Author Topic: Any other planned lifelong renters?  (Read 21784 times)

Beric01

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Any other planned lifelong renters?
« on: August 01, 2014, 12:01:00 PM »
I personally have no intention to ever buy a home in my lifetime. I'm not saying this is the only path or that everyone else should do this, but IMO buying a home is more of a lifestyle decision than a financial one.

Here's an article on why renting isn't totally irrational. Yes, it was written back in 2007, but the points still ring true.

A few of the reasons why I never plan to buy:
  • The ROI on investments is, on average, much better than that of a home. The ROI on a home generally matches inflation, or barely exceeds it. Putting your money in a home rather than investments is an opportunity cost.
  • Buying is generally more expensive than renting, at least for the up-front period. I can reach FI earlier by not buying.
  • Rent is a fixed payment each month. Home ownership can have many unexpected expenses, such as maintenance and repairs, or even natural disasters.
  • Home ownership takes time out of your life to do maintenance and repairs, which then require learning additional skills. I'd prefer to spend my time doing/learning other things.
  • Home ownership is not a diversified investment. It's putting huge stock in a single type of investment.
  • Home ownership offers almost no flexibility. If you need to change jobs, you may be forced to give up biking to work if the place is too far away. You can't sell your house due to commissions. Imagine paying 6% fees on the act of both buying and selling stock!

I know there's a lot of homeowners and prospective homeowners on these boards. I'm not saying you made a bad decision, though it is (IMO) a lifestyle decision. I just wanted to open up the idea that you really can reach FI as a lifelong renter (haven't seen this type of discussion on these boards).

Franklin

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Re: Any other planned lifelong renters?
« Reply #1 on: August 01, 2014, 12:13:17 PM »
Good topic.  I ponder it frequently.  Although I take great pleasure in maintaining and upgrading my house, I know that it's not for everyone.  I'm coming up on ten years in my house and I was planning on crunching the numbers to do a comparison.

Zikoris

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Re: Any other planned lifelong renters?
« Reply #2 on: August 01, 2014, 12:16:08 PM »
Absolutely. We live in a city where buying is insanity and renting is extremely favourable financially. We also greatly value our freedom and flexibility and would not want to be tied down to any one location. We fully intend to randomly drop everything and take off to go live in cool countries short term after ER.

Eric

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Re: Any other planned lifelong renters?
« Reply #3 on: August 01, 2014, 12:35:54 PM »
Life long renter here.  There's a few of us around here, although we're vastly outnumbered.  Like you Beric01, renting is a faster path to FIRE for me so I'll definitely be a renter until I FIRE and leave the SF Bay Area.  After that, I'm not opposed to buying, but I have no idea where that would be at the moment.  I also know it can be more challenging to get a mortgage without a full time job, so it's possible that I'll never own a place.  At least not a full size place.  I'm slowly becoming a fan of the tiny house "movement", so that may be an option to own.

I do sometimes feel left out on all of the posts that talk about mortgage payments vs. investing.  :(

Also, here's the obligatory Jim Collins post to make all of us renters feel great about our decision:

http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

Trifecta

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Re: Any other planned lifelong renters?
« Reply #4 on: August 01, 2014, 12:38:24 PM »
Great points.  It would be nice to be able to get up and move without needing to sell, and also not have to take a big financial hit on upkeep - we recently had to get a new a/c unit for about $5K.  Some of our friends love renting and I admire the flexibility in their living situation.

Though as a homeowner there is comfort in knowing that the mortgage will be paid off in a few years which will take that expense out of the equation.  And it's nice to know that we could always sell and pocket the equity somewhere down the road.

Helvegen

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Re: Any other planned lifelong renters?
« Reply #5 on: August 01, 2014, 01:11:17 PM »
If we stay in the Seattle MSA, yeah, it will be lifelong renting unless the market seriously crashes. As it is, renting is cheaper than buying. I would probably pay $1500-$1600 a month easy on the house I rent for $1100. People here think everything RE is dipped in gold. I've seen some of the crappiest construction thrown up in a month commanding $500k TO START. Pfft, forget that.

More likely to happen is that we stay here 4-5 more years making good money and enjoying the PNW, then move back to the Great Lakes and buy something 50%+ down.

Beric01

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Re: Any other planned lifelong renters?
« Reply #6 on: August 01, 2014, 01:30:49 PM »
Life long renter here.  There's a few of us around here, although we're vastly outnumbered.  Like you Beric01, renting is a faster path to FIRE for me so I'll definitely be a renter until I FIRE and leave the SF Bay Area.  After that, I'm not opposed to buying, but I have no idea where that would be at the moment.  I also know it can be more challenging to get a mortgage without a full time job, so it's possible that I'll never own a place.  At least not a full size place.  I'm slowly becoming a fan of the tiny house "movement", so that may be an option to own.

