Retiring as a lifetime renter?

[kcowan]

It could be hard to find a place to rent 1/2 the year in each place, which would be ideal...

We take the place fulltime and then sublet it for 5 months using a ReMax agent. We are considering doing the same thing down south after 10 years of ownership.

We are expecting another RE slump in PV in the next few years so would like to consolidate our gains and retain a light footprint for our heirs. They are overbuilding like crazy and all comes on stream in two years.

In four years, the toll road from GDL might be done, so we would need to sew up a LT rental before then.

 

[christrong]

If you own your house outright and only need to pay taxes and upkeep I don't see how renting is a financial positive.
Rents in my area run about $3K per month ($36K annually) for a decent place; that's a big chunk of one's WR.

Yeah but if you own a home where rents are that high likely you are paying $12k in property and school taxes and $5k on upkeep. This would be a net loss of $19000. But you need to think about the opportunity cost by owning a home rather than having that money in the market. If you home then cost over $500k you are losing by owning.

 

[marko]

Yeah but if you own a home where rents are that high likely you are paying $12k in property and school taxes and $5k on upkeep. This would be a net loss of $19000. But you need to think about the opportunity cost by owning a home rather than having that money in the market. If you home then cost over $500k you are losing by owning.

I've never claimed to be a math wiz so I'm sure I'm missing something here.

Owning my home outright with taxes and upkeep costs about $10K total. I don't see how paying $36K in rent would put me ahead.

As far as opportunity cost, I've never understood folks who consider their home an investment or it's idle value as lost investment opportunity.

In the end, you have to live somewhere and having an extra $700K in the market, paying $36K in rent to make $49K (net $13K) just doesn't make sense.

But I'm open to learn what I'm missing.

 

[christrong]

I've never claimed to be a math wiz so I'm sure I'm missing something here.

Owning my home outright with taxes and upkeep costs about $10K total. I don't see how paying $36K in rent would put me ahead.

As far as opportunity cost, I've never understood folks who consider their home an investment or it's idle value as lost investment opportunity.

In the end, you have to live somewhere and having an extra $700K in the market, paying $36K in rent to make $49K (net $13K) just doesn't make sense.

But I'm open to learn what I'm missing.

You said before that it would not be a financial positive. Then you show renting is a $13k annual positive. I think that makes perfect sense. Am I missing something here? That is exactly why you would do it lol. It isn't right in some circumstances but renting can make sense financially depending on where you want to live.

Tying up $700000 in a vehicle that barely appreciates is certainlynot everyones cup of tea.

 

[FIREmenow]

......I've never understood folks who consider their home an investment or it's idle value as lost investment opportunity.

Therein lies the problem. Just because you don't view the same thing the same way as other people doesn't make it wrong.

 

[travelover]

..........Tying up $700000 in a vehicle that barely appreciates is certainly not everyone's cup of tea.

Man, that's an expensive car.

 

[marko]

You said before that it would not be a financial positive. Then you show renting is a $13k annual positive. I think that makes perfect sense. Am I missing something here? That is exactly why you would do it lol. It isn't right in some circumstances but renting can make sense financially depending on where you want to live.

Here's my view: Yes, $13K is a financial positive. Ok.
But to make that $13K net, I have to pay a landlord, perhaps put up with a lot of restrictions (can't change the kitchen, layout, rip out something that displeases me, some places you can't even bang a nail in the wall),
rely upon someone else to fix things,
maybe with the insecurity of having to move even if I don't want to.

I'm not new to renting. I've been a landlord (and still am) and when we lived in France we rented; $7200 USD a month.

I just don't view the positives ( a mere $13k) as outweighing a lot of the negatives.

Therein lies the problem. Just because you don't view the same thing the same way as other people doesn't make it wrong.

I'm not sure it's a problem. I never said it was wrong, just a point of view I don't understand or perhaps don't fully appreciate. Like 52 flavors of ice cream, there are things I like and things I don't like but it doesn't make it wrong. If you feel that that renting is a good deal for you, have at it.

Maybe here's the thing for me: I'm living in my great-great grandfather's house. My mom (age 88) lives my great-grandfathers house. People around here don't move much. Most folks in my neighborhood are 3rd and 4th generation owners of the same house they grew up in. One moves out when the funeral director comes and hauls you away.

Maybe the roots are going down too deep for me to grasp a more mobile demographic.

 

[daylatedollarshort]

It really depends where you live and even then timing is everything. In the Bay Area most long term home owners have come out way ahead between prices going up and Prop 13 keeping property taxes low. But people who bought in 2007 with mortgages have only probably recently not been underwater.

Our local news is filled with people who have had rents double in one year and are in a tough spot because their rents were already high, and their jobs are where they can no longer afford to live. If you rent in a place with a more static housing market and better rent to buy ratios, renting has many positive factors like flexibility and less time spent on upkeep.

