renters for life a question

Friends of my family rented until they chose to retire, and then paid cash for a retirement house. We met them first in Pittsburgh, later again in Houston, and then ultimately in Birmingham. We went to the same schools, played the same sports... even same neighborhoods. Purely coincidental that we traveled the same path and kept up with each other, completely different employment and reasons for moving.

My parents had three house transactions over their lifetimes, dying as renters in care situation. Our friends lived the exact opposite lifestyle, renting their entire lives and dying in their retirement home.

I never noticed a lifestyle difference, and it never entered my thinking until I saw this thread.

We had endless maintenance and upfit, my father explained it as a way to keep teenage boys busy and out of trouble. They had not a tool in the house but never lacked for adventure.
 
indiajust said:
I never noticed a lifestyle difference, and it never entered my thinking until I saw this thread.

We had endless maintenance and upfit, my father explained it as a way to keep teenage boys busy and out of trouble. They had not a tool in the house but never lacked for adventure.
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There are so many ways to look at the calculations in this. We bought our first home in Dallas in 1999 for $145k (20% down) and locking in the cost for 24 years, about $800 for a 2200 sq ft home (rent would have been double this, imo). Maintenance and upkeep, minimal. The $30k would be about $120-150k today if invested. Home about $450k.

We only lived there until 2007 though. Moving to LA for 4 years & Mexico for 3 years and rented then. Total rent was ~130k all in. We made mad-money in LA while renting...

Back to Dallas in 2015, have paid cash for 2 homes since & netting ~$200k after all expenses for updates, taxes and realtors. $275k in market from 2015 til now would be ~$600k (minus rent, $400k). Again, maintenance is negligible.

We have done both for the current lifestyle at the time. Hindsight & timing is everything in this subject & always looking backwards imo. We only go forward & do what makes sense in the moment.

We prefer owning, but not totally against the option, obviously. Rent from 1999 to now I estimate ~$500k in our past... We are fine with our choices in hindsight.
 
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indiajust said:
My parents had three house transactions over their lifetimes, dying as renters in care situation. Our friends lived the exact opposite lifestyle, renting their entire lives and dying in their retirement home.

I never noticed a lifestyle difference, and it never entered my thinking until I saw this thread.
Click to expand...

I don't see much of a difference financially between the people that I know who rent vs those who own homes.

The only real differences from my perspective is that they renters love the fact that they can lock and leave with little or no worry if they're going on an extended vacation. Or they lack DIY skills or desire and don't want the hassle of home maintenance.

The home owners can't lock and leave as easily but they enjoy other benefits like private yards, smokers, home theater rooms, decks, fire pits, hot tubs, gazebos, etc. But that freedom requires maintenance.

Owning a home vs renting is mostly a lifestyle choice. I would never have been happy renting because I wanted the things that home ownership provided.
 
Our issue with renting is that for the most part rentals are not in the areas we like or would even consider living in. Now of course this is a money problem. But locally $3,000 a month is the minimum monthly rent for a home we would want to live in but, not in an area we would want to live in. We could get what we want for ~$5,500 a month or more, but that seems to defeat the object. We like gated HOA communities where folks cannot put 3 or 4 cars/trucks in the driveway and have to keep their homes in decent condition. But that is just us. Some are happy with less I suppose.
 
My goodness. If you want a house and can afford it, buy a house. If renting suits you better, do that instead. The ongoing discussion re: the pros and cons, is interesting, though a few in this thread do seem to be putting quite a lot of energy into justifying their choices to others. Not everything needs to be rationalized in terms of it's investment value.
 
I prefer the "freedom" of owning.

If I own I can do anything I want with the house, and I've done some level of renovation to every house that I've owned. Its a way to make it feel more like a "home" suited to my needs & preferences. I've got some maintenance & construction skills out of my past and I'd rather rely on myself than on someone else. I know how to buy a house that is almost certain to appreciate, and I've always done well when I sold a house.

I'm sure many would disagree. And I've often wondered about the same question that OP asked.

For me, its not about the money - I figure I will always have "enough" money. But more money is nice too, and half of my net worth is in real estate. I'm comfortable with that.

I'm certain that for some renting is the cheaper option and gives its own kind of freedom, and for others buying is the cheaper option. Both are lifestyle decisions. Where you live, when you buy, what you buy, your family situation, your job situation, your personal skills -- all of these have to be factored in.
 
I also won the rent stabilized lottery: 1100 sq ft. 2bed with a 70sq ft balcony in NJ, right across the Hudson from the World Trade Center. The view is gone now but it was there for the first 15 years... When I first moved in 30 years ago, nobody wanted to live here - it was a residential dessert. Now it's a hot new hood where a comparable apartment next door rents for 5-6k while I'm at $1334 with all the utilities included. If I need a bulb in a kitchen changed I call the office and someone comes in and replaces it. Leaky faucet? More often than not I just get a new one installed. Let's not forget about central AC running 24/7. What does electricity cost again? I have no idea... All problems are solved with a phone call and free of charge. Raises are capped at CPI and can only reach certain level which is determined by area median income. I'm not concerned about that. The building is improving since the vacated units are being converted into fully market priced apartments. As a result I get to use the amenities that higher paying tenants expect.

