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Rent Forever, Don’t Buy A Home

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This is a Devil's Advocate post.

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!

{ 1,074 comments, please add your thoughts now! }

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1,074 Responses to “Rent Forever, Don’t Buy A Home”

  1. Tabby says:

    I own a home now, and I’m still pretty happy about it. I never had any intentions of moving to a new state or city so it seemed like a good plan. I pay much less now (even with taxes and insurance) then I did renting. Plus, I’m building towards something that’s mine. I could pay rent for 30 years and be no further ahead. Now, in 30 years I have some equity. I bought at the low of the market so I’m not too worried about another big drop. Well, you know. Unless the country self destructs or something.

  2. Jon says:

    This is a good point of view but some things have to be considered as well. I live in Honolulu and because its an island,land is limited and scarce, its also a desirable place to live in which makes land more expensive. Yes I am aware of fees you have to pay and it might seem like you are paying more than renting for now but in the long run you are actually saving because of inflation, rent prices changes over time and when inflation occurs rent will go higher, but a mortgage payment for 30 years will always be the same. Also if you have a family or plan to have one its better to own one so you have something to pass down. I think is better to rent when you do not have any children or immediate family.

  3. Larry says:

    This article is correct. Many people forget all the taxes and fix ups they paid for over the years when it comes time to tell you how much they made when they sold their house and property. I read an article many years ago which simply stated “A house is a place to live and not and investment”.

  4. Anonymous says:

    WHY NOT RENT FOREVER WITH SO MANY OPTIONS FOR FABULOUS LIVING SPACES DURING YOUR LIFETIME?

  5. jackgusto says:

    the idea that owning a home is more reasonable or smarter economically is an old wives’ tale. Unless you pay cash at the time of purchase, you don’t “own” anything. don’t believe me; miss about 6 payments and see if you still own. there is a mindset that people who rent are throwing their money away. first of all, to each his own. whatever works for your personal finance situation is the best business practice. look at your staying power over the past decade; if you’ve not lived at any one residence for longer than 24 months, you probably don’t need to purchase a home. if you’re living in the same town you grew up in and have a steady job and are content, contact a lender and a realtor and get the ball rolling. but be prepared to get a Lowe’s card and spend your Saturdays dicking with your house when us renters are laying in bed watching cartoons….

    • Happy renter says:

      Coming from a once owner to now renting…keep learning and researching what fits best with your lifestyle. Remember, not even that cool realtor will back you up when that bank or lender comes after you when you are behind on your mortgage. You make sure you have more than $20,000 in emergency fund in case you get laid-off your job. Well, you know what I mean? Unless you are a strong writer, own lot of assets then you are well on your way to owning that house. If you are having a hard time putting away $500 to $1000 in savings a month, I wouldn’t recommended. Don’t take my word for it, only those who went through hell with mortgage company to try and save their homes would know where I’m coming from. Keep reading and researching on what the worst that could happen after fighting hard to save your home. No one will be on your side except you.

    • ace carolla says:

      poignant and comedic.

      *like!

  6. Neil says:

    Nothing is as good as having a paid off home when you are retired.

    • Bill Globalist says:

      Then buy one with cash when you retire. In the cities with the highest incomes, such as Los Angeles, it’s far cheaper to rent than to own. Same with New York City. Work your career in those cities, renting cheaper than buying, and with top incomes, then when you retire you buy with cash where you want to live. You will have saved up far more money than one who bought a house young and paid PITI and maintenance for 30 years – only the interest and principle owed goes away at 30 years. You still have to pay property taxes, insurance, and maintenance beyond those 30 years.