 

[marko]

Tying up $700000 in a vehicle that barely appreciates is certainlynot everyones cup of tea.

Another thing I can't quite wrap my head around is how one would be able to bank $700K of house value --in addition to setting aside investment money-- while being a life long renter.

If one is paying down a mortgage to the tune of $3K-$5K a month, you're paying down a debt, but also paying yourself to buy something you'll eventually own. Plus the property appreciates over 20-30 years. In fact, that $700K house might have only cost you $300K in monthly payments.

If you're paying a similar amount in rent, I'd imagine it would be hard to accumulate a similar amount in addition to building your own investment portfolio.

At the end of 20 years, a buyer has an extra $3K a month he no longer has to pay out plus a $700K asset while the renter still has to pay rent.

 

[ShokWaveRider]

Most early retirees and retirees own their $700k homes outright. It is hard to go back to renting once the house is paid off. Plus renting a home of the same value in a neighborhood that you like (and know) would cost you a lot more than $2-3k pm. Using a rental income rule that I have heard some Landlords use, 1% of home value pm Rent, is worth renting out their house for, that would be $7k pm.

 

[Onward]

In the end I think it's more a lifestyle decision than a financial one.

You may save some $$ one way or the other, but when your landlord suddenly jacks up your rent in a tight market, you're gonna wish you owned.

Likewise, when the neighbor from Hell moves in next door to the house you own, you're gonna wish you could give 30 days notice and escape.

The tears and stress you could save, accumulated over decades, far outweigh the dollars your decision may (or may not) put in your pocket.

 

[kramer]

As a single guy I rented for most of my pre-FIRE life, and all of my eight years post-FIRE.

Rent vs. own is an eternal debate on this forum. I'm in the "rent" camp and feel it gives me flexibility and and a certain lightness of being that I value highly.

There are some disadvantages to renting, too, which I'm sure you're aware of.

But for me renting is working out just fine, and I have no plans to change.

Same situation for me ... in fact, I have never really even considered owning a place my whole life up to this point. I did buy my first refrigerator a few years ago when I moved into my present place

I am currently about 99.9% financial assets and 0.1% tangible assets.

 

[Olbidness]

I was a homeowner for many years and then got a new job. The commute time was about an hour, depending on traffic. My plan then was to work another 6 years then retire. I came across a small house, on the water, with a 10 minute commute to the new job. Those 6 years passed quickly and I retired last July so now I'm ready to move on to a new adventure but I'm not 100% certain what that will look like. Downsizing possessions is a ongoing project, I've made great progress but have more to go. My landlord is making noises like he wants me to buy this house but that does't fit my plan. I'm mentally prepared to make some bold moves if he wants me out.

My net worth has increased dramatically in the time I have been renting so I can't say that being a renter has been a negative in that respect.
One problem I have had is with my landlord, who is my neighbor. He is older than me, retired, and without much to do except to interact with me. I am compassionate to his situation but I've had to get rather assertive to get some privacy and personal space. That and Hurricanes are really the only negatives.

 

[ncbill]

There's so much emotion tied up in homeowning...like dividend stock investing, it's a "comfort food" issue.

From a financial perspective, from what I've seen online, homeowners have a tendency to under-state the actual costs of owning, whether or not they consciously realize it.

 

[brett]

There seems to be stigma with some people about renting. Especially oldsters like us who are empty nesters.

For us it really came down to a financial decision first and an emotional decision second. We sold and subsequently rented for four plus years. We had some friends and some acquaintances wondering if we were dead broke and could not afford to buy. Not at all certain why someone would arrive at this conclusion but they did.

There is nothing special or magical with either renting or buying. Strictly a lifestyle and a financial decision.

 

[travelover]

There seems to be stigma with some people about renting...........

Yes, there definitely is. We were home owners for over 30 years and are now renting while we look for a home. We had to get used to being treated shabbily and scrutinized as mere renters. The apartment complex where we initially rented was the worst.

 

[Olbidness]

In my case the plan is to travel so having an expensive home base or having a home base at all reduces the funds to travel. If I knew where I'd like to be longer term I'd consider buying.

Conventional wisdom says that home ownership is necessary for a successful retirement.
If I followed conventional wisdom I would't be FIRE'd.

 

[brett]

We found that after selling our home and travelling for eight months our housing preferences changed. And they changedagain after a 3 month furnished rental adjacent to the downtown area. And changed a little more after a great four year rental.

We subsequently bought but only after the intersection of lower market prices and an HMO half duplex that met all of our requirements.

What we saved by renting in each those four years went a long way to funding two 2-3 month international trips each year. Not to mention that our housing tastes changed over the period. We had a great landlord. She was from my home town. We did the deal on a handshake. Six month lease but no paperwork for the other 3 1/2 years.

