Author Topic: Is FIREing w/o home-ownership possible?  (Read 1549 times)

rainbow_unicorn

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Is FIREing w/o home-ownership possible?
« on: October 11, 2017, 10:33:02 AM »
Hello! Is anyone else planning to FIRE without home-ownership? Or is that not recommended? Currently, my FIRE estimates includes the cost of rent in Los Angeles. And I am hoping to travel extensively after FIREing.

ketchup

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Re: Is FIREing w/o home-ownership possible?
« Reply #1 on: October 11, 2017, 10:38:43 AM »
Lots do it.  It's very possible.  Rent is just another line item in your budget.  Whether it's recommended or not boils down to your own geography and preferences.

SubmarineNavigator

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Re: Is FIREing w/o home-ownership possible?
« Reply #2 on: October 11, 2017, 10:40:47 AM »
Anything is possible.

My path to FIRE included home-ownership and completely avoiding the stock market. There is no one single path that all must follow.

jlcnuke

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Re: Is FIREing w/o home-ownership possible?
« Reply #3 on: October 11, 2017, 10:49:30 AM »
I'm not planning to, but plenty of people retire without owning a home, early and not.
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RobFIRE

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Re: Is FIREing w/o home-ownership possible?
« Reply #4 on: October 11, 2017, 11:22:19 AM »
Most people would probably own their home at FIRE point, but there's nothing to say you need to as long as your budget/planning covers what you want/need. Rental prices could vary, but so could home maintenance costs, property taxes etc. In some locations it seems it is much more cost effective to rent (comparing returns on invested money minus rent versus house bought and no rent), others better to buy.

I would think in your circumstances if you are budgeting for LA renting you would always have another option of moving to a lower COL area should budget become tighter.

MrThatsDifferent

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Re: Is FIREing w/o home-ownership possible?
« Reply #5 on: October 11, 2017, 12:02:29 PM »
I’m currently planning on never owning, I can’t quite see the purpose or need. My FIRE will look like 10-20 years traveling the world, renting makes sense. I’m toying with the idea of having home bases if I can find places cheap enough in cities I want to spend time in. Might get an investment property, not sure if I want the hassle.

dresden

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Re: Is FIREing w/o home-ownership possible?
« Reply #6 on: October 11, 2017, 12:34:06 PM »
Renting vs buying a 200k paid for house.

200k generates 8k per year income stream @4% withdrawal rate.  So once you factor in taxes, insurance and maintenance add $667/month you are losing in income stream and that is the number to compare to rent. 

Opinions vary I am sure but it shouldn’t impact fI although most fi people have a paid for house as part of the plan.  Rent price market fluctuations could be an issue in some hot markets.

MrMoogle

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Re: Is FIREing w/o home-ownership possible?
« Reply #7 on: October 11, 2017, 01:29:11 PM »
I hope so, I have no desire to own a home again.  This may change as circumstances change though, so I may buy a home after I FIRE, but I won't have one when I FIRE.

rainbow_unicorn

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Re: Is FIREing w/o home-ownership possible?
« Reply #8 on: October 11, 2017, 02:17:09 PM »
Renting vs buying a 200k paid for house.

200k generates 8k per year income stream @4% withdrawal rate.  So once you factor in taxes, insurance and maintenance add $667/month you are losing in income stream and that is the number to compare to rent. 

Opinions vary I am sure but it shouldn’t impact fI although most fi people have a paid for house as part of the plan.  Rent price market fluctuations could be an issue in some hot markets.

Thank you, I had not thought of home-ownership in these terms before.

rainbow_unicorn

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Re: Is FIREing w/o home-ownership possible?
« Reply #9 on: October 11, 2017, 02:18:31 PM »
I hope so, I have no desire to own a home again.  This may change as circumstances change though, so I may buy a home after I FIRE, but I won't have one when I FIRE.

So are your FIRE number assumptions accounting for possible home-ownership? And if so, did that have any impact on when you can FIRE?

rainbow_unicorn

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Re: Is FIREing w/o home-ownership possible?
« Reply #10 on: October 11, 2017, 02:23:55 PM »
Most people would probably own their home at FIRE point, but there's nothing to say you need to as long as your budget/planning covers what you want/need. Rental prices could vary, but so could home maintenance costs, property taxes etc. In some locations it seems it is much more cost effective to rent (comparing returns on invested money minus rent versus house bought and no rent), others better to buy.

I would think in your circumstances if you are budgeting for LA renting you would always have another option of moving to a lower COL area should budget become tighter.

Thanks, I just did the math again and renting is definitely more cost effective for me. When I've told people how much I pay for rent - their responses are usually "I could buy a house for that in *insert LCOL city here*.

MrMoogle

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Re: Is FIREing w/o home-ownership possible?
« Reply #11 on: October 11, 2017, 02:43:47 PM »
I hope so, I have no desire to own a home again.  This may change as circumstances change though, so I may buy a home after I FIRE, but I won't have one when I FIRE.

