Rent or Own principal residence in ER?

[Scuba]

The non-financial aspects are not insignificant.
- Renting provides more flexibility
- Renting is more carefree. When something breaks, the landlord has to deal with it.
- Rent inflation is likely higher than inflation on property taxes/HOA fees, depending on your location
- Landlords can force you to move even when you don't want to. My sister rented in Yountville, CA and loved her home, but the landlord decided to sell and she had to leave.
- If you care a lot about your home decor, buying allows much more freedom. When renting, you're limited to what the landlord will allow. A god friend rents, and the carpeting in her apartment was already stained before she moved in. It took her landlord 10 years to put in new flooring and she didn't get any input on what they picked.
- Depending on where you rent vs what you can afford to buy, the quality of neighbors is something to consider. Our condo neighbors are mostly professionals or retired professionals who are quiet and respectful of the HOA rules. My friend's apartment complex is much less expensive, but she is surrounded by people who work in bars and restaurants and come home at 2 am ready to party loudly.
- A home you own can be turned into an income-producing asset. In our case, we could rent our condo out for $4.5K-$5K/month, which more than covers our costs. We could rent in a less expensive location and come out ahead financially.
- This last point is a financial one too - depending on where you live, home equity can be a significant wealth builder. Probably more relevant for younger folks vs retirees, but even as a retiree, I like the idea that our home will likely be worth a lot more in 20-30 years. We haven't counted on that in our financial planning, other than thinking home equity could be one way to pay for LTC if ever needed.

 

[W2R]

- This last point is a financial one too - depending on where you live, home equity can be a significant wealth builder. Probably more relevant for younger folks vs retirees, but even as a retiree, I like the idea that our home will likely be worth a lot more in 20-30 years. We haven't counted on that in our financial planning, other than thinking home equity could be one way to pay for LTC if ever needed.

I bought my home in cash back in June, 2015, just as a huge real estate bubble began to affect my immediate neighborhood (only), raising selling prices over 50% in just two years. Oh well, we don't plan to sell anyway. Luckily it will not affect our property taxes, due to age/income related freezing of assessments.

So you're right; it isn't relevant for us as retirees although it provides us with great entertainment. "Did you see what the house over there sold for? These people are complete lunatics!"

Like many of us, I expect a HUGE market crash at some point. Surely this bull market can't continue much longer. I think I will be far less likely to panic and sell low, while living in a paid off home than might be the case otherwise. YMMV and obviously does for many others but that is the psychology of it for me.

 

[brett]

Only one answer....it depends.

On your preferences, your finances, your desired lifestyle, the real estate market, and the property itself, plus many more.

Far too many variables.

We have owned and we have rented. Both were financially beneficial. Various homes, various cities, various real estate climates, and of course changing personal preferences.

We certainly do not think that one is always better than the other. Four years of renting in a down real estate market was financially advantageous for us and it suited our desired lifestyle.