There is no upside in owning for the sake of home ownership. You really do have to balance off needs/preferences/housing market trends, eats against competing financial opportunities for your equity.

 

[Totoro]

Yes, there definitely is. We were home owners for over 30 years and are now renting while we look for a home. We had to get used to being treated shabbily and scrutinized as mere renters. The apartment complex where we initially rented was the worst.

Not out here where I live, fortunately.

 

[Totoro]

Just to offer my perspective.

perhaps put up with a lot of restrictions (can't change the kitchen, layout, rip out something that displeases me, some places you can't even bang a nail in the wall), rely upon someone else to fix things

I don't want to change anything anyway (not even paint), and I don't have to worry about fixing things or things going bust. No surprises, just pay the fixed fee and I'm done. If it doesn't get fixed fast enough, I have several ways to apply pressure. Not to mention that the company actually doing the fixing is contracted for several buildings, so I'm more important to them than I would be as simple single home-owner.

maybe with the insecurity of having to move even if I don't want to.

I can't get kicked out as long as I behave (by law), and I don't have to deal with the insecurity of my assets being concentrated in a single illiquid physical object that might not get sold when I want / need it the most. Not to mention finding a house to buy is a lot more taxing mentally than finding one to rent - mistakes don't cost me much.

So it's not only financial, but also how much the qualitative differences matter. They all differ by personality, circumstances, time and geography. If I had a family for example I'd very probably would have bought.

 

[marko]

Just to offer my perspective.



I don't want to change anything anyway (not even paint), and I don't have to worry about fixing things or things going bust. No surprises, just pay the fixed fee and I'm done. If it doesn't get fixed fast enough, I have several ways to apply pressure. Not to mention that the company actually doing the fixing is contracted for several buildings, so I'm more important to them than I would be as simple single home-owner.



I can't get kicked out as long as I behave (by law), and I don't have to deal with the insecurity of my assets being concentrated in a single illiquid physical object that might not get sold when I want / need it the most. Not to mention finding a house to buy is a lot more taxing mentally than finding one to rent - mistakes don't cost me much.

So it's not only financial, but also how much the qualitative differences matter. They all differ by personality, circumstances, time and geography. If I had a family for example I'd very probably would have bought.

All good perspectives!
As noted, we rented when we lived in France (we kept our US home). Nosebleed level rent ($7200 USD/mo) but it was a very high end place in one of the best neighborhoods. There were a lot of restrictions on what we could/couldn't do but we managed.

At the lower end, someone noted that there's a stigma about renting. I know it is so in my area as most rental places are not considered very nice and are mostly in bad neighborhoods so that does skew my view of things.

 

[marko]

Funny story just came to mind:

Many years ago, before I met DW, I was flying from X to Y. The plane wasn't full and I struck up a conversation in the back of the plane with a flight attendant. The flight team originated from my area.
She asked where I lived and I told her the town.
Very next question: "Oh, very nice! Own or rent?"
I said that I owned.

I'll leave it there.

 

[pj.mask]

Renters do seem to be a bit clueless at times. Little things, even at a medium $ level on prices - some basic skills seem to be lacking. Plenty of people who have good jobs but no financial skills and that can bleed over into other areas that cause trouble. What do they say? Once burned twice shy?

 

[haha]

There's so much emotion tied up in homeowning...like dividend stock investing, it's a "comfort food" issue.

From a financial perspective, from what I've seen online, homeowners have a tendency to under-state the actual costs of owning, whether or not they consciously realize it.

This is definitely correct. However it is not by any means the whole story. Anyone who lives in big west coast cities and who lives close to the salt knows that he or she has often come pretty close to living for free, while the rents for functionally similar places have gone up sometimes dramatically year after year. There are no newish sfh where I live, and the unhandy vertical townhouses sited maybe 8 units to a former city lot for one WW1 era quality home can get little light and air flow and often cost $800k to $imm.

Condos can be much more pleasant, and I very much like my condominium, but I do think that there are important flaws in this type of ownership. It's not noise, or shared wall, it is actually much quieter than a typical suburban home. It is aspects of condo legal ownership form that I don't really like. My girlfriend lives in an expensive lakefront condo with many wealthy owners who often live there only part time, but they can strongly influence the way money is spent on common areas, and many of them seem to have spending money as their main life interest. My place is more modest, but the issues are similar- spending common money on important functional things, not on window dressing. Still, when I bought 6 years ago my expenses took a real drop, and living here I am safe from what to me would be a very negative event, "down neighborhooding" due to rising rents.

Ha

 

[ncbill]

Sure, many those who bought in HCOL areas have collected what economists term a "rent" over and above the expected normal return for housing (overall, for most of the country 1% real return annually)

But now they own a highly appreciated but highly illiquid asset whose "service" in HCOL areas normally requires two incomes (better hope both stay employed full-time, which was a huge problem for many of those owners 2008-9)