I do sometimes feel left out on all of the posts that talk about mortgage payments vs. investing.  :(

Also, here's the obligatory Jim Collins post to make all of us renters feel great about our decision:

http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

That's a pretty awesome post! Definitely feels like a pat on the back.

I agree, after reaching FI and leaving this incredibly expensive area, it could make sense financially for me to buy (assuming I settle down in one spot in particular). But for now, I'm calculating my FI "number" based on renting. And the nice thing is that even though I'm living in a small studio, rent will still be cheaper elsewhere, even if I can't find a place this small.

And that brings me to another point - living with less. I don't need thousands of square feet of living space. I have ~250 now, and it's plenty. More space means more cleaning, and more room for "stuff". So I also like the idea of the "tiny house" movement. I'm, if anything, anti-claustrophobic - I like small spaces!

MoneyCat

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Re: Any other planned lifelong renters?
« Reply #7 on: August 01, 2014, 01:40:49 PM »
Owning property makes sense if you plan to stay in an area for a long time and use the property to make money, either through increased value over time for a primary residence and then sale, or through renting the place out.  Renting wasn't the solution for me, because I wanted to keep more of my money.  I live in a high COL area, but I was able to take advantage of the housing bubble collapse to pick up a house for cheap.  Several people I know buy distressed properties or foreclosed places and fix them up to flip them or turn into apartments for rent.  Another option is to get a house and turn the basement into an apartment to live in while renting out of the rest of the house to tenants.  There are different options for different people, but renting often is not the best choice to make (depending on your circumstances).

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Re: Any other planned lifelong renters?
« Reply #8 on: August 01, 2014, 01:46:55 PM »
I own 6 properties and rent 7 Unit's so I like that responsible people still want to Rent.  My mother's father owned for a couple years and rented after that until he died.  He was quite happy.  At the end he rented from my parents so he had a fairly reasonable rate as my parents didn't raise his rent.  The one downside to renting is the cost will continue to rise but the reality is so will home ownership.  The taxes scare the crap out of me regarding my rentals as a retirement plan.  I essentially have enough income when the loans are satisfied to live on for the rest of my life save the damn taxes.  I figure I will be able to raise the rents enough to cover the taxes if they don't get to crazy with them.

All that to say it's not dumb, when I am working on a holiday to fix up one of my properties I often think I would be better to rent.  In the short term very true but for me in the long term not the case.  As it is now I pay no mortgage.  The rents we receive more then cover all our mortgages even our own home.  It's a personal decision on many levels.

NoraLenderbee

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Re: Any other planned lifelong renters?
« Reply #9 on: August 01, 2014, 02:06:37 PM »


A few of the reasons why I never plan to buy:

These are all really good points. 

I rented for many years. For me, the biggest drawback was that someone else ultimately had control of my life. I rented one place (had a great deal) for 10 years. The elderly landlord died, and his widow sold a bunch of properties. I had to move at the end of my lease. The market was at its peak, and rents had skyrocketed, so our costs really went up. We rented another place, intending to stay a long time. The landlord died--yep, again--and we had to move again. We found another place with YOUNG landlords. However, they got into trouble during the recession and decided to sell the house. So we had to move 3 times in four years. We were great tenants--never paid late, took care of the place, fixed things--but none of that mattered.

I much prefer owning and knowing that no one can make me move until *I* want to move. I also like being able to do what I want. Since we bought in 2004, I've put in a huge vegetable garden and planted a bunch of fruit trees that now provide delicious fruit. I don't ever want to go back to renting. 

dodojojo

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Re: Any other planned lifelong renters?
« Reply #10 on: August 01, 2014, 02:07:54 PM »
I live in a high COL area and my hometown, where I plan to return one day, is in an even higher COL area. So I'm pretty sure I'll be renting forever.  I'm fine with that.  If I fell into dumpster truck full of cash, I'd consider buying.  But my income is finite and I have to make choices--I'd prefer to rent, save and invest rather than buy, own and maintain a home.

And I knew I didn't want to buy when I was home-shopping last summer and the only places I could afford--I wouldn't even rent.  I stopped the home buying process when I asked myself why I was looking to buy homes in neighborhoods I wouldn't even rent.  The answer, "because that's what I can afford" wasn't a good enough reason to buy.

eostache

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Re: Any other planned lifelong renters?
« Reply #11 on: August 01, 2014, 02:51:41 PM »
I have no interest in ever owning a house.