So are your FIRE number assumptions accounting for possible home-ownership? And if so, did that have any impact on when you can FIRE?
My FIRE number is accounting for a bunch of desires that may not come to fruition.  Home ownership is one that I'm not really accounting for.  Marriage and children are two that I am trying to account for, so I've added 50% to my number.  Having children would be a reason to have a less mobile lifestyle, and home ownership could come into play there.  I can get a ~1800 sqft home here for $150k, and that's less than the savings increase I'm already planning.  There's too many variables, I can't account for everything.

undercover

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Re: Is FIREing w/o home-ownership possible?
« Reply #12 on: October 11, 2017, 05:41:15 PM »
Sure, it's possible, but owning a home is a guaranteed return on your money and a hedge against inflation. I would definitely want a larger cushion on the part of my portfolio reserved for housing if I didn't plan on owning and preferred traveling/moving often.

In general, owning, regardless of where you are, will always be cheaper if you're looking at directly comparable properties. In a HCOL market like LA, you'd probably need to own and stay in the home for much longer than a cheaper city in order for it to be worth it.
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IWannaGo

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Re: Is FIREing w/o home-ownership possible?
« Reply #13 on: October 11, 2017, 05:54:18 PM »
I agree, it's all about perspective.  When I first learned of FIRE'ing...I too saw a lot of examples of peeps with their mortgages paid off, so an overall lower monthly cost on overhead for the monthly nugget they needed because they didn't have a mortgage or rent....but I'm a renter (former homeowner), so what do I need to do?  I posted something about owning a home vs renting - of course the city and market takes a big factor into it, lots of calculators, etc.  If you were to buy, is there a way to have it paid off by the time you're in your 50's or early 60's?  Or fully save to pay cash at some point in time?  Rent or a mortgage is a big monthly expense if you're on a 4% rule, if there is anything you can do to reduce that monthly expense by any amount once you FIRE, the more breathing room you'll have once living off 4%.  There are ways other than actually buying a home - i.e. roommates, but hopefully mature, respectful ones....not something out of Animal House! 

pdxmonkey

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Re: Is FIREing w/o home-ownership possible?
« Reply #14 on: October 11, 2017, 06:00:13 PM »
Yes. It's possible.

Telecaster

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Re: Is FIREing w/o home-ownership possible?
« Reply #15 on: October 11, 2017, 06:49:29 PM »
Hello! Is anyone else planning to FIRE without home-ownership? Or is that not recommended? Currently, my FIRE estimates includes the cost of rent in Los Angeles. And I am hoping to travel extensively after FIREing.

For lots of people, home ownership is a path to wealth because it is essentially a forced savings plan, so it works out well. 

The key to FIRE is minimizing expenses.  Housing is an expense.  Sometimes you can minimize that expense by owning.  Sometimes you can minimize that expense by renting.  Sometimes it isn't clear which is the better option.  But if you are disciplined enough that you don't need a forced savings plan, then you can evaluate each option on its merits. 


rainbow_unicorn

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Re: Is FIREing w/o home-ownership possible?
« Reply #16 on: October 11, 2017, 08:59:18 PM »
Sure, it's possible, but owning a home is a guaranteed return on your money and a hedge against inflation. I would definitely want a larger cushion on the part of my portfolio reserved for housing if I didn't plan on owning and preferred traveling/moving often.

In general, owning, regardless of where you are, will always be cheaper if you're looking at directly comparable properties. In a HCOL market like LA, you'd probably need to own and stay in the home for much longer than a cheaper city in order for it to be worth it.

Thanks, I re-worked my numbers to reflect an additional cushion for living expenses. It pushed my FIRE date some, and that's okay. 

rainbow_unicorn

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Re: Is FIREing w/o home-ownership possible?
« Reply #17 on: October 11, 2017, 09:04:47 PM »
Sure, it's possible, but owning a home is a guaranteed return on your money and a hedge against inflation. I would definitely want a larger cushion on the part of my portfolio reserved for housing if I didn't plan on owning and preferred traveling/moving often.

In general, owning, regardless of where you are, will always be cheaper if you're looking at directly comparable properties. In a HCOL market like LA, you'd probably need to own and stay in the home for much longer than a cheaper city in order for it to be worth it.

Yeah, your response has me thinking about accounting for possible homeownership - likely several years after I FIRE. Mostly, I want to be FI, and maybe travel for long durations before settling into my own home.

EnjoyIt

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Re: Is FIREing w/o home-ownership possible?
« Reply #18 on: October 11, 2017, 09:51:48 PM »
Considering that most people buy larger and more expensive than what they would rent, I would bet renting may come out ahead for those people.  Plus owning a house decreases your freedom to explore the world and to move on a whims notice.  There are huge benefits to renting just like there are huge benefits to owning. Sometimes I wish I still rented especially when all at once the roof springs a leak, the AC is on the fritz, and the water sprinkler system springs a leak charging me hundreds of dollars.  Life was defiantly easier when we rented.

Dicey

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Re: Is FIREing w/o home-ownership possible?
« Reply #19 on: October 11, 2017, 10:33:47 PM »
Renting vs buying a 200k paid for house.

200k generates 8k per year income stream @4% withdrawal rate.  So once you factor in taxes, insurance and maintenance add $667/month you are losing in income stream and that is the number to compare to rent. 