  7. bobby says:

    i was one of those young people that started out renting for about a year and then at age 24 i bought my first home for about $68000 on a temporary income ( what was the bank thinking!!!) and things seemed to been going well, then i got a letter in the mail from insurance company stating they are cancelling me due to curl in roof, from then on it has been hard to get insurance, then the worst thing happened, i lost my job 4 months into my home, got another job 4 months later, so far i have not been able to save $300 a month in savings, when i rented i had a few grand, now that i gotta put a new roof on ( $7500) and a new heating system (7000) if asked what should i have done, i would say rent a few years, don’t rush out and buy if you can’t afford maint.jobs here only pay about $9.00/HR and are mostly Temp, no good to buy on Temp!! bobby, monticello,IN

    • Dianne says:

      Hi Bobby don’t know what size your home is but it is time to start looking for a room mate, one who can help with repairs. There are some agencies who can help you find a good roomy. Make sure you get things in writing before you move them in. Quite a few people are renting out space in their homes to make ends meet. Again do your research before you let some one in your home. Also keep in mind their are quite a few programs for home owners in financial distress. Start looking around for State recommended programs. I have a friend who was laid off and has only been able to find part time jobs. He has not been able to pay his mortgage in over a year. He is doing a lot a paper work back in forth to explain his financial situation. Several companies have been working with him. On the other hand another friend lost her job and lived in a apt. She fell behind and was out in 90 days. So by all means don’t give up your house.

      God Bless

      Dianne

    • kesh says:

      I’m from my mother-n-law me and her son been living togather for 7 yrs and now we renting a house that is now house in her well. she want u to fix it and pay rent because she don’t have the money to fix it. I told her we not fixing the house and paying rent and say if we don’t pay we have to live is that how it fills to own a house.

      • AMARANTHE says:

        Kesh,

        As far as I am concerned, you are an illiterate, deadbeat user.

        You and your husband have taken advantage of your mother-in-law’s kindness for the past 7 years. I think it is disgusting that you have been leeching off of her for all this time, taking her for whatever you can get, (including rent-free living, no homeowner’s insurance, taxes, or anything else!) And I am reasonably sure that isn’t all you have taken from her!

        Now, in HER hour of need, when she came to you asking you to begin to actually pay rent (like adults), and to pay for a home repar that she cannot afford, you STILL refuse to do so! So, she has warned you that you will be kicked out! Well, I say more power to her! She should have done this long ago!

        Then, you have the unmitigated gall to ask if this is what home ownership is like! Well, let me have the honor ot answer this one. He!! no! To be perfectly honest, you won’t ever have to worry about what it is like to own b/c no bank would ever loan money to someone as illiterate as you who is obviously a using, self-serving loser!

        • Mike says:

