Anyone renting for life?

[CubicleDrone]

Having not grown up around here, but been here for over 12 years now...
I never really got indoctrinated in the whole mortgage thingy.

Anyone here already been renting for life, and planning on it? And instead putting their money in other somewhat more liquid assets for investing instead (ie stocks etc)?

Is there a disconnect where younger people are more likely to see this as a viable path compared to older generations?

 

[exnavynuke]

I rent and own. I rent my current place because it's cheaper than buying (each month it costs me what utilities alone would if I had bought). I have bought my retirement home (still ~10 years left on the mortgage) however. If I hadn't bought the retirement home, I'd be putting that into an investment account to pay for a retirement home in cash when I do retire as having a paid for home will almost always result in lower monthly expenses for the average retiree.

 

[Major Tom]

Anyone here already been renting for life, and planning on it? And instead putting their money in other somewhat more liquid assets for investing instead (ie stocks etc)?

Me! (For the most part, anyway.)

I did own a house that I lived in for 4.5 years. At the time, I loved my little house and was very open to the possibility of growing old in it. Then the market went up sharply, and I started thinking about how nice it would be to have all that money in my bank account. I sold the house, went back to apartment living, and ended up using the money to purchase 3 rental houses. Owned them for about 18 months while the market continued it's strong upward journey. Before long, I started weighing the thought of all that lovely equity I had built in a very short space of time, against the long-term liabilities of owning 3 houses. I sold them and haven't looked back.

Owning was fun and while I wouldn't rule it out again in the future, I really do like the lack of responsibility and liability that comes with renting. Being single, I don't have a family to house, or another person to think of. I suits me quite well. I do think that if you plan on being a lifelong renter, you also have to be open to being adaptable as to what kind of places you live in, and where you live. At some point, my current rental will probably no longer be a rental, due to the type of property and the age of the owner. Rent in the Bay Area has risen so sharply that when I have to move out, it will almost certainly be to another area. I'm open to change, and find the challenge of meeting it interesting.

 

[ExFlyBoy5]

Me! (For the most part, anyway.)

I did own a house that I lived in for 4.5 years. At the time, I loved my little house and was very open to the possibility of growing old in it. Then the market went up sharply, and I started thinking about how nice it would be to have all that money in my bank account. I sold the house, went back to apartment living, and ended up using the money to purchase 3 rental houses. Owned them for about 18 months while the market continued it's strong upward journey. Before long, I started weighing the thought of all that lovely equity I had built in a very short space of time, against the long-term liabilities of owning 3 houses. I sold them and haven't looked back.

Owning was fun and while I wouldn't rule it out again in the future, I really do like the lack of responsibility and liability that comes with renting. Being single, I don't have a family to house, or another person to think of. I suits me quite well. I do think that if you plan on being a lifelong renter, you also have to be open to being adaptable as to what kind of places you live in, and where you live. At some point, my current rental will probably no longer be a rental, due to the type of property and the age of the owner. Rent in the Bay Area has risen so sharply that when I have to move out, it will almost certainly be to another area. I'm open to change, and find the challenge of meeting it interesting.

Very good points! I have owned for a good bit of my adult hood and can say that if I was single (I don't have kids) I would most likely be a perpetual renter. I tend to get a little stir crazy after a while (perhaps moving around w/ the military?) and am not sure that I would want to live in the same place for 10+ years. DW and I are considering the pros/cons of custom building a house for our next stop but in all honesty, I see the cons far outweighing the pros...and I am beginning to think that when we sell this house (and most likely a rental we have), that renting will be the way to go and not sure that I would own again.

 

[Red Badger]

Hi - check out FIREcracker's very opinionated view. It's funny and very relevant. We do own but never got house-horny or worried about impressing people we don't like.
Millennial Revolution - Stop Working. Start Living.

Good luck!

 

[Walt34]

We have always owned. Both of us grew up in the D.C. suburbs in the 1950's and '60's and at the time house prices always held steady with inflation or more often grew in price because of inflation and increasing commuting distances as the population grew. So we saw it as a very safe investment. The year 2008 was the first time either one of us ever heard of house prices falling because living near D.C. one is pretty much insulated from the financial disasters that befall other areas, like a major manufacturing plant closing or the oil industry cycles. The steady federal jobs in D.C. and the surrounding areas provide a lot of insulation to the cycles of the financial world "beyond the Beltway" as it is called around there. (The Beltway is the nickname for I-495 which circles D.C.) Had I not scrimped and saved to buy a house after my divorce in 1985 I'd have had a very difficult time staying local to my job because five years later the rent on a 1-bedroom apartment was more than my house payment. So with the advantage of hindsight buying at that time and place was the smart move.