My parents rented a house for a long time. Mom told me a long time ago that they might have bought a house but never had the 20% downpayment (back when you *had* to have that). When my dad died my mom wanted to move closer to town so she just gave 30 days notice and moved. Easy. She now lives in subsidized senior housing (my dad was a vet and town employee) and she is happy. But I digress.

Most all of the places I've rented have been fine to great and landlords have been sad to see me leave. The place my bf and I are in now is probably bigger and more expensive than we need but its a great location (walk/bike everywhere) and the landlord is a very nice guy.

If my life situation changed and I was on my own I'd move to a much smaller place, maybe even just rent a room from someone.

Oh, and I hate doing house maintenance and yardwork and don't want to be tied down.

A friend of mine got a good Federal job in a small mountain town. She thought she was set so she bought a house. A year later the job was discontinued and she had to scramble to find another Fed job somewhere. She ended up moving out of state for a new position and is renting the house out now. She bought an RV to live in which seems to have worked out well for her. She just moved to another Fed job in another state and the RV saved her butt as far as housing went. I'm not sure how she is doing financially now but she used to admire my lack of debt.
« Last Edit: August 01, 2014, 02:54:16 PM by eostache »

TJ79

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Re: Any other planned lifelong renters?
« Reply #12 on: August 01, 2014, 03:18:40 PM »
I live in SF, and have no plans on buying (at least while I'm here). My apartment is rent controlled, a couple blocks from the water, with a beautiful view of the bay. The rent isn't "cheap" by any normal definition (except to other SF residents), but it's also not going up.


solon

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Re: Any other planned lifelong renters?
« Reply #13 on: August 01, 2014, 04:17:20 PM »
I own a home, but I feel like it's a millstone around my neck. I can't afford anything else. And because I can't sell it, I can't move anywhere else to take any other job.

Here's blogger I love: http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/

Fleacircus

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Re: Any other planned lifelong renters?
« Reply #14 on: August 01, 2014, 06:13:53 PM »
My spouse and I have been renting our current house for over 7 years.  We hope to stay here until our kids are finished with high school -- another 7 years.  Once they move out, we want to move to another state.  We also want to travel a lot once we retire.

We both had financially disastrous first marriages and divorces, and we both lost the money we had invested in the houses we bought and lost to divorce.  I don't care if I ever own another home.

We are happy to avoid the expenses and responsibilities of home ownership. Our landlord is happy to have stable, responsible tenants.

aeliz

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Re: Any other planned lifelong renters?
« Reply #15 on: August 01, 2014, 08:05:43 PM »


A few of the reasons why I never plan to buy:

These are all really good points. 

I rented for many years. For me, the biggest drawback was that someone else ultimately had control of my life. I rented one place (had a great deal) for 10 years. The elderly landlord died, and his widow sold a bunch of properties. I had to move at the end of my lease. The market was at its peak, and rents had skyrocketed, so our costs really went up. We rented another place, intending to stay a long time. The landlord died--yep, again--and we had to move again. We found another place with YOUNG landlords. However, they got into trouble during the recession and decided to sell the house. So we had to move 3 times in four years. We were great tenants--never paid late, took care of the place, fixed things--but none of that mattered.

I much prefer owning and knowing that no one can make me move until *I* want to move. I also like being able to do what I want. Since we bought in 2004, I've put in a huge vegetable garden and planted a bunch of fruit trees that now provide delicious fruit. I don't ever want to go back to renting. 

If I wasn't planning on having kids, I would probably decide between renting long term vs. owning and renting rooms to roommates. To me, having kids changes the game given that its been shown that kids do better if they have a stable home. I wouldn't want them to have to go through 3 moves in 4 years disrupting their lives.

I just want to say that moving isn't the worst thing for kids!  I'm 1 data point, but my family moved a lot (4 regions, 2 states, which necessitated 5 different schools for varying lengths of time), until my parents bought a house when I was 11, and I think it was actually really good for me. It helped me develop a letter-writing habit that really shaped me as a person and kept me connected to friends.

The secure foundation built in our home, not just our house, is what mattered.  Just wanted to throw in that 2 cents so people don't feel like they're going to ruin their kids by moving a bunch!

Paul der Krake

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Re: Any other planned lifelong renters?
« Reply #16 on: August 01, 2014, 08:23:21 PM »
I just want to say that moving isn't the worst thing for kids!  I'm 1 data point, but my family moved a lot (4 regions, 2 states, which necessitated 5 different schools for varying lengths of time), until my parents bought a house when I was 11, and I think it was actually really good for me. It helped me develop a letter-writing habit that really shaped me as a person and kept me connected to friends.

