It’s Ok to Rent

Realtors do a disservice by denigrating renting. Yes, homeownership can be a source of significant wealth. There are copious studies and data out there that back this up. I’ve had agents talk about me, and never to me that I shouldn’t say that renting can be good. My role is to advise my clients – buyers, sellers, and even renters (even though there is no compensation for advising people to rent, or for the very rare occasion that I point someone to a rental). Sometimes that advice is to buy, sometimes to sell, and sometimes to hold.

That said, sometimes renting makes a lot of sense.

  • If you can’t afford to buy. (not saying that renting is less expensive, but sometimes qualifying for a loan is near impossible, even if renting is more expensive)
  • If you think you’ll be in that place for less than five years.
  • If you don’t have life/job stability that leads you to believe you’ll be in that place for at least five years.
  • If you can do better in the market – whether stock, or high yield savings – and your home is your investment
  • If you don’t have the disposable income to deal with the costs of homeownership — and the costs can be big and often unexpected.
  • And sometimes, the math for renting is better than the math for buying a home.

To help people understand the trade-offs, The Times has just relaunched its popular rent-versus-buy calculator. Even if you already own your home — or are a committed renter — you may enjoy playing with the calculator and learning a few things about the real estate market. I did.

The calculator, which The Times’s Upshot section built, has been updated in several important ways, including to take into account the 2017 tax law that affected the mortgage-interest deduction.

Ultimately, the calculator can’t tell you whether you should rent or buy. That decision depends on the future paths of home prices and rents, which are unknowable. It also depends on your life stage — a factor that too many people fail to consider when making this decision. If you know you will move again a few years from now, for instance, buying is almost certainly a mistake.

Homeownership is good, too

Owning a home, and staying in that home, can give you agency over your life. And the opportunity to create wealth and generational wealth.

From 2014

Every home buying experience is a journey; some journeys are longer than others, some are terrifyingly short. This note is the type of reaffirmation that is needed from time to time. Buying a home can be a great (bad or good) financial investment, but above all, buying a home is an investment in one’s self and one’s family:

“Amidst the clutter of a fresh move, boxes strewn everywhere, disorganization, life going on, cakes to make…there is a peace in me, a calm, that cannot be shaken. This house became our home the moment we stepped inside. We willed it to happen. Owning a home has lifted a weight off of our shoulders that was ever present in our subconscious. The weight and worry of never knowing what your landlord is thinking, of ever being asked to leave a house that you have made into a home, being outbid on a rental, never being able to really make the house your own, paying someone else’s mortgage with nothing to show for it in the end, these are things I hope I never have to think about again.”

This morning, I saw the husband of that note-writer driving past us as we sat having coffee after our morning ride, and I’ve seen him walking with his daughter some early mornings. Homeownership allowed them to choose to stay and live.

From 2005.*

Seven Harsh Truths About Real Estate

Don’t want your housing foray to end in tears? My advice: Never forget these seven harsh truths.

1. A house is an undiversified bet on a single piece of property
2. Real estate doesn’t always go up
3. Leverage bites when you get it wrong
4. A house is a long-term investment
5. The big money is in the rent
6. Home improvements aren’t an investment
7. Mortgage debt has to be repaid

Most of this is pure common sense. However, those whose expectations are out of sorts may be in for a surprise one day. Soon.

*The above link goes to the WSJ, but they have long-since killed the original link and story

(Visited 22 times, 1 visits today)