Learning, Sharing, and Teaching > Ask a Mustachian

What's wrong with renting forever?: Stigma of non-home ownership

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okits:
In Canada the ownership rate is about 70%, so DH and I are really bucking the trend by planning to rent indefinitely.

There is definitely a stigma to being a renter, like you aren't grown up or successful yet.  I anticipate that my toddler will ask questions when she's older (things that may sting a little, like "why don't we have a real home?"), but if I'm going to teach her financial literacy and critical thinking, evaluating situations against conventional wisdom needs to happen.

You can show off your hardwood floors and granite countertops and have friends and family ooh and aah over them.  You can publicly beam about your pride of ownership.  Without really pissing some people off (at the very least), you cannot show off your fat investment portfolio and gush about your pride of ownership of that. Socially very unacceptable and you will receive very little oohing and aahing.

There's a judgment that you're not doing right by your kids if you don't have a backyard for them and one bedroom per kidlet. The attitude is so entrenched it is ridiculous.

I do care, to some extent, what people think of us. For most, an easily-understood explanation (great deal on rent, DH's job may require we relocate, houses are so expensive) is good enough. If I sense someone is open to the financial argument I might discuss rent vs. own, or excessive risk in concentrating a huge chunk of our NW in one illiquid asset.  It's a screening process for me, too.  If someone thinks less of us for being renters after they learn we've made a thoughtful decision to do so, I've learned something about that person's values or decision-making capacity. 

Keeping shelter costs under control has been a significant factor in our ability to build a stash.  We've been through some stressful life events where 1) having that stash was a big comfort, and 2) not having the stress of paying a mortgage or maintenance on an owned property was a relief (we could not own a similar dwelling for anything near the deal we get on rent.  Locally, real estate prices have detached from rents so it's not an uncommon scenario.)

markbike528CBX:
For 22 years of my adult (real job) life, I rented.
Early, because I despised mowing the lawn ect.
Later,because I had a job that had 1day to one week notice for out of town work that could be up to two months away from home.
As a renter, I could have my mom stop by on a bi-weekly basis to water plants and check the mail.
no hassle, nice place with a pool, central location.

Now married, a house has its strong points, but upkeep/upgrades take their toll.
mortgage ~= rent, which was a strong house buying push.

All the people who insist that " you must buy a house mostly want you to join in their misery.

clifp:
In general, I think if you are interested in saving money you are better off buying than renting. 

Look at this way. Most landlords make a profit renting.  Who pays for the profit the landlords make? The renters. So why give the landlords profits when you can make it yourself?

Secondly, there are numerous tax breaks that the government provides to homeowners that long term renters miss out on.  The most obvious is, of course, the deductibility of interest and property taxes.  There is also a variety of other deductions that are available to homeowners but not renters. So for instance I've reduced the cost of electricity (and gasoline since I own an electric vehicle) to about $30/month, the cost of the system was subsidized by the state, and federal governments.

Perhaps most importantly is the $500K, capital gains exclusion.  You got the kids out of the house, and now you can downsize, you can exclude $500K in capital gains, that's a pretty big tax saving.  It is virtually impossible to find anything similar in size or scope outside of being a homeowner.

Now that isn't to say that renting is always the right thing, because it isn't.  Especially if you have career where you can benefit for being more mobile.  But if you think are going to be in a place for at least 5-10 years with the possibility of being there for 20+ I think you are better off buying.

markbrynn:

--- Quote ---The only time renters don't pay the landlord's real estate taxes is when the property is vacant.
--- End quote ---
This isn't true. Although people like to think so, the rent charged is set by the rental market, which is more concerned with supply and demand than how much the landlord pays in property taxes. The landlord would like to pass on all costs (and make a profit) to the renters, but that doesn't automatically happen. It is true that the underlying costs of owning property will be somewhat related to the rental prices, but this is far from an absolute/direct link.


--- Quote ---Look at this way. Most landlords make a profit renting.
--- End quote ---
I also don't know if this is true. I'm sure there are plenty of landlords who make a profit, but have also heard of plenty who don't (if someone has statistics on this, I would be very interested). People are quite bad at calculating the full cost of ownership (the many, many costs; time put in to manage and maintain; risk of very big expenses; risk of eventual sales price being lower than expected). I'm not saying that people don't make money as landlords (there are examples on these forums), but the idea that renting is bad because all/most landlords are making money is bad advice.

Specific situations where landlord could be making a profit and it's still better to be renting:
1. You don't have time/skill/desire to fix up your own house and you would end up paying someone to do all your maintenance. Landlord does his own, so is better off.

2. You move cities, countries from time to time for a better job or life situation. Landlords make profit off of you, but you spend far less money than buying and selling.

3. Housing market is overpriced/hot/high. For you to buy into that market and possibly exit at a lower level in the future could be disastrous. Landlord is profiting short term (and maybe holds on long enough to sell at the right time), but has a large risk of falling prices in the future.

I'm not against house ownership, but I don't like to see blanket statements (usually somewhat emotionally charged statements) that tell people that renting is a always a bad idea.

patrickza:
Owning even my own property felt like work to me, at one stage I had my property, and two rentals. 'Now I'm a happy renter. Strangely my two rentals felt like less work than my own home!

Never again will I own bricks and mortar and pay the government for the privilege of doing so. Closest I'll come to again is a boat or an RV I live in.

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