Now we would be much more open to renting. We contracted for this house in Sept. 2001 and moved a year later when I retired. Up until 2008 it appreciated nicely of course, but still has not fully recovered from the fall in house prices, so clearly a strong case can be made for renting in this area. In the D.C. area I'd still say buying is probably the better bet if one can afford it because the real estate market shows no signs of slowing down there.

 

[CubicleDrone]

Yeah, thats part of the point...

What if housing prices were just a multi-decade bubble (an extravagant way of putting it, but it gets to the point), and now will stagnate - or even decline over the next few decades.

Just a thought, as I could totally be wrong.

 

[Teacher Terry]

I like owning so I can decorate, paint, etc the way I want. I also don't want to have to worry about moving. However, my kids all prefer to rent.

 

[Fedup]

Yeah, thats part of the point...

What if housing prices were just a multi-decade bubble (an extravagant way of putting it, but it gets to the point), and now will stagnate - or even decline over the next few decades.

Just a thought, as I could totally be wrong.

It depends on the location. But renting for life is not smart for some HCOL areas in California.

 

[rodi]

My grandparents always lived in high end (rental) apartments. It worked for them.

I think there are pros and cons to both sides of things (renting vs owning)... in my area (southern california) it is often cheaper/better cash flow to rent... especially if you are a long term tenant with a private (vs corporate) landlord... A 3br house that just went up for rent a few blocks from me is charging $2500. A very similar house recently sold for $620k. Assuming the buyer puts 20% down, they'd finance $496k. The payment is pretty darn close to the rent amount - and you're tying up $124k in down payment. If you put down less - your mortgage payment is more than rent.

Location and real estate prices matter.

 

[FUEGO]

We own but that was because it was way cheaper to buy than rent. Today, it's a closer question of rent vs own here in Raleigh. I don't really care about having 100% control over what I do with my living accommodations but my wife says she does.

Right now I'm dealing with 3 different issues requiring professionals (plumbing, HVAC, roofing) and wouldn't miss this aspect of homeownership a bit. It's probably still cheaper than renting even when considering the sunk cost of a $180,000 house. We pay ~$3,500-4,000/yr total for taxes, insurance, routine maintenance, plus big capital items. A comparable rental house would probably be $15000-18000/yr. In the end, we save around $10,000+ on a $180,000 house value which is a 5.5% yield on cash (and that's probably in real terms, since the underlying real estate should keep up with inflation over the long term). I am currently unable to find a guaranteed 5.5% return (real or nominal) anywhere else, so I'll keep owning for now.

Make sure to not conflate owning a larger, more expensive 3-5 BR house vs. renting a much simpler 1-2 BR condo or apartment. Instead, consider the all-in costs of owning a smaller attached dwelling (townhouse, condo) vs renting the same.

 

[Fedup]

It's much higher here. My brother is a landlord and the rent on his house is $10k a month. Ouch! Even I can't afford that.
But here is the math. Bought it for $2M, owe about $900k. Monthly mortgage is about $4500. HOA, Mello Roos and property tax is about $4k. So it's roughly break even. But the house is now worth $3M-$3.5M. About 12 years of ownership. His kids are grown up, he and his wife downsized to a condo.

 

[FUEGO]

It depends on the location. But renting for life is not smart for some HCOL areas in California.

When I run the numbers, it seems like it's nearly ALWAYS a better deal to rent in the HCOL cities vs. own. Unless you assume perpetual 9% property value appreciation forever (or some other crazy high number).

Rodi's example seems very typical - $2-3k rent vs. mid to high six figures (or more!) to buy a comparable house/condo/townhome. The mortgage alone is about the same as rent but as an owner you still have to pay for all the lurking maintenance expenses, property tax, insurance, HOA, etc. And you have $100k+ tied up in the down payment!

 

[Fedup]

When I run the numbers, it seems like it's nearly ALWAYS a better deal to rent in the HCOL cities vs. own. Unless you assume perpetual 9% property value appreciation forever (or some other crazy high number).

