If you ever want to start a fight on the internet randomly ask the public audience, “is it better to rent or buy?” then sit back and enjoy yourself. Things will escalate quickly. At the end of the day it’s all down to personal preference and financial situation. If you want to look for houses for rent in clovis ca or buy a house in New York then go for it!
Typically, both parties are right for the wrong reasons, but the internet isn’t designed to entertain two correct opinions. As far as the internet is concerned, only one side can ever be right about any one thing at any given time. We interviewed two experts from the respective rent versus buy corners of the internet. Here’s what they had to say.
- In this corner, we have a self-taught real estate expert who amassed a collection of eight homes by age 34 and secured the elusive financial independence (PB85: Afford Anything ft. Paula Pant)
- In this corner, we have a Wealth Adviser who estimated that over the course of a 30-year mortgage a typical homeowner might expect to net a whopping profit of $789.50 (PB48: Renting vs. Buying with Kirk Chisholm)
Renting is throwing money away … Right?
Renting is no more justification to explain throwing your money away than eating out when you are hungry is throwing money away. It is simply a personal choice. Whether you rent or buy, you still need to secure a roof over your head. Given that this is one of the more basic needs of Maslow’s hierarchy, I hope we can at least agree on that point. However, the blanket statement that “renting is throwing money away” is about as logical as the evidence used to explain aliens built the pyramids.
But, everyone is entitled to their own opinions.
To me, the better framing of the debate is not whether renting or buying is better or worse, it is whether renting or buying is currently the best decision based on your personal finances and where you live in the country. The “rent vs buy” debate in North Dokata isn’t exactly the same financial circumstances as the debate in North Manhattan.
Even if we could all agree that home ownership is the cure to wealth building in America (it’s not), you would still have to pay off your home to gain the full wealth benefit, right? If we agree also that is true, then Houston, we have a problem.
Key Takeaway: You’re not building much equity, especially during the first decade-and-a-half. Most of your mortgage payment
gets“thrown away” on interest, taxes, andinsurance – learn more.
About four in 10 retirees carry a mortgage into retirement. Overall, only one in five Americans ever pay off (or live long enough to pay off) their mortgage. This means while nearly 80 percent of homeowners may refinance, upgrade, or downgrade during their lifetimes, they will never outright own their home. In reality, the closest to “homeownership” most homeowners will ever realize is the claim they have to the paper their home loan is printed on.
What you don’t know about renting vs buying can cost you
It may cost ya a little. It may cost ya a lot. But, it’ll cost ya.
There is a great illusion when it comes to real estate. This illusion is that owning your home is an investment. When you own real estate and use it to generate monthly income… it is an investment. When you buy real estate and develop it to sell for a profit… it is an investment. When you buy real estate to live in… It is not an investment. It is a personal expense. – learn more.
Most blind followers for real estate advocacy are:
- homeowners themselves; or
- real-estate agents.
There’s nothing wrong with either of these fine people, of course. But, if I already “own” a home, or my job is to sell homes, then I’m probably a little biased towards convincing anyone that will listen to my rants that my decision or, quite literally, my job is justified. It would be strange if someone whose paychecks depend on selling homes admitted that buying a home is not the universally best financial decision to make in all circumstances. Lots of money can be made by people like me and we buy houses Sacramento (who buy houses from people looking to sell quickly), as long as we make the right investments.
Either all staunch homeowner-advocates are psychic, or they are presumptuous in their assumptions. In most of their debates, they will only entertain the idea that the irresponsible rental-owner will do nothing responsible with their discretionary income. Responsibility–as obviously demonstrated by taking on a multi-hundred thousand dollar asset you cannot afford without a bank loan–is limited to homeowners. Everyone knows that.
The most popular refrain is that homeowners build equity in a home, and renters just throw money away. Renters also have to buy Lemonade renters insurance too. This is like arguing that because alcoholics exist, no one can control their liquor. Further, the pro-homeowner debate conveniently, if not frequently (all the time), ignores the sunk cost of the recommended 20-percent down payment on a home.
If you are a homeowner that chose not to make a downpayment, which is itself an interesting investment decision, then you are still responsible for the cost of any upkeep and maintenance — an obligation most renters don’t have to account for. Enough talk, what does this mean for the average person’s bank account?
Over a period of 30 years, assuming you do no renovations and don’t have a HOA fee, living in a home you bought would net you $1,430. Yes, you read that correctly… $1,430 in gains over 30 years on your $125,000. Wow. Actually, if you discount the value of your $1,430 due to inflation, your $1,430 in 30 years from now would only be worth $789.50 in today’s dollars. – What is the True Cost of Owning a Home?
Hopefully, you’re at least willing to entertain the idea there are as many arguments for purchasing a home as there are for continuing to rent. Admitting this, however, moves you no closer to figuring out whether renting or buying is the best financial decision for you personally. The latter requires the consideration of your own personal finances, living arrangement preferences, and the city where you plan to buy a home —
How to Decide Whether It’s Better For You to Rent or Buy
Like with all #AskPB questions, we did the research for you. Here are our favorite tools for deciding when it’s smarter to rent or buy in your city.
- Smart Asset Rent vs. Buy Calculator – “Determining whether to buy or rent your home involves a complex decision-making process. The SmartAsset rent vs. buy calculator helps you see when you’ll reach your break-even point and integrates some of the following questions to help you make an informed choice:
- How long do you plan on staying in an area?
- The most important factor to consider when making this buy or rent decision is how long you plan to stay in your home. If you’ll only be in town a year, renting will almost always be your best choice
- How much flexibility do you enjoy?
- Are you prepared for the responsibility of homeownership?”
- How long do you plan on staying in an area?
- The New York Times – Is It Better to Rent or Buy? – “The choice between buying a home and renting one is among the biggest financial decisions that many adults make. But the costs of buying are more varied and complicated than for
renting, making it hard to tell which is a better deal. To help you answer this question, our calculator takes the most important costs associated with buying a house and computes the equivalent monthly rent.”
So, internet…is it better to rent or buy?
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