dash man]

We’re homeowners and would never be able to put up with the restrictions of renting. We’re also landlords, owning a townhouse for year round rental and close in just over a week on a beach house that will be a weekly rental during the summer season. We live in Pennsylvania from mid spring to mid fall and in our Florida condo on the beach in the cooler months. We’re mortgage free, and use a property manager for the rentals. We use a lawn service for our PA home and will need one for the beach home we’re purchasing. I can do some basic home maintenance, but it’s getting harder. I’m looking for a good handyman for future use. Property taxes are the main expense followed by insurance. The rental income pays all the costs of maintaining our homes.

 

[Ronstar]

Own with no mortgage. Eventually will downsize and will probably buy.

 

[WestUniversity]

We own our home. Paid it off a couple of years ago. When we leave here we will simply rollover everything from the sale of this home into the purchase the next home, our retirement home, which will be in about 2-3 years...

 

[ShokWaveRider]

Can you clarify this? Are you saying your current “owned” home costs $12k/yr but, it would cost you $48k/yr ($4k/m x 12mo) to rent an equivalent home?

Yes, the maintenance (averaged) and Taxes, Insurance etc. I could not rent mine for that $4kpm though. Renters do not want to pay more than $2kpm around here and it is not worth me even trying rent mine out. Rentals around here long term are usually for small nondescript homes that I would not want to live in, in an area that I would not care for.

 

[LakeRat1]

Prior to retirement we sold our custom built home on 6 acres, purchased a condo on a lake in Missouri. Once we retired, we realized the weather was just as the weather in Kansas cold. We then decided to purchase in addition to our condo apark model home in Florida for the winter months, became residents of FL....... Both our homes have HOAs, this is great no outside maintenance for us, pools, etc...... So nice to just leave at anytime to travel and not have to worry ........ Life is good retired ....... For us, the ownership is where there is an HOA for maintenance ........

 

[Huston55]

I used to live on OC,CA. If your home is worth more than $1m it may be better to sell and rent some place cheaper. If you want the same locale, then renting will be a lot more than what it takes to run the house.

I have struggled with this question many time. Even done some sums. Our home is worth around ~$850k ish. Probably more. It cost $12k to run. I would have to pay $4kpm to get anything close.

Yes, the maintenance (averaged) and Taxes, Insurance etc. I could not rent mine for that $4kpm though. Renters do not want to pay more than $2kpm around here and it is not worth me even trying rent mine out. Rentals around here long term are usually for small nondescript homes that I would not want to live in, in an area that I would not care for.

As I said in the post above, there are non financial reasons for choosing to rent or buy. So, ownership seems to be the right choice for you based on your posts. However, any financial comparison should include ‘opportunity cost’, which is missing from your numbers.

So, for the OP, ‘Opportunity Cost’ should be included in any analysis you do.

 

[Freedom56]

Own 3 homes (1 is a condo) with no mortgages. We spend 6 months in California, 3 months in Florida, and 3 in Europe. We use our homes as travel hubs. I can't see myself ever renting. It costs us about $900 month for property taxes, utilities, insurance and maintenance for my home in California. It would cost us about $3500 a month to rent a similar property. It costs us $920 a month for our condo in Florida for property taxes, condo fees, insurance, utilities and maintenance. It would cost $2300 per month to rent in the same building. Our home in Switzerland has 3 apartments. 2 are rented out and the rent covers all costs.