The secure foundation built in our home, not just our house, is what mattered.  Just wanted to throw in that 2 cents so people don't feel like they're going to ruin their kids by moving a bunch!
Thank you. I too was a child of expats and never understand why people talk about moving their kids (often within the same first world country where people eat the same food and speak the same language) like it's the harshest thing in the world. 5 countries and 3 foreign languages later, I think my siblings and I turned out quite okay.

Count me in the renter for life camp. There may be a time in my life where I can seriously say "alright, I am ready to drop the anchor here and commit to 10 years", but I have a hard time seeing it.

DarinC

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Re: Any other planned lifelong renters?
« Reply #17 on: August 01, 2014, 08:51:10 PM »
That article has some different numbers that really diverge with what I've seen. The highest I've paid for insurance on a home has been ~$80+/month on one valued at ~$600k, and the maintenance figure is very high. I doubt I've ever paid more than $50/month. The mortgage calculation is also a little high for a ~$400k home. I'm getting ~$1930 with current interest rates.

Still, it is ~$600-$700 more per month to rent. Complaining about mortgage interest is valid too, but the solution to that is to get a 15-year mortgage with lower interest rates and a higher monthly.

There's also some missing tax savings. It's not a lot over a few years, but it adds up over time. My grandmother pays ~$800/year on her $600k home. Anyhoo... Ignoring that, I'm still getting hugely different results. Over 15 years (15 year loan), I'm seeing a home cost ~$100k less than renting, even with 8% ROI, and ignoring any increases in rent due to inflation, which I think is very unlikely.

Still, if someone doesn't shop around for insurance, pays a gardener and repairmen $350/month, and gets a 30-year loan with a highish interest rate, then I can see how renting/investing could be better. And naturally, if you move a lot, purchase/sales fees can eat up any advantages.

Lyssa

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Re: Any other planned lifelong renters?
« Reply #18 on: August 02, 2014, 03:30:09 PM »
If we ever buy it definetly will not be where we live now. Provided that we want to live central enough to allow for a car free lifestyle where I can continue to make 150.000 EUR a year (significant other makes 60.000 EUR and commutes, COL at his place of work would be much lower, but my working hours are incompatible with commuting - or at least incompatible with commuting and sanity), the math plays out as follows:

Apartments suitable for a couple (2-3 rooms) cost around 800-1500 EUR per month in rent and around 450.000-700.000 to buy.

Apartments which are big enough to raise 2+ kids in cost around 1800-2200 EUR per month in rent, whereas to buy such a place would cost around 750.000-1.000.000 EUR.

If we absolutely wanted to own prior to FIRE that would delay things several years. For us it makes a lot more sense to throw 11.000 - 26.000 at rent per year than burdening us with a 500.000 EUR mortgage on top of a 300.000 EUR down-payment. Plus there would be the risk that those crazy prices eventually do not only fall but really collapse and several years of savings would be completely lost.

Renting is fine for now and the next 7 years. We'll re-evaluate then.

defenestrate

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Re: Any other planned lifelong renters?
« Reply #19 on: August 02, 2014, 09:40:26 PM »
I personally have no intention to ever buy a home in my lifetime. I'm not saying this is the only path or that everyone else should do this, but IMO buying a home is more of a lifestyle decision than a financial one.

Here's an article on why renting isn't totally irrational. Yes, it was written back in 2007, but the points still ring true.

A few of the reasons why I never plan to buy:
  • The ROI on investments is, on average, much better than that of a home. The ROI on a home generally matches inflation, or barely exceeds it. Putting your money in a home rather than investments is an opportunity cost.
  • Buying is generally more expensive than renting, at least for the up-front period. I can reach FI earlier by not buying.
  • Rent is a fixed payment each month. Home ownership can have many unexpected expenses, such as maintenance and repairs, or even natural disasters.
  • Home ownership takes time out of your life to do maintenance and repairs, which then require learning additional skills. I'd prefer to spend my time doing/learning other things.
  • Home ownership is not a diversified investment. It's putting huge stock in a single type of investment.
  • Home ownership offers almost no flexibility. If you need to change jobs, you may be forced to give up biking to work if the place is too far away. You can't sell your house due to commissions. Imagine paying 6% fees on the act of both buying and selling stock!

I know there's a lot of homeowners and prospective homeowners on these boards. I'm not saying you made a bad decision, though it is (IMO) a lifestyle decision. I just wanted to open up the idea that you really can reach FI as a lifelong renter (haven't seen this type of discussion on these boards).

This is a great topic. But I think each one of the points needs investigation, especially if the goal is early retirement.

