Sunday, January 19, 2014

Renting does not avoid the problems of owning a house.

Home ownership isn't for everyone. There are pros and cons for both renting and owning a house to meet the needs and wants of different people. Now a lot of people just don't want to own a house for a number of reasons....

"Home prices can collapse. Just look at what happened in 2008!"
Tell me about it I lost 50% of the equity in Town home 1.

"Plus you have all those repairs. New furnace, AC, maintenance and repairs, roofing, siding. Those aren't cheap."
I hear you. I paid $6,000 for a new furnace and AC because I wanted to install an AC unit but my 20 year old furnace couldn't handle it.

"Then you have nosy HOAs that are always wanting to tell you what to do with your house."
A 150 page HOA agreement is no joke. Tons of rules in there with all sorts of fines.

"You are tied down! If you get a job in another city what are you going to do with your house? With rent you can just up and move whenever. Freedom!"
I am certainly tied down with my underwater mortgage no doubt about that.

"Lastly, you have all those hidden costs. Several types of insurance and property taxes. Nope not for me I'll just rent."
It is amazing at how many extra fees are involved with owning a home.

"OMG rent is too high how do you sleep at night charging these rates!"

Now this is not a story about my tenant. I treat them well and they have been pretty quiet.
No this is a story about what I see online. I'm amazed at some of the discussions I see on renting vs home ownership. People seem to have gotten the idea that renting = relaxed existence without a care in the world. That they just pay a little bit because its really just storing some things and a place to sleep. Landlords do nothing according to Rolling Stones magazine.

Here is the thing. All those reasons you do not want to own a home? Someone has to deal with them. They don't magically go away because you do not own the building you sleep in at night. Of course rent is going to be high I am not renting as a charity I want to make profit. That means that my rent will need to be above my costs including all the things you want to avoid while renting.

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.


  1. The tax deductions alone from financing should make owning one's own place a compelling long term investment. Sure there are ongoing maintenance costs, but I struggle to understand the lack of interest in home ownership among folks. You've got finance commitment whose real value declines over time vs a rental obligation that's rising in real terms.

    1. Yeah I don't get the lack of interest either. I understand not being able to afford a house. I can also understand wanting a cheap 1 bedroom apartment to free up money for other things in life.
      I don't get being able to afford it and choosing not too.

  2. Hmm, this is a tough one. Owning a home CAN be the better financial decision IF you are going to stay there for the long haul. There's just so many issues that pop up all the time that people don't think of. Right now, we're renting, and the dryer went one month (was fixed for ~250) and the AC the next month (another ~250). Guess what? I was able to pay the repair guy and just pay the difference for the rent that month.

    We know this is a temporary situation but we're not stuck in one place because we own a home. We have a lot more freedom and we actually save/invest the money that we're not putting into property tax/interest/repairs etc.

    Now, if we lived in a cheaper cost of living area, it might not be true.

    I also don't like the talk of deductions. You can save a few grand in taxes! WOOHOO! Oh wait, you're still growing your interest WELL ABOVE THAT on the loan! Reminds me of saving 5k on a 30k car. You still bought (or financed) a 30k car. You didn't save squat...

    But if you're savvy and buy a property at a good value with an area that is pro-renting, you can definitely make some money. I just don't think that using a house as a forced savings bank is a good thing unless you're terrible with your money.

    1. I rented for a number of years too. It has its advantages and freedom of moving was a huge one for me at that time. And I don't want to say that buying a home is best for everyone. Each family has their own needs and wants. However that is the peace of mind aspect.
      Guess my point was that financially... renting does not avoid problems because the landlord will calculate it and roll in their costs into rent. Its more of a hidden fee renters are paying.

      Thanks for the comment.

    2. That's a great point. I guess it's almost like insurance for the renter where they don't have to worry about the big issues but have to pay a bit more a month for peace of mind.

      Buying a house is a huge decision and I feel like too many Americans take it lightly and assume that they have to do it.

    3. Chris: Insurance.... thats actually a great way of looking at it. Yeah it gives you peace of mind to not have to worry about those things but you will pay for it in $.