Rodi's example seems very typical - $2-3k rent vs. mid to high six figures (or more!) to buy a comparable house/condo/townhome. The mortgage alone is about the same as rent but as an owner you still have to pay for all the lurking maintenance expenses, property tax, insurance, HOA, etc. And you have $100k+ tied up in the down payment!

Honestly, I don't know if there are properties in Rodi's price range in my hood. My sister just bought a condoish near me for 3/4 of a million and even then her house went up already. She said she can't afford it today.
I've rent before and I never found a property as good as my property for the same payment. It's not comparable.
While in theory it sounds good but it's not in real life.

 

[FUEGO]

It's much higher here. My brother is a landlord and the rent on his house is $10k a month. Ouch! Even I can't afford that.
But here is the math. Bought it for $2M, owe about $900k. Monthly mortgage is about $4500. HOA, Mello Roos and property tax is about $4k. So it's roughly break even. But the house is now worth $3M-$3.5M. About 12 years of ownership. His kids are grown up, he and his wife downsized to a condo.

Great example. $3.5 million house renting for $10k. You get a $3 million mortgage and pay $14,000/month mortgage plus another $4k tax/HOA (and it's probably higher since the tax is based on 12 year old purchase price plus a small % increase). Throw in some basic annual maintenance and repairs and you're probably hitting close to $20k/month to own a place that you could rent for $10k (and you have a half million tied up in equity!).

Only way this pencils out is if you assume significant price appreciation at rates higher than the ~1% plus inflation that the entire US real estate market has experienced over the very long term.

And that's before considering the friction costs of buying and selling property (unless you're one of the rare few that stay in one house for many decades).

 

[FUEGO]

Honestly, I don't know if there are properties in Rodi's price range in my hood. My sister just bought a condoish near me for 3/4 of a million and even then her house went up already. She said she can't afford it today.
I've rent before and I never found a property as good as my property for the same payment. It's not comparable.
While in theory it sounds good but it's not in real life.

Very strange because the renters I know in HCOL cities say the opposite Either they pay a lot more for a smaller/crappier place because they own (house poor) or they're in a sweet rental for not a ton of $ that they couldn't otherwise afford.

 

[daylatedollarshort]

I think in some areas it is smarter to rent and less hassle. Robert Shiller has said housing is generally not a great investment:
Shiller: Housing Not A Great Investment - Business Insider

In our area there are many factors to consider for either renting or owning. Prop 13 favors long term home ownership, yet the chance of a big earthquake makes renting attractive.

 

[Fedup]

Great example. $3.5 million house renting for $10k. You get a $3 million mortgage and pay $14,000/month mortgage plus another $4k tax/HOA (and it's probably higher since the tax is based on 12 year old purchase price plus a small % increase). Throw in some basic annual maintenance and repairs and you're probably hitting close to $20k/month to own a place that you could rent for $10k (and you have a half million tied up in equity!).

Only way this pencils out is if you assume significant price appreciation at rates higher than the ~1% plus inflation that the entire US real estate market has experienced over the very long term.

And that's before considering the friction costs of buying and selling property (unless you're one of the rare few that stay in one house for many decades).

If you buy today, it's 3.5M. But he bought it 12 years ago at around $2M. He put down $1M. He won't be able to find similar house in similar location. I think his expense is about $8K, his wife is in real estate, so she can sell it for no fee or cheap. But I think it's about appreciation.

 

[Fedup]

Very strange because the renters I know in HCOL cities say the opposite Either they pay a lot more for a smaller/crappier place because they own (house poor) or they're in a sweet rental for not a ton of $ that they couldn't otherwise afford.

I can see it is true even for me. For my current house, it's cheaper to buy. For my other house in the Bay Area, if the buyer was to buy it, it would cost more. But my renter has offered to purchase my property there and I refused. The reason is I pay low property tax, my house value has increased 5 times since I bought it. My mortgage is nearly nil.
I don't need the money. If I sell I have to pay capital gain.
Both houses are in HCOL areas.

 

[Bryan Barnfellow]

When we lived in the States, we always owned and always made a profit on price appreciation when we sold. Now we live in Switzerland, where owning is very expensive and so 2 out of 3 people rent (most living in flats in apartment buildings in the cities).

As retirees we like the flexibility of renting; but the cost is high (think NYC level prices). Over the next thirty years we will spend close to the equivalent of $1M on rent alone. If our flat were for sale we could never afford to buy it, so there is that.

