And there you have it. I rented from when I graduated college in 1980 until my first house in 1986. Typical. Never rented again. I always bought (after finding a location I wanted) and have owned and sold 6 houses & the difference between the cost of renting vs owning the same comparable was always cheaper owning, as appreciation pretty much always meant the cost of the sold house was nothing. However, in my case, sweat equity was real. Not real expensive, but the ROI on my work performed always paid off handsomely. There is NO WAY I would have retired with as much NW had I rented vs owning. But luck was also with me, as I always sold in an up market, and bought fixer uppers that seemed obvious good investments to me. Like many here, I have a skill set and have never paid a carpenter, plumber or electrician. And anything I paid for (a paved driveway once for instance), easily return more than the cost. I earned that equity with the banks money, with the equivalent mortgage interest easily paid for by investment returns of the same financed amount. So the loans cost me nothing, or even negative, but I kept the appreciation, which was typically way more than the principal paid during the mortgage time.
The current home was bought new, for $650k in 2018, with $200k down, entirely from the proceeds of the previous house, which were about $300k net. Retired at 61 in 2019. Mortgage & taxes, & HOI, have been about $2300/mo. So I have paid about $138,000 P&I, taxes and insurance in 5 years. The house has appreciated over $200k. Currently enjoying the last roughly 3 years at 2.75% mortgage. Rent of the same home is about $3500/m, if you can find one.
So in a like for like comparison it is a no brainer. So it most definitely is a YMMV situation.
You framed the topic very nicely - plenty of food for thought. I keep fairly decent records, so could do the calc of rent vs buy comparison.
Back of the envelope, for the home I'm sitting in right now, owned for 10 years, I've paid (rounded numbers):
- $250K in mortgage interest
- $100K in property taxes
- $50K in property insurance
- $100K in routine grounds/pool maintenance
- $100K in upgrades, landscaping, etc. (mostly unnecessary)
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- $600K Total Owning Expense
House was fairly new, lightly used when bought it so none of the upgrades were really necessary, just adjusting the home/grounds to our tastes, and repairs have been negligible. I'm excluding furnishings and such, as those would be expenses no matter renting vs buying.
On the plus side of the column would be:
+ $500K market value appreciation (according to Zillow, but market is currently greater than this)
+ $1,000K rent avoidance (based on local MD to LD seasonal rental rates)
+ $140K tax breaks
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+ $1,640K Total Benefits
+ $1,040K net benefit
Now the wildcard is how should I think about how I would have invested if I had rented vs buying. Certainly, my $200K down payment would have tripled over the past 10 years if invested in SP500 - I got $727K from one calculator.
So, I'd be the first to admit that $1M vs $727K is close enough in my book. The costs are tangible - the benefits more squishy though tried to be conservative.
Should I have simply rented? In my case, no, this is the house I'm going to stay in next 20 years, and I would not feel comfortable with the uncertainty involved in a rental. Plus, I get to customize it to our precise needs. This is just one illustration, really just to share my thought process.
As others have said, YMMV.
