Owning vs. renting

[MusicalFIRE]

Young Dreamers (those of you still working toward FIRE), do you rent or own your the place you live? And why?

We currently rent, but I struggle with whether renting or owning is the best strategy. My thought process behind renting is that we avoid the cost of huge repairs inevitably needed to a house over time. I'd love to hear other perspectives on this.

 

[RunningBum]

Many, many threads on this. Go to advanced search and put Rent and search in titles. Factors include your local market rents vs. purchase price, how long you think you'd stay, how handy you are, etc. There is no "best" strategy, though there may be one that's better for your own situation.

 

[97guns]

I've never rented and feel renting is throwing money away, nobody in my immediate family has ever rented, in fact I do not know anybody that has Fired and rents

I just turned 8 years owning my rental properties and my tenants have literally paid me in full for the homes they are living in.

 

[SpinDr]

In looking at this question, I always looked at buying as helping to ensure manageable costs in the future. Initially, year to year comparisons can make renting look attractive as houses do require a lot of maintenance and upkeep. 20 years from now, though, you'll likely be spending the same amount on your mortgage where rents could go up 2-3 times.

Yes, things like property taxes increase, although in CA not so much, so costs for owners do increase but not like rents can be raised. I'd much rather be in my early 60's with no house payment or rent to pay. Now, if you've lucked into an ideal rent control situation, in a nice apartment, that would be great but is a rare situation.

 

[Blue Collar Guy]

I've never rented and feel renting is throwing money away, nobody in my immediate family has ever rented, in fact I do not know anybody that has Fired and rents

I just turned 8 years owning my rental properties and my tenants have literally paid me in full for the homes they are living in.

I rented most of my adult life. NYC has about 70 %(65 %?) rentals, Many extremely wealthy people rent. Ill low ball my after tax pocket money if I sold my house at 1 million dollars. thats at least 30,000 a year i could draw from plus the 20 K it costs me to run the house. I could rent nice places for far less than 50k a year. This might be an oddity of the high cost of livivng areas ,that I dont know, just wanted to give the other side of the coin.

 

[CoolChange]

Retrospective from Not So Young Dreamer

I have never really owned real estate in my adult life, always apartment living before moving into SO's house (which she does own). I will also eventually inherit my mother’s home, my boyhood home.

Given the benefit of hindsight and assuming all else being equal, buying would likely have been a better financial move: I live in an area where rents are high compared to real estate prices; and, we were not hit terribly hard by the real estate crash.

But...there were a couple of significant positives about renting for me, especially while I was completely solo:

• Renting was better for me from a quality of life perspective. I hate to deal with home maintenance, yard work, etc. And, I loved having a pool and other amenities that do not make sense for me in a single family home.

• Renting also gave me more flexibility, at least mentally, to take positions requiring travel and potential relocation, short or long term. This was a major benefit while I was building my career. Yes, I could have done this as a homeowner; but, I am not sure I would have. My apartment gave me the flexibility to lock it and leave it at a moment’s notice for an indefinite period of time.

 

[ERD50]

Young Dreamers (those of you still working toward FIRE), do you rent or own your the place you live? And why?

We currently rent, but I struggle with whether renting or owning is the best strategy. My thought process behind renting is that we avoid the cost of huge repairs inevitably needed to a house over time. I'd love to hear other perspectives on this.

I think renting can make good sense for many people, just depends on circumstances.

But, I just don't see that cost avoidance for repairs working in the long run, and on average. If your landlord has to pay for those repairs, it has to be built into the price of the rent. If they are not making money, they wouldn't be in the business (or at least not for long).

From that view, I think it generally makes sense to buy - your landlord can be seen as a middleman, and they need their cut. I don't see any way around that. But maybe since they have a relationship with contractors, they get a better value than an individual homeowner trying to get that repair? Might be a few mitigating issues like that.

But if you need the flexibility to move every few years, or for other reasons, renting can make a lot of sense. Lots of people did well with their home purchases, but some did not.

-ERD50

 

[BigMoneyJim]

There is no simple answer.

I'm single, and when I was renting I always made the point that I can rent a one-bedroom apartment and move to save money if necessary, but if I bought it would be a bigger place--I've never liked the idea of buying a condo or townhome--so it would be more expensive.

Then, when I was debt-free, had no plans to move for several years, and both prices and interest rates were at long-term lows, I bought a 3-bedroom house. I've been in it 6+ years, and it's worth almost double what I bought in for. So I'm high on the "buy" opinion, but I'm not sure it would make sense to make the jump from renting to buying now.

It really, really depends. In either case, if you don't need to commute to work a lot you can choose a cheaper place to rent or buy.

On the other hand, if you have a family to move around, the calculus probably changes for a lot of things.

 

[YVRRocketSurgery]

We bought a detached house before the housing boom in Vancouver so the price and monthly payments were relatively reasonable. For us, it's about the intangibles of make our own decisions about the house. We have the odd repair but we don't find any of them excessively expensive.