Rental insurance is very sophisticated here; for example, we carry full replacement insurance on our window glass. Swiss windows are amazingly well made and thus very expensive. That one was new for us.

As a consequence of not directly owning real estate, my wife and I invest in Real Estate Investment Trusts (REITS) in our portfolio.

-BB

 

[TallTim]

Great example. $3.5 million house renting for $10k. You get a $3 million mortgage and pay $14,000/month mortgage plus another $4k tax/HOA (and it's probably higher since the tax is based on 12 year old purchase price plus a small % increase). Throw in some basic annual maintenance and repairs and you're probably hitting close to $20k/month to own a place that you could rent for $10k (and you have a half million tied up in equity!).

Only way this pencils out is if you assume significant price appreciation at rates higher than the ~1% plus inflation that the entire US real estate market has experienced over the very long term.

And that's before considering the friction costs of buying and selling property (unless you're one of the rare few that stay in one house for many decades).

+1 to this analysis -- and don't forget the opportunity cost of not investing that capital in liquid assets that earn a higher rate of return than real estate. The NYT put together a pretty comprehensive make vs buy (rent vs own) analysis for this that we use periodically to assess the question.

IMHO in most HCOl areas, renting almost always comes out better if you use realistic returns and rates. See https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

 

[TallTim]

We have both owned and rented over our lives ... started out renting a duplex in our 20s then moved into (and sometimes renovated) a series of 3-4 houses of increasing relative value, rolling the proceeds into the next one each time and stepping up our basis ... when we moved to SoCal, we held onto our house in NorCal both b/c we (1) weren't sure we would not move back and (2) didn't want to sell in 08 at the bottom of the mkt. Fast forward a few years and we sold NorCal once we determined we wouldn't move back to that house, even if we moved back to NCal. So we've rented for a long time and it has turned out to be just fine for us. Buying where we live now would be doable but would require significant (and unplanned) capital diversion into real estate, impairing our cash flow and investing returns.

We may buy again if we move to a new place or to a much smaller one here once it is clear that DS and DW won't be back (they're in college now) ... but until then, happy to pay rent.

 

[Fedup]

+1 to this analysis -- and don't forget the opportunity cost of not investing that capital in liquid assets that earn a higher rate of return than real estate. The NYT put together a pretty comprehensive make vs buy (rent vs own) analysis for this that we use periodically to assess the question.

IMHO in most HCOl areas, renting almost always comes out better if you use realistic returns and rates. See https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

Maybe. But in my cohort, everybody owns, sometimes more than one house. One guy who was a director at a large chip company in San Diego, he bought and managed 6 properties before he retired. Of course it's about risk diversification. Some of us already have money in the stock market and don't want to risk any more money with it.
I'm glad I listened to my sister, she knows a real estate guy and he owns 9 properties in California, he said never sell your property in California, so I never did.

 

[savory]

We bought/sold over 5 homes due a combination of job moves and desire for a new house. I really did not do the math for buying vs renting until recently. I am sure if I did the analysis, on a couple of the houses I lost money even if the house sold for a higher price than I purchased it.

Now that I am more familiar with the math, I am not convinced it is the best idea. And, in our frequent moving situation, the only thing that helped was the company covered closing costs and realestate fees.

Fully retired and traveling, we do not want to own.
The housesitter thing worked for us OK and actually we do it from time to time, but we still had the worries.

We started renting four years ago and will likely be moving again soon. There are some downsides. For example, we are now renting a house from the homeowner and he has decided to put the house on the market. We are fortunate that we have been planning to move and his desire to sell coincidentally falls into our time frame. We have downsized a lot however which should help. We no longer have a bedroom set, separate dining room furniture, etc.

If we buy again, it will likely be because we do not have an alternative. But, it won't be based upon the idea that a person should own a house.

 

[Music Lover]

I own a house but bought when they were inexpensive and it's now paid off. Monthly utilities, taxes, etc., are less than rent, plus 2 bands rehearse in my basement...not possible in an apartment. Plus I'm quite handy, so owning is best for me.

I have two friends who both rent. One of them built a house just after the boom and it cost way more than expected and after a few years realized that he'd never pay it off in his life. He sold and will probably be a life long renter.

The other friend isn't handy and doesn't like debt, so she rents.