          LOL Amaranthe, I read Kesh and thought the very same thing,, Not much to hope for as far as quality employment with such horrendous attitude, lack of compassion and expression, I am forever in angst when “Trying” to read way too many reader responses and even writers of some articles of whatever topic that written expression, vocabulary and sentence structure is so so illiterate and practically undecipherable these days, Maddening! Kesh needs to get some basic skills in expressing herself as an educated responsible adult and I agree her and boyfriend? The homeowners own son should be there for the aged struggling, in need Mother, She is providing a roof and a bed and safe? shelter,, They OWE her the consideration of compassion and assistance at the very least, Including paying rent and assisting in any way they can to make this kind woman’s life more rewarding,, Shameful, You are spot on in you remarks about everything, Well put…You sound like the very people this country needs more of, I am just certain if you have children that they are responsible educated hardworking young folks, Congratulations on a job well done if that is the case,, As for myself, I was led here for the same question, Buy home or rent, I am a 57 yr old 30 yr G.M. retiree, with no debt’s cept a car payment and utilities,a G.M. pension plus a Social Security total and permanent disability income and I am convinced by my research that rent/lease? a home in a 55+ community is the way to go for myself, I get to keep the $20,0000? 20% or so of my net worth, that a home down payment would require, I can keep that and travel, I would have none of the hassles that others above describe even if I lived long enough to see any equity, It would take 20 yrs or so before I saw even a dollar of that, I’m 57 now, So that isn’t a good bet.. Plus as stated above, Even if the home was paid free and clear it isn’t worth on todays market close to what it was worth 10? 15? yrs ago, and you still have Taxes, Maint, Ins Yard work etc etc, Rent increases if and when they happen in the big pic I bet don’t equal the potential cost of roof’s and general maintenance upkeep and who knows what else over the years Plus there’s yard work which is OK if ya like that kida stuff but I have mowed, shoveled, raked and trimmed enough vegetation for decades, Enough of that, Now if whatever hits the ground and it’s naturally occurring then that’s where it’s going to stay…:) I just want to vegetate myself now, and see some world….:). I am a very blessed Man, I put my time in, I paid my dues, Uh Uh, I had all of thathome ownership for 30 yrs,I know houses are a great buy now but all indications are that the days of investment equity in a home are long gone, The market will probably improve, but nothing like the days of yore, But if you are, say, under 30 then yea you might be better off buying, As stated above, To each his/her own, And God help the poor souls who got taken by reverse mortgages or took loans on their equity, dreadful situation the banks have people in, Not to mention the criminal, IMO, credit card industry, And what humongous amount of debt far too many folks have themselves stuck with,, Yikes! my heart just aches for those unfortunates,,, My son’s are grown and have responsible job’s, College degrees, and I am a healthy 57 yr old single man now, You’re advice is very sound,, Hear that Kesh? You and boyfriend, Get off your a$$”$ and get some A$$et$!!! Oh and some empathy wouldn’t hurt ya either, We all create our own realities and the what goes around comes around, Bla Bla Bla..

        • Mike says:

          Oh AMARANTHE!!! Bravo! So very well said

    • AMARANTHE says:

      Bobby,

      I would read online about how repair the roof or put the new one on yourself. Also, if you or your wife have a skill that can be bartered for a new roof, consider trying that. (Even if you can’t barter the whole price, you may still be able to barter a portion of it.)

      (Some examples of bartering skills include but aren’t limited to the following: sewing, tailoring, painting, computer work, fencing, tutoring a child in a school subject,or teaching an adult or child to play a musical instrument,

      house cleaning, child care, produce from a garden or canned food from a garden, homemade meals, elder care sitting service or driving someone elderly to appointment the grocery or other places when they can no longer drive, professioal services such as dentistry, chiropathic care, massage, hair cuts, standing invitation to use your pool, etc.

      If nothing else, just hire one worker (who knows what he is doing), and tell him that you have never done this before, but would like him to show you how to roof.) It isn’t rocket science, and with your help and only one pro roofing, you would save a bundle.(You would need to buy a roofing nail gun for about $225, but after it’s all over, you would still have the nail gun to make future repairs. Plus, it would seriously pay for itself, accourding to my husband, who as a contractor, framer, and roofer has roofed many houses.)

      Also, call EVERY, SINGLE roofer in the phone book who gives free estimates. Then, try to negotiate with all of them. (Due to the decline in new construction, most sub-contractors, such as roofers, don’t have enough work). So, I betcha that most would be willing to negotiate and also train you for a much, much lower price!

      Also, ask them to bid the materials and labor separately. Then, after you hire them, YOU go and buy the materials. Call and price the materials at 3-5 different places including Lumber Yards, Home Depot, Lowes, etc. (Based on my personal experiance,(since my husband contrats and builds houses as a side job) it will usually be cheaper thru a lumber yard.)(But, even if you must borrow a friend’s truck to do so, you ABSOLUTELY MUST go get the materials yourself! That way they cannot charge you for something not used on your job.) I hate to say this, but there are alot of dishonest people out there out to cheat people! One common trick is to buy a lot of extra materials and show the reciept to the homeowner, then take the extras back and get the cash back!

      I hope these tips will help you to get a much,much lower price.

      Best of luck!

      Sincerely,
      Amaranthe

    • Justin says:

      Don’t blame the bank…blame yourself for not being responsible.