My buddy who owns his own business decides to rent a condo. The owners of the condo live most of the time out of town and are happy with him as a tenant and haven't raised the rent in years so he's getting a great deal. He wouldn't mind buying a place but his current accommodations are just too ideal financially.

My nieces and nephews in their 20's generally want to own but have to rent. The prices aren't practical for them to buy, even more so without a large downpayment.

Some of my friends who own their own places generate cashflow by renting out their basement / part of the house. One has even built a laneway/coach house to rent out.

 

[MusicalFIRE]

In looking at this question, I always looked at buying as helping to ensure manageable costs in the future. Initially, year to year comparisons can make renting look attractive as houses do require a lot of maintenance and upkeep. 20 years from now, though, you'll likely be spending the same amount on your mortgage where rents could go up 2-3 times.



Yes, things like property taxes increase, although in CA not so much, so costs for owners do increase but not like rents can be raised. I'd much rather be in my early 60's with no house payment or rent to pay. Now, if you've lucked into an ideal rent control situation, in a nice apartment, that would be great but is a rare situation.

I guess I should have mentioned that our rent situation is quite unique. We rent from my husbands brother who has many rentals in the area, and we live right next to him and his very large family. My husband helps out with the kids a lot. Rent is pretty average for the area and has not increased in the 3 years we have been here. That being said, I'm not sure what happens when the house need a significant repair, does rent increase? Maybe that situation will give us our answer to the best direction to take.

 

[Jeffman52]

I own my home and consider it part of my ER strategy. When we ER we plan to sell, downsize, pay cash for the new home and pocket what should be a considerable difference.

Outside of that I enjoy owning my house and working in the yard. I have a fairly large vegetable garden that supplies our veggies for the most part. We can our own stuff to keep us over through the winter (Thanks to my Grandparents (RIP) for showing me how to be self sufficient in this way). We also grow our own herbs (not those kind!!!) We grow Basil, Oregano, mint, parsley, Thyme and rosemary. Nothing like controlling your own food supply. We use no poisons or pesticides and a lot of our fertilizer is from our compost pile.

The house we have today is only 3 years old and requires very little upkeep.
Three sides brick with the odd side in Hardi-plank siding. So that's a big plus as well. We have a 6 zone sprinkler system so we dont worry about a big grass die out during drought months. We do however get some really high water bills when we turn that crazy thing on.

I probably wont want to do the amount of work I do outside forever, but for as long as I enjoy it, I plan to have enough property to have a garden.

 

[97guns]

I own my home and consider it part of my ER strategy. When we ER we plan to sell, downsize, pay cash for the new home and pocket what should be a considerable difference.

This is the strategy for a lot of people, it's the easiest and only way to save money for most people, essentially it's a retirement fund that you pay into monthly

 

[pj.mask]

I think if you want something fancy you should buy because renting fancy cost way more. If I were to rent an apartment I would shoot for 700 to 1200 a month. My current housing cost for property tax insurance and interest are currently around 1500 a month (but house is larger and nicer) and I have $650/month tied up in principal based on 4%. On the other hand when you own you tend to say 'oh here's a project I want to do it only cost $5k or $10k' - so even if the monthly cost is low or comparable if you add in all the one time expenses it can become very costly.

When I fire, I would like to travel a and I don't want to have to maintain things if I am out of the country or on vacation. I'll probably rent for 10-15 years and then look at buying a small house near the grandkids. Some of that rental may be cheap international.

 

[wolf]

I've never rented and feel renting is throwing money away, nobody in my immediate family has ever rented, in fact I do not know anybody that has Fired and rents

I just turned 8 years owning my rental properties and my tenants have literally paid me in full for the homes they are living in.

+1. Own. So common sense.

 

[CyclingInvestor]

I have been a homeowner for 36 years only so that I could own dogs. My stock investment returns have far exceeded my house appreciation, and I would have been way ahead if I had rented. That said, it was worth it.

 

[brucethebroker]

Generally, 3 kinds of people recommend renting:

1. Those who cannot buy (low income, poor credit, etc.).
2. Current renters.
3. Landlords.

 

[brett]

I think that it really depends on lifestyle and on the market in your area.

We owned our homes for 35 plus years. Sold, downsized, and traveled with the intention of buying when we returned.

Our market changed with the price of oil. We found that it was financially advantageous to rent for four years. During this time condo prices went down, house prices remained constant or dropped a little depending on location.. Bottom line is that the after tax return from investing our home equity for four years paid for our rent and much of our travel. We recently bought. We paid slightly less what we would have paid four years ago in our market. It is starting to pick up a little now. Those who bought condos for personal or investment purposes have seen the value of their condos decline, and rental income has also declined.

So for us, homeowners who had several homes in various cities and made money on each one, renting was a new experience. We enjoyed the freedom and it was financially beneficial for us. Our son was thinking of buying four years ago. He decided to rent. He is well ahead of the game financially in our market by not buying and saving more money for a down payment.