My rent was always lower than the smallest studio apt maintenance fee - if I were to buy one in a comparable neighborhood. Never mind taxes, insurance and interest on mortgage. So buying never made any financial sense. I do not like houses - nor driving, so living in an urban setting is a requirement. I also need to be close to a major airport since I'm traveling for most of the year.

I own two rental properties in Europe and conceivably I could turn one of them into my base but for as long as I appreciate being so close to NY (and I do take advantage of it) I'm staying where I am. For life? Why not...:cool:
 
wildsun said:
I prefer the "freedom" of owning.

If I own I can do anything I want with the house, and I've done some level of renovation to every house that I've owned. Its a way to make it feel more like a "home" suited to my needs & preferences. I've got some maintenance & construction skills out of my past and I'd rather rely on myself than on someone else. I know how to buy a house that is almost certain to appreciate, and I've always done well when I sold a house.

I'm sure many would disagree. And I've often wondered about the same question that OP asked.

For me, its not about the money - I figure I will always have "enough" money. But more money is nice too, and half of my net worth is in real estate. I'm comfortable with that.

I'm certain that for some renting is the cheaper option and gives its own kind of freedom, and for others buying is the cheaper option. Both are lifestyle decisions. Where you live, when you buy, what you buy, your family situation, your job situation, your personal skills -- all of these have to be factored in.
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To me it is about the money. I don’t like labor work. Most Millennials and Gen-Z are not into this kind of stuff that older generations are.
 
I in essence live for free in my home. The total of my mortgage, taxes, insurance and maintenance are less than the income I earn from the money I would use to pay off the house. In addition the house is appreciating so I am making money there too.
 
COcheesehead said:
I in essence live for free in my home. The total of my mortgage, taxes, insurance and maintenance are less than the income I earn from the money I would use to pay off the house.
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Yup. We pay $1400/mo for a 2200 sq ft house in a gated development. Sure helps that I kept refinancing and ended up with a 2.5% mortgage. And that as senior citizens our RE tax is frozen.

Savings account are paying about 5% interest right now. 5 year CDs are 5.6%. 5 year Treasuries are 4.25%. Heck, 30 year Treasuries are 4.1%. 20 year Treasury Zeros are 4.5%, so for the remaining term of our mortgage we are clearing 2%.

Not to mention the S&P 500 is up 19% YTD.


In addition the house is appreciating so I am making money there too.
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We don't even care about that. The kids will see that when we finally croak.
 
tenant13 said:
I also won the rent stabilized lottery: 1100 sq ft. 2bed with a 70sq ft balcony in NJ, right across the Hudson from the World Trade Center. The view is gone now but it was there for the first 15 years... When I first moved in 30 years ago, nobody wanted to live here - it was a residential dessert. Now it's a hot new hood where a comparable apartment next door rents for 5-6k while I'm at $1334 with all the utilities included. If I need a bulb in a kitchen changed I call the office and someone comes in and replaces it. Leaky faucet? More often than not I just get a new one installed. Let's not forget about central AC running 24/7. What does electricity cost again? I have no idea... All problems are solved with a phone call and free of charge. Raises are capped at CPI and can only reach certain level which is determined by area median income. I'm not concerned about that. The building is improving since the vacated units are being converted into fully market priced apartments. As a result I get to use the amenities that higher paying tenants expect.
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You get a deal only because someone passed an unfair law that benefits you at someone else's expense.

I imagine if it was the other way around, instead of bragging you'd be irate.
 
tenant13 said:
I also won the rent stabilized lottery: 1100 sq ft. 2bed with a 70sq ft balcony in NJ, right across the Hudson from the World Trade Center. The view is gone now but it was there for the first 15 years... When I first moved in 30 years ago, nobody wanted to live here - it was a residential dessert. Now it's a hot new hood where a comparable apartment next door rents for 5-6k while I'm at $1334 with all the utilities included. If I need a bulb in a kitchen changed I call the office and someone comes in and replaces it. Leaky faucet? More often than not I just get a new one installed. Let's not forget about central AC running 24/7. What does electricity cost again? I have no idea... All problems are solved with a phone call and free of charge. Raises are capped at CPI and can only reach certain level which is determined by area median income. I'm not concerned about that. The building is improving since the vacated units are being converted into fully market priced apartments. As a result I get to use the amenities that higher paying tenants expect.

