Home ownership vs Renting: no brainer?
June 6, 2013
This post about all the reasons a house is a terrible investment (via nicoleandmaggie) made me laugh a little. Most of these ring true as financial reasons my pocketbook doesn’t want a house just yet, even as we’re staring at homes in the area, and starting to save for a new down payment.
If it were a purely financial transaction, I’d really think about six more times about trying to buy a house given the real estate market here in the Bay Area. Everywhere I look: astronomical prices. Apparently this is the “Paradise Tax” according to @isobelcarr, but my heat-loving soul protests.
I grew up renting all our lives and I still think it was a relatively simple way to go considering my family didn’t have steady and at least a bit consistent income. They could manage rent but managing the costs of maintenance and ongoing property taxes probably wasn’t likely. So despite being good friends with people who were firm proponents of real estate as investments, I had trouble picking up that attitude.
I can’t think of my home as an investment, not the home that I live in.
It’s my home and retreat and I’d love it. But I wouldn’t be so enamored as to think we’d ever resell at a high enough price to recoup: down payment, all fees associated with the hunt and the purchase, all the interest (yes, it may be tax deductible but still), any fees associated with refinancing as we’d probably do at least once, and of course, principal payments, insurance.
Given the high unlikelihood that a home would reliably turn a profit, it’s a purchase, in my opinion. Unless it’s to be rented out, in which case you have a whole other set of calculations, but we’re talking about a home you live in for the sake of argument.
The case for buying?
There are certainly good reasons to buy. As a homebody, it’s the place I’d spend the most time. Owning would mean having general, if slightly limited, control over the routine monthly costs when I made the initial financial decisions: down payment, term of loan, interest rate (which is still ultimately determined by the market rate).
Assuming no HOA, I would have generally free rein to do with the house as I pleased, and most importantly, rescue any kind of dog I wanted. None of this stupid breedist crap you get from HOAs which assume that large dogs are dangerous when my experience shows that 80% of the small dogs owned by our neighbors are untrained, unsocialized panic or aggression-driven little craps that go for Doggle’s throat every time.
The case for renting?
There’s definitely something to be said for only being responsible for your own conduct in a rental, and not being responsible for routine or emergency maintenance. Having to fix your own EVERYTHING is expensive and exhausting according to multiple homeowning friends. I’m not greatly familiar with the rules outside of CA but landlords must respond to problems within a reasonable period of time, and if we preferred to handle calling in for services ourselves, our landlords tended to be fine with our deducting the bill from our rent.
A good renting and credit record tends to buy you leniency and cooperation from a hands-off landlord too: they don’t mind accommodating requests that might be slightly out of the ordinary.
Having the flexibility to pack up and move with a month of notice may be important if you’re a university student, a young adult starting out with a new job, an adult looking for new jobs in a tight job market, a retiree who doesn’t like to be tied down to a mortgage or a single place … in other words, the flexibility of renting could be important to just about anyone. There’s something incredibly stressful about, say, getting a new mortgage and then unexpectedly getting laid off in a recession or bad job market, even with the best of emergency funds.
Cost effectiveness of renting v buying: Depending on where you are, the supply of rentals may be low, driving the cost of renting an equivalent home higher. Or it may be high, in which case you have lease incentives, and more expansive options to lure you as a renter. Toss-up.
Your living space: If you have a good and reasonable landlord, you may have relative freedom as to personalizing your home. Or not. Or your landlord may suck at doing repairs in a timely manner. Or you might, as a homeowner.
HOAs: There’s a bunch of stuff I hate about HOAs. It is nice not to have to worry about the long-term maintenance but I’m not sure it’s totally worth the trade-off. And we feel that much more tightly bound to our neighbors. The good ones, the horrible ones, the really horrible ones. It’s a crapshoot whether the people who run for a seat on the board will be competent as well.
Over to you: what are your priorities when it comes to your living arrangements? Are you a renter, buyer, both? (neither…?)
Confession: I always dreamed of buying a house outright with cash. I don’t think that’s going to happen soon.