  8. ED says:

    I was a renter for about 20 years on two different addresses. The last apartment I rented, I lived in it for 13 of those years. Not apartment hopping like most people. Two years ago I purchased a home so I know the difference too well.

    I saw my rent increase by a lot in the time I was a tenant. For some reason people keep saying that renting is between 700 to 900 dollars a month (maybe a very “affordable” studio) and that utilities are always included. Some people even claim that you can just pick up and leave (they forget they had signed a lease which kind of makes you responsible for that rent for the period of that contract or as long as that apartment is vacant after you leave. is up to the lease). You are also responsible for any damage you cause to that apartment in the time you lived there. Some people have even claimed that their rent has gone down (I rented for 20 years, my rent never went down) I payed about 1550.00 a month in a not so nice neighborhood. Friends of my who live in better areas pay way more than I did.

    I think the problem is most people see buying a home as a “Get rich quick skim” A home is a place to live (not stocks) you have to do the math and buy what you can afford. Don’t buy a 900K mansion if you don’t have the money. Same way as a renter. You should not get into a luxury rental if you cannot afford it. Just like a home, If you miss payments you’ll be out on the street. Landlords now do credit check before they accept you as a tenant. As with a home or an apartment you must meet your financial responsibilities.

    In my case, I was able to get a house for about 150K with all the fees and taxes I only pay about 1254.00 a month which works great with my income. I live in a divided 2 family home. I rent one side of the house to a tenant who pays me about 1150.00 a month. which I just put away. I pay my bills with the money I make from my day job. In the past two year my repairing costs have been less than 2k on fixes for my tenant. Which is nothing considering that in the past 15 months he had put about 17k in my pockets (in 7 more month is 50 bucks a month more for 1 more year or 100 a month for 2 more years when he renews his lease with me).

    So far I favor buying over renting . Today about two years after I moved my new lease would’ve been 1705.00 going up every two years. My fees will have no to little increases in the future. With inflation, many of my friends will pay more and more on rent.

    I’m not saying owning is better than renting (Its was for me). I think people should do A LOT of research and math before they move into an apartment or buy a home. It can come back and bite you (you know where). Also is very important to understand that wether you rent or buy you have to take responsibility for what ever you get yourself into.

  9. Laroque says:

    Ok so lets look at a home with a 30 year mortgage. lets say the home is $350,000.00 and you put 5% down. You mortgage $341,000.00 including the factored in PMI. With a 4.25% interest rate. If you only pay on schedule over the entire 30 years your total cost will be $588,852.05. Now lets look at renting something similar payments around $1600 a month which is about what your mortgage payments will be.You will have spent $576,000 with nothing to show for it but “flexibility”. With the home You’ll be at least have a net worth of $350,000, equity in case soemthing happens, the possibility of either renting your house to buy your next house, or waiting until closer to retirement and selling it and then paying rent if you want to move around alot. Either way the longer you rent and the longer it takes you to make up your mind about where you want to live, the more money you’re losing. When you rent you tend to spend alot of money going out more often, you buy all the other things that a no commitment lifestyle promotes and all in all you’ll have wasted alot of money. Yes it might be a smart choice to wait a couple of years until you decide what job you are going to be stuck in, but there is always resale possibility. And if you absolutely have to move you can probably rent out your house while you are paying mortgage on it and go pay rent somewhere yourself if you’re going to make that much more money with a new job opportunity.

  10. JimBeam says:

    Brilliant advice for 2007! LOL

  11. Matt says:

    Jim, I like the points you made about renting a lot and I think they are superb. However if there is ever a time to buy isn’t it now, or the last few years. With the down market prices are almost certainly going up in the near future which makes it a smart investment. Also because of the down market sellers are desperate to sell, one of my friends just bought a house with the seller paying all $20,000 of the closing costs.