My rent was always lower than the smallest studio apt maintenance fee - if I were to buy one in a comparable neighborhood. Never mind taxes, insurance and interest on mortgage. So buying never made any financial sense. I do not like houses - nor driving, so living in an urban setting is a requirement. I also need to be close to a major airport since I'm traveling for most of the year.

I own two rental properties in Europe and conceivably I could turn one of them into my base but for as long as I appreciate being so close to NY (and I do take advantage of it) I'm staying where I am. For life? Why not...:cool:
Click to expand...

Shhhhh. Don’t let the neighbors know your rent price.
 
livingalmostlarge said:
Has anyone here rented for life and never bought? It's applied to people who rented and then fired then bought?

Did you do the cost calculation? Did you figure out if it was cheaper always renting? Anyone who fired or got close probably rans a ton of numbers for everything. They also tracked what they spent on rent and what the house/condo they rented would have gone for in 2000 and then gone for in 2020.

I'm curious if anyone rented forever and did the calculation on how much more they saved renting? And if they saved the difference between a mortgage and rent? And if they invested the down payment and how the numbers all worked out after say 30 years.

And if you rented, did you ever calculate what the appreciation over the time you were renting there what happened?
Click to expand...


That calculation would be very difficult, it seems to me. Nobody would tell you the market value of a unit being offered to you as a rental, would they? I suppose you could have hired an appraiser when you first signed the lease, and again when you moved out, but who does that? And the landlord won't typically share with you what his actual costs are each year, will he? Property taxes are public record, but insurance and maintenance are not.


Plus usually the same unit isn't available both ways, so your actual choice at the beginning is between Home A for rent and Home B for sale.
 
COcheesehead said:
I in essence live for free in my home. The total of my mortgage, taxes, insurance and maintenance are less than the income I earn from the money I would use to pay off the house. In addition the house is appreciating so I am making money there too.
Click to expand...

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.
 
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F.I.R.E User said:
They invested heavily in the stock market?
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Very old school people. They were married for 71 years. My aunt worked part time occasionally. She never had a driver's license in her life and knew relatively nothing about their financial situation. My uncle was a manager in a factory during his working years and took care of all the finances. He passed away first at 94. My aunt was 91 at the time and very close with my mother. She asked my mother to come over to her apartment to help her go through her late husband's stuff. They found over $81,000 in cash in various places in the apartment......Sport coat pockets, jacket pockets, old shoe boxes, etc. My aunt had no idea the money was there.

Mike
 
Back to OP's question:

Rent-vs-buy is an age old debate and a question with no clear answer. It is highly personal calculation based on the location and other factors. One of the better calculations I have seen are in this article. You can use the ideas from this article to do your own calculations.

My personal experience about why owning the home is better:
* It forces you to save. Lot of studies show that homeowners have a larger net worth than their renting counter parts. It may be a correlation or a causation. I think it is both.
* The cost of home ownership goes down over time in real dollars. In our area, your ownership monthly cost (mortgage interest+insurance+repairs+HOA) will be lower compared to the rents on the comparable (or even smaller) rental home after 5-10 years.
* You may benefit from positive leverage if your mortgage rate is lower than the appreciation and/or inflation. If there is no leverage today, you may be presented with one when the mortgage rate drops and you can do a refinance.
* Lot of intangible benefits especially if you have family and kids.

And I will end with this:
I am a landlord and I have made truck loads of money at renters expense. If renting was not profitable to the landlords in a long run then you wouldn't have the rental houses/apartments available. Would you now? This point alone should tell you that owning real estate is financially rewarding compared to renting.

PS: Other disclaimers apply for a successful homeownership: You should have a stable job. Lower debt ratio. Financial discipline. Live in the house for a long period. etc.
 
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pjigar said:
And I will end with this:
I am a landlord and I have made truck loads of money at renters expense. If renting was not profitable to the landlords in a long run then you wouldn't have the rental houses/apartments available. Would you now? This point alone should tell you that owning real estate is financially rewarding compared to renting.
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Thank you for admitting this.


As I mentioned, I have lived in a rent stabilized apartment since 1994. My rent increases are based on what the Rent Guidelines Board approves each year for 1 and 2 year leases. Over that 30 year time frame it's averaged out to be 2.5% which I'm fine with.

However , at every yearly hearing cry me a river landlords always claim they "cant make any money" which is obviously complete BS.
 
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Music Lover said:
Some experiences are better or require a house. It's a lifestyle choice.

- You can't sit beside a fire pit with a group of friends if you live in an apartment.
- In many (probably most) areas you can't operate a smoker on the balcony...f you have a balcony.
- My house has a private yard, [-]a sunroom[/-], [-]3 decks[/-], a gazebo, a fire pit, and a fire table.
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All of the above, and
- A workshop
- A shooting range
- An axe throwing range
- An archery range
- A zip line
- A dog park
- A large garden

Just bragging but the point is the same: A home can be 'your' playground.
 
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