Retiring as a lifetime renter?

[haha]

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)

It's a little hard to decipher what you are trying to say, except that you don't own in an expensive market, so owning in expensive markets must be bad.

Where to live and how to finance it is a personal decision. But, if one is going to live near the salt in a big US city, especially a West Coast city, and that person would like to have a decent chance of continuing to live there, under these conditions buying has usually been better than renting for maybe 50 years, as long as one can have some control over holding period.

Of course, a good entry always helps but then I guess that brings up the mortal sin of market timing, which we know cannot be done, as per our favorite gurus.

As usual YMMV.

Ha

 

[ncbill]

It's a little hard to decipher what you are trying to say, except that you don't own in an expensive market, so owning in expensive markets must be bad.

Where to live and how to finance it is a personal decision. But, if one is going to live near the salt in a big US city, especially a West Coast city, and that person would like to have a decent chance of continuing to live there, under these conditions buying has usually been better than renting for maybe 50 years, as long as one can have some control over holding period.

Of course, a good entry always helps but then I guess that brings up the mortal sin of market timing, which we know cannot be done, as per our favorite gurus.

ZIRP really helped out with mortgage rates, but that's going away.

30-year average U.S. mortgage rates are closer to 9% than the 3% borrowers have enjoyed recently.

Along with the new limit on deducting mortgage interest, it is unlikely future buyers will reap such rapid appreciation going forward.

 

[Mr. RME]

I wouldn't stress over this at all. It really isn't a rent vs. own question, but instead a cash flow question.

If you buy you will deplete your nest egg by a large chunk. Will the remaining assets be enough to generate the income needed to stay retired?

If you rent, would the large monthly payments be of concern knowing that you will have to deal with them for the rest of your life?

Keep in mind that nothing is forever. I would suggest you retire and rent for a few years, see how it goes. If all is well, great! If you want to buy instead, great too!

A townhome might be right for you. You own your living space but don't have to worry about much of the typical upkeep. Best of luck!

 

[Freedom56]

Home ownership has worked out well for me (and my wife). I bought my first home at the age of 24. I could never get used to the idea of renting. It was difficult at first being single and living by myself and dealing with all the expenses and maintenance. I always bought brand new homes. By the time I married at the age of 31, I had already bought and sold 5 homes and built up a considerable amount of equity. You can't do that by renting. We also rented our homes until we got tired of dealing with tenants. After marriage we focused on paying off our mortgage (our only debt) and did so 10 years before retiring early. We bought another home (condo) 6 years ago and paid cash for it. As to the question of rent vs buying. Our 5 bedroom home in California costs us just under $1000 per month (including property tax, insurance, utilities, internet, TV, phone, maintenance). To rent a similar home in our area, it would cost about $3500 to $4000 per month. Our neighbors on the average have mortgage payments in the $3000-$3500 range. Our condo in Florida costs us about $980 per month (property tax, utilities, insurance, condo fees, internet, TV, phone). To rent a similar condo in the same building would cost about $2200 per month. In both cases, owning a home free and clear is significantly better than renting especially during retirement.

 

[Onward]

We had to get used to being treated shabbily and scrutinized as mere renters.

As a renter, I've run into this attitude too. It's easily overcome. Just think to yourself, "My brokerage account could buy your house several times over, and my account is appreciating faster than your house. Oh, and this summer, while you're painting, trimming, shingling, or whatever, I'll be in Tahiti."

Think it, don't say it. Problem solved.

 

[kcowan]

20 years ago when we started renting, our friends all assumed we would buy when we had built the necessary equity. We said no, we have done the math and renting works best for us. Still does.

In fact, renting enabled us to retire 5 years sooner.

 

[RobbieB]

My girlfriend rents. The place has fixtures that are loose in the wall, cabinet doors falling off, a ceiling fan that is inoperative and the deck is rotted out.

Nothing gets fixed anytime soon. Which was my experience also when renting.

 

[Totoro]

I am currently renting a newly built apartment. Tis great.

Also this weekend my friend told me he is refurbishing his place: 70k+ to replace a roof and lots of other things. Stark reminder to me that a house, as in the building, is a depreciating asset.

The underlying land is a different story, but still. I can rent for 6+ years for the kind of money.