Opinions vary I am sure but it shouldn’t impact fI although most fi people have a paid for house as part of the plan.  Rent price market fluctuations could be an issue in some hot markets.
Yeah, there are lots of $200k houses available in LA <eyeroll>.

However, many parts of LA have rent control.

Part of my FIRE story is that I lived in a rent controlled apartment in LA for a decade. I held the lease in my name only. Each time I got a new roommate, I'd increase the rent, until I was paying by far the smaller share and they were still getting a good deal.

I then bought a rental property in a more affordable area.

Eventually, I moved to NorCal. I found a great condo on a short sale, so I sold the rental, and bought and moved into the condo. It doubled in value in less than four years. It was a big step in my journey to FIRE.

Doing one for a while does not preclude you from doing the other at some point.
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RecoveringCarClown

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Re: Is FIREing w/o home-ownership possible?
« Reply #20 on: October 11, 2017, 11:06:56 PM »
I know this isn't the exact question you are asking but, taxes can be a reason to outright own vs mortgage or rent.  If you need 70k to pay rent but only 35k with a paid off house, income taxes and health subsidies can be a big difference.

rainbow_unicorn

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Re: Is FIREing w/o home-ownership possible?
« Reply #21 on: October 12, 2017, 09:02:04 AM »
I agree, it's all about perspective.  When I first learned of FIRE'ing...I too saw a lot of examples of peeps with their mortgages paid off, so an overall lower monthly cost on overhead for the monthly nugget they needed because they didn't have a mortgage or rent....but I'm a renter (former homeowner), so what do I need to do?  I posted something about owning a home vs renting - of course the city and market takes a big factor into it, lots of calculators, etc.  If you were to buy, is there a way to have it paid off by the time you're in your 50's or early 60's?  Or fully save to pay cash at some point in time?  Rent or a mortgage is a big monthly expense if you're on a 4% rule, if there is anything you can do to reduce that monthly expense by any amount once you FIRE, the more breathing room you'll have once living off 4%.  There are ways other than actually buying a home - i.e. roommates, but hopefully mature, respectful ones....not something out of Animal House!

Thanks for the suggestions and things to think about. Namely, I don't know if I would want to live with roommates when I'm in my 40s+, so that has really forced me to consider home ownership in my FIRE plans. And yes, home ownership is feasible.

rainbow_unicorn

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Re: Is FIREing w/o home-ownership possible?
« Reply #22 on: October 12, 2017, 09:08:42 AM »
Considering that most people buy larger and more expensive than what they would rent, I would bet renting may come out ahead for those people.  Plus owning a house decreases your freedom to explore the world and to move on a whims notice.  There are huge benefits to renting just like there are huge benefits to owning. Sometimes I wish I still rented especially when all at once the roof springs a leak, the AC is on the fritz, and the water sprinkler system springs a leak charging me hundreds of dollars.  Life was defiantly easier when we rented.

Yes, it's so odd too. I am by nature and habit a minimalist, and I've been able to live like a queen in small 250 sq ft apartments - and absolutely loved it! And when I think of buying, all of a sudden I think "a nice yard would be nice, you know for BBQs" and a guest bedroom for family etc. etc. etc. whereas in a rented studio, friends sleep on the fold out couch a night, and the couch with a couple of small tables doubles as a dining area. What is it with buying a home that makes me want to face-punch myself?

Rhoon

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Re: Is FIREing w/o home-ownership possible?
« Reply #23 on: October 12, 2017, 08:12:44 PM »
DW and I will be selling our current house to fund the purchase a 40/44 ft catamaran. We will sail the oceans of the world until we get tired of doing that and then probably get a 5th wheel until we're too old to do that. I expect to rent something the rest of our lives. We just have to plan for that added expense.

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Re: Is FIREing w/o home-ownership possible?
« Reply #24 on: October 12, 2017, 11:53:22 PM »
I hadn't had a house in about 10 years. I love living in apartments but just a few days ago we bought a house. I love being able to call maintenance and them coming out within 30 minutes to repair the a/c and not owe a bill! And I also love going through the gate and seeing the guys mowing the grass and me not having to worry about it. I will miss apartment living (and the GREAT view!) but the lil woman said it was time for a house again :(

Bateaux

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Re: Is FIREing w/o home-ownership possible?
« Reply #25 on: October 14, 2017, 02:51:32 AM »
DW and I will be selling our current house to fund the purchase a 40/44 ft catamaran. We will sail the oceans of the world until we get tired of doing that and then probably get a 5th wheel until we're too old to do that. I expect to rent something the rest of our lives. We just have to plan for that added expense.

I've been pondering this exact plan.  I was mentally set to sell it all and buy a Lagoon 440/450.  Then the hurricanes hit and destroyed so many in an instant.  Good insurance is a must.  But yes, turning 50 next year and may do the cruising life for 5 to 10 years.  Then maybe RV after that.  The DW wants a home base of operations so I may end up getting a homestead that is low maintenance in the mountains of Tennessee.   Maybe just build a large metal shed tht the RV would dock with. 
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