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Rent Forever, Don’t Buy A Home
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With the new year comes the inaugural post for my new series, the Devil’s Advocate posts, where I try to argue the other side of common sense personal finance advice (read the Devil’s Advocate series introduction post). This post will tackle one of the cornerstones of well-accepted advice: rent as little as possible and buy a home as soon as you can, renting is just like throwing your money away. I think that, like all one-size fits all advice, is completely wrong and here’s why.
Renting Keeps You Flexible
When you rent, you can pick up and move almost whenever you want, with very little penalty (perhaps an early termination fee of some kind); when you own, selling a home can take a very very long time. You lose a lot of flexibility when you “put down your roots” and this is one the biggest reasons why you shouldn’t buy. When you want to look for a new job, you’re restricted to looking in the geographic area around your home. If you ever get a job offer in another area, you have to go through the headache of selling your home before you can take advantage of it. If you rented, you could just end your lease, rent a moving truck (avoid U-Hauls!), and just go.
Someone Else Does The Repairs
When you own your own home, every time something breaks, you have to fix it. Every time something breaks and can’t be repaired, you have to fork over the cash to buy a new one. A new refridgerator costs thousands, a new washer and dryer is on the hot side of a thousand bucks, a new dishwasher can set you back a couple hundred bucks, and that’s just the cheap stuff. When you rent, hopefully your landlord will take care of all of your problems, fixing things that need fixing, replacing things that need replacing, and if you pick your landlord correctly, it’ll be a corporation with deep pockets.
Owning A Home Is More Expensive Than It Looks
With renting, you do throw your money on rent because you never gain ownership of the place you’re renting. However, when you own a home, you also throw your money away on other fees and taxes that never go towards your home ownership. For example, you’ll pay property taxes, homeowners association dues, condominium fees, and any number of other fees associated to the area your home is in – none of which go towards the equity in your home. For example, on my home, I pay about $3,000 in property taxes each year plus $30/month for HOA fees, and $500/yr for a parks and recreation fee.
Renters Insurance Is Much Cheaper
When it comes to home related insurances, renter’s insurance is ridiculously cheaper than homeowners insurance – oftentimes ten times cheaper. I was able to get renter’s insurance when I was renting for as little as $7 each month but now I’m paying for homeowners insurance at $55 each month – a difference of $576 each year.
Home Prices Can Go Down Short-Term
One of the cornerstones of the argument to buy a home is that home prices always go up. I’m not one of those haters who sees the current housing market and is ready to throw falling prices into the faces of all those people who bought a home (I bought one last May, arguable near the peak of the housing prices nationally), but if you treat the housing market like any other market, you’ll recognize that in the long run every market will go up (yay inflation). The problem with that theory is the fact that while you can invest in the long term, reality forces you to live in the short term and in the short term the market can go down. Is this a strong enough argument to rent? Likely not, hence being placed last in the set, but it is a consideration.
Summary
Owning a home is something seriously significant, it’s a life changing decision, unlike investing in a 401K, which would likely not change much in your life right now; and so it’s not one that should be entered into lightly. My honest opinion is that the general rule of “buy a house, stop renting” is probably the most strongly believed but most weakly defensible of the common sense personal finance advice concepts out there.
Please weigh in! If you have an opinion, one way or another, I hope you will share it!
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Amazing how many uninformed people there are here on this board.
But then, look at the U.S. economy, the education system and most people in general, regardless of socio-economic status.
Sadly, I now know why the elite look down on and control so many of you sheeople. I’ve been offered entry into that inner circle and I’m ready to do just that… sell out and sell the lot of you out for my profit.
You’ve proven yourself unworthy of the freedoms once provided you. You need to be controlled.
My husband and i wish we had rented after we sold our home cause when we sold our home we were investing in a new one and we got it and a year later we had to move cause my husband got cancer and we both had to be out of a job in order for me to care for him and unfortunetly we had to sale so we would not get bad credit and it helped us to pay bills and saved for another cheaper home , but then we had to move again cause my mother in law got disabled and my sister in law offered us to stay with her for ten years free to take care of her and she tricked us so itook it to a lwyer and told her I would not do it unless it was thru a lawyer cause she had talked my inlaws into signing the house over to her and she did not give any thing to her brhters when they died she kept the house and so I am glad I got a lawyer now we pay the taxes and the insurace and the upkeep if something goes wrong which we don’t mind ,,,But I was told if I pay the taxes on the house for ten years that it outomaticlly becomes ours ????can someone answer
[...] cycle repeats a long long time. Another example is the Rent Forever, Don’t Buy A Home post. It has 31 subscribers and over 400 comments. It was written in early 2007 and the latest [...]
In a city like Vancouver where the median household income is only about 10% of the median cost of a single family dwelling, ownership is simply not an intelligent choice unless you have a very large amount of cash saved up.
At 26, it will likely be 20 years before I have any kind of money worth putting into a condo and even then that won’t be worth the investment. By the time I save 25k to put as a down payment on a home, the median cost will be close to 1 million dollars and I will die with an unpaid mortgage.
Good times!
totally confused. don’t make a ton of money but have been steadily employed for many years and am being advised to buy in this suffering econonomy.”just throwing your money away” i’m repeatably told. “this is the time to buy” again this is what i’m hearing over and over. i want to make wise decisions for the future but don’t want to get in over my head. i realize the concept of ownership is really false security as you just make the bank your new landlord who is willing and able to evict you at any time. there doesn’t seem to be real security in buying unless you pay in full with no loan at all. i need more advise. i love the fantasy of a home of my own.
There’s no such thing as “the time to buy.” Timing the market rarely works. If you see a property you like, and you plan to live there more than five years, and it’s for sale rather than for rent, buy it. Otherwise, rent.