 

[debshaw13]

Buying property can be a great investment, especially if you get in at a good time or plan to stay in one place for a long time. Given the power of leverage (needless to say, which works both ways), it can also be a much better investment than buying stocks over the long run. There are also significant tax benefits to owning real estate (depreciating the building and doing a 1031 exchange)

If you get in at the wrong time (ask anyone in Generation X who bought before the last recession) or tend to move around a lot, buying real estate is a terrible idea. You are much better off buying a portfolio of liquid securities that includes stocks, bonds and some inflation hedges (i.e. gold or TIPS).

 

[kcowan]

My girlfriend rents. The place has fixtures that are loose in the wall, cabinet doors falling off, a ceiling fan that is inoperative and the deck is rotted out.

Nothing gets fixed anytime soon. Which was my experience also when renting.

For God's sake Robbie! Save her! Move her in before the wedding!

 

[kcowan]

Buying property can be a great investment, especially if you get in at a good time or plan to stay in one place for a long time. Given the power of leverage (needless to say, which works both ways), it can also be a much better investment than buying stocks over the long run. There are also significant tax benefits to owning real estate (depreciating the building and doing a 1031 exchange)...

I refer to owning property to live in as a lifestyle expense. If it exceeds the large annual costs of keeping it livable, hey bonus!

 

[EvrClrx311]

So many variables at play with renting vs. owning. So the correct answer depends heavily on your situation...

In my area, the cheapest homes are $400,000 and equivalent rent is approximately $2,000 a month ($24,000 a year). $400,000 invested can make between 4-7% depending on allocation for the long haul... so that $400,000 invested is worth about $16,000 - $28,000 a year (on average). So that's a bit of a wash... before looking at the pros and cons of each of the other things involved:

Property taxes, HOA fees, repairs, sales of home (6%) realtor fee... are extra costs if you own that you don't have when you rent.

Tax deductions, equity (growth of home value - approximately inflation) are extra perks if you own instead of renting.

Intangibles are also there... some would have trouble sleeping at night trying to produce the steady income needed to replace the sunken cost of owning the home outright. Faith in the market, or your investment strategy for producing income on wealth, comes into play there.

The need/desire to uproot and move around plays heavily too. I did some basic calculations in excel with as many variables as I could possibly find on owning vs renting and came up with a value of about 5.5 years as being the breaking even point of owning vs renting. So from a strictly cost point of view... if you're going to live in the same place for more than 5.5 years owning is more beneficial... but if you're not going to be in the same place for that long... renting is smarter.

I'm happy to rent while I work, because I tend to not stay put for more than 5 years. So renting is much better... also I don't need to worry about the roof, leaks, termites, etc... (list of things that my landlord has had to pay for in the last 3 years I've been renting).

I suspect that as I reach FIRE I'll prefer to own... because I'll find a place to call home base for the long haul. In the mean time I've ignored some of the common questions I've gotten from family and friends who assume renting is "throwing money away"... it's all based on the numbers. For me, I've calculated that owning would be more costly in the long run, for now. So renting is actually a better way to accumulate wealth.

 

[Junior]

Quick question: Have you thought about leasing?

I don't have experience in this area, but maybe, another person with more understanding/experience, could give a better perspective about this option.

Good luck.

 

[Hyper]

We have friends that have rented in our area for the last ten yrs that say they like to have the flexibility to leave if they chose. Nice rentals here are higher than a comparable owned home. If I wanted the flexibility of moving, I'd still buy and just fire sale the home even for half the value. Half would still be better than losing all your $ for those yrs and could still get out of it quickly. We've built, remodeled, sold many times. The longest it's ever taken us to sell is 4 mths and this was in the middle of the recession.

 

[97guns]

Just a quick run of my rental numbers says renting is not too good, I purchased a rental for 90K, it rents for $1250, I’ve had the same tenant living in it for 9 years and he has paid me $105k in that time, he has literally paid in full the home he rents from me

 

[kitesurfer2]

in my neighborhood, we are mostly home owners. good thing too, because at 65 years young , most of us are totally un able to pack up and move every time the rent comes due (as the renters do, it seems) I cannot imagine having to move when I am 70, or lord help me at 80! at my age of 65, I would buy and own and live in a $10k mobile home before I would rent anything.