  12. Tom says:

    Boy, I’m sure the renters side of the argument has gained a significant amount of momentum over the past few years. For people in the US I think one consideration is how you see the US Currency holding up and how valuable your asset will be over the next 20-30 years. We saw how easy it was for people from Europe to go on shopping sprees in the US when the Euro was in the 1.50′s. I think over the long term our currency will be OK and that real estate will prove be to a great hedge against inflation.

  13. mrs w gundersen says:

    i get very little ssi. and i would give my right arm for a house of my own for under 20.000.00here is my name and address. wandagundersen 942 cable road waleska ga 30183. 7705454266 cell phone number

  14. Ernie says:

    I just paid off my 3000 square foot home (in beautiful southern calif) with a pool and view. My mortgage was 2,000 a month. I’m 59 years old. The rents in our area
    are $3,600 pr month for same type of house. My wife and I still LOVE our
    home after 20 years here.
    Hopefully we live 20 more years, I’m looking forward to not having to worry about paying rent, or having a landlord raise the rent.
    Sure I have to pay taxes etc, but it’s worth it.
    Peace of Mind and security contribute to happiness. Who care’s about
    a life of spread sheets and profit from investing. You can’t live or enjoy an investment, unless your’e the type who loves going on-line 5 times a day to see what your portfolio is doing!
    I feel that everytime someone writes an article in favor of renting vs. owning, they have not yet achieved ownership and its joy. They are only looking at life a spread sheet of numbers with no human value, just paper wealth masturbation. It’s OK to, want to move around and be free etc.
    With the money I don’t have to pay for rent, or mortgage, I can go visit anywhere I want, and still come home to a place I love, and is paid for.
    I know I come off as snide etc.I’m just trying to say there are joys and finanicial upside, once the house is paid off.

  15. Kelly says:

    These observations are accurate and compelling reasons to rent, however the reality is that the wealthiest folks are continuing to buy up inexpensive properties (the result of the criminal housing bubble burst) and become landlords, which makes renters vulnerable to unregulated rent payments, which have proven to keep increasing even as more and more people are struggling financially. There are risks and benefits on both sides of the rent vs. own equation, and advantages for those who can afford to buy an affordable home that allows them to avoid potential inscrutable behavior on the part of landlords. I’d hate to think that only the wealthy will end up being property owners.

    • jim says:

      The “criminal housing bubble”?? Exactly what was criminal about the housing bubble?

      You say “unregulated rent payments”?? Yes, rent will increase with inflation just like all the other commodities, because housing is a commodity. That is one of the reasons why if you want to get ahead in life, you really have to buy a house. You blame rent increases on the landlords; do you blame the price of milk increases on the farmers?

      It sounds like you were born and raised in the old Soviet Union, and you wish it hadn’t fallen.

  16. The Master says:

    We are all renters because we are going to die and nothing goes with you when you die.

    • Machati says:

      The Master-you are right -we are all renting on this planet/ the last destination is Forest Lawn with a view.

  17. Bibiana says:

    Renting is my option because I am neither handy nor well off enough to pay someone to do repairs. Also, being disabled I do better with less space to clean. I like my apartment. I keep it neat and pretty and treat it as home.

  18. Bibiana says:

    To each his own, that’s what I say. As for myself, because of health issues that limit my energy level and keep me from working full-time, I prefer to rent. I could not keep a large space clean, and I do not have the ability or the money for the repairs a home often requires.I am content in my small apartment, which I keep clean, pretty and cozy for myself, my daughter, and my kitties.And I feel very much at home!

  19. k hall says:

    historic low mortgages rates didn’t play into your argument on rent vs buy.

  20. Preston Zuccarelli says:

    Thanks for these guidelines. One thing I should also believe is the fact that credit cards offering a 0% interest rate often bait consumers along with zero interest rate, instant authorization and easy over-the-internet balance transfers, nevertheless beware of the most recognized factor that may void your own 0% easy streets annual percentage rate and throw one out into the very poor house fast.


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