 

[cathy63]

Just a quick run of my rental numbers says renting is not too good, I purchased a rental for 90K, it rents for $1250, I’ve had the same tenant living in it for 9 years and he has paid me $105k in that time, he has literally paid in full the home he rents from me

That's highly dependent on location though. We own a condo that we rent out and an identical unit in that building just sold for 320x the going monthly rent. That's with no rent control. Renting makes a lot more sense in some places.

 

[kcowan]

I would buy and own and live in a $10k mobile home before I would rent anything.

Yes there are mobile home sites on the Capilano River near us. Aside from the pad rental and common services, it is your place to decorate as you please (subject to the home owner rules). I cycle through it (even though they post no trespassing signs). I have never been challenged so I think the signs are just giving them the right to challenge. Probably for squatters on their riverside beach.

 

[Totoro]

Just a quick run of my rental numbers says renting is not too good, I purchased a rental for 90K, it rents for $1250, I’ve had the same tenant living in it for 9 years and he has paid me $105k in that time, he has literally paid in full the home he rents from me

That's >15% gross yield. Good luck finding that in Europe. Lucky if you get 5% around these parts.

 

[indiajust]

I love renting. The opportunity cost of having my capital tied up in dirt is unacceptable. Real estate ruined 2 relationships and a career. I doubled my money over 16 years, made it to 80% ownership; through 2 stock market crunches and I still proved in excel that I would have been better off renting and investing instead.


You can't own without a deed. Renting money is not ownership. It's an american fad that needs to die.

 

[indiajust]

Absolutely, possessions are a gas, expanding to fill the available volume. Selling/donating everything and downsizing was a huge relief. Those settlers on the oregon trail that left pianos along the way missed the point. Downsize first, move second. You can delay the fire until you die or go to a retirement home. By then, much of it will be obsolete and go right to the dumpster. Don't let your stuff own you.

 

[97guns]

That's >15% gross yield. Good luck finding that in Europe. Lucky if you get 5% around these parts.

Is is cheaper living outside from the large cities? My brother made the sacrifice of buying 30 miles away to become a home owner, he would have commuted 50-70 miles if he had to, that’s how important owning was for him.

 

[Corporateburnout]

This is a comprehensive calculator that evaluate the financial payback of renting vs owning.


https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=1


But as we all know and discussed many times there are other non financial reasons that support each preference.

 

[Souschef]

Yes there are mobile home sites on the Capilano River near us. Aside from the pad rental and common services, it is your place to decorate as you please (subject to the home owner rules). I cycle through it (even though they post no trespassing signs). I have never been challenged so I think the signs are just giving them the right to challenge. Probably for squatters on their riverside beach.

We live in a +55 mobile home park. We pay space rent,which thank goodness is rent controlled runs about $500/ month.

 

[Huston55]

This is a good calculator to compare buying vs renting; surprised it took six months of posts for it to be linked.

This is a comprehensive calculator that evaluate the financial payback of renting vs owning.


https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=1


But as we all know and discussed many times there are other non financial reasons that support each preference.

This JLCollins post (along with several others on his website) is also an excellent, and elegantly simple, analysis of buying vs renting.
Rent v. Owning Your Home, opportunity cost and running some numbers

And this post is so funny (and true) that it hurts...to read!
Why your house is a terrible investment

And... now some of my personal thoughts on the rent vs buy question.

- Opportunity Cost is real whether you recognize it or not. It may not sway you one way or the other but, it is as real as any other cost.

- Most of the rent vs buy discussions are on the ‘financial’ aspects but, the personal/emotional aspects are also important. And, it’s very important to not mix the two.

- Whether it’s better financially to rent or buy depends very much on your particular circumstances but, there are a few key drivers:
> Location
> How often you move
> Timing (% rates & housing market)
> Who’s paying the moving & RE costs

- When looking at the total US housing market, current circumstances point to an unattractive financial future for home buying (rising % rates, worsening tax treatment, unfavorable demographics)

- And, WADR, our personal anecdotal experiences (including mine) are essentially irrelevant when doing any meaningful rent vs buy financial analysis.

YMMV

ETA: Got to preaching & forgot to answer the OP’s questions.

We’ve owned several (5) homes and rented several (too many to count) in 16 moves over our careers. Although we made $$$ owning, now that we’re FIREd, we will likely never own again by choice. Our circumstances make renting best for us now that we’re FIREd, and we can attest that you certainly can rent in retirement & be perfectly happy doing so.