1. ROI of investments is NOT always on average higher, if you are looking at risk adjusted return--the stdev of housing is less than half that of the stock market--this matters a lot.
2. Buying is more expensive then renting (initially)--but can you sustain FI when renting? Is your rent somehow controlled so you can predict the inflation?  Referencing point 1, you eliminate you risk to the housing market by owning, and since a large portion of your income will go to housing in ER, reducing this risk has huge option value.
3. You pay your landlord to do this work--you could pay other individuals to take care of your house as well. Trust me, you do pay for this while renting
4. You are incorrect that your house is not a diversified investment. As you utilize your home, and you need to utilize real estate to live, owning what you consume is not an investment. If you know there is a 100% chance that you will live in the home you bought for a long time, and you own that home, you are taking on 0 market risk (because the market is 100% correlated to your consumption). If on the other hand you own a diversified index fund, and you are relying on its income to pay your rent, the housing market and the stock market are not 100% correlated, and you have now increased the risk that you may not meet your payments.
5. Good point--and if you are not in ER, then you are absolutely correct. Housing markets are not nearly as liquid as others, but if you pick the right neighborhood, it may not take you as long to sell your house as you think.

fixer-upper

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Re: Any other planned lifelong renters?
« Reply #20 on: August 03, 2014, 12:00:33 AM »
Most of you are not talking about owning a home, but rather purchasing on margin.  Owning is an entirely different calculation.

For the people talking about six percent transaction costs, I'd propose that anyone using a realtor isn't being very mustacian.  They do have their place, such as when you're selling out of town, but if listing on zillow and CL can save you 5%, isn't it worth a try?

Lyssa

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Re: Any other planned lifelong renters?
« Reply #21 on: August 03, 2014, 03:30:09 AM »
Most of you are not talking about owning a home, but rather purchasing on margin.  Owning is an entirely different calculation.

True. That's what I meant by re-evaluating in 7+ years. If we have more than 1 million net worth, are FIRE and can buy a nice home for 350k in a low COL area that is certainly worth thinking about.

alsoknownasDean

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Re: Any other planned lifelong renters?
« Reply #22 on: August 03, 2014, 04:28:24 AM »
What I'm actually thinking of doing is renting a place for myself to live in, and buying properties in a lower COL area to rent out.

Partly because I think Melbourne's too damn expensive, and partly because my own situation's likely to change in the next five or ten years. I'm single, so a one bedroom apartment is fine now, but if I meet someone and we decide to start a family in a few years it won't be fine anymore.

frugledoc

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Re: Any other planned lifelong renters?
« Reply #23 on: August 03, 2014, 04:31:06 AM »
It depends on whether renting or buying is cheaper.

It definitely doesn't make sense to take out a jumbo mortgage you can barely afford but it you find a property you like and can easily afford it then it definitely makes more sense to buy. 
 
It is complete fallacy to say that you will make more money investing in the stock market than property.  This only holds true if you do not employ leverage, which almost everybody does when they mortgage their property.

I currently do not own property at the moment having recently sold but over the time period of 10 years have made 220,000 capital gains profit tax free and at most had 50,000 of my own money in the pot at any point.  Also, over that period, due to having extremely low interest rate mortgages I was paying less than half what monthly rent would have cost to live in similar properties.
« Last Edit: August 03, 2014, 04:44:19 AM by frugledoc »

matchewed

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Re: Any other planned lifelong renters?
« Reply #24 on: August 03, 2014, 07:25:02 AM »
I personally have no intention to ever buy a home in my lifetime. I'm not saying this is the only path or that everyone else should do this, but IMO buying a home is more of a lifestyle decision than a financial one.

Here's an article on why renting isn't totally irrational. Yes, it was written back in 2007, but the points still ring true.

A few of the reasons why I never plan to buy:
  • The ROI on investments is, on average, much better than that of a home. The ROI on a home generally matches inflation, or barely exceeds it. Putting your money in a home rather than investments is an opportunity cost.
  • Buying is generally more expensive than renting, at least for the up-front period. I can reach FI earlier by not buying.
  • Rent is a fixed payment each month. Home ownership can have many unexpected expenses, such as maintenance and repairs, or even natural disasters.
  • Home ownership takes time out of your life to do maintenance and repairs, which then require learning additional skills. I'd prefer to spend my time doing/learning other things.
  • Home ownership is not a diversified investment. It's putting huge stock in a single type of investment.
  • Home ownership offers almost no flexibility. If you need to change jobs, you may be forced to give up biking to work if the place is too far away. You can't sell your house due to commissions. Imagine paying 6% fees on the act of both buying and selling stock!

I know there's a lot of homeowners and prospective homeowners on these boards. I'm not saying you made a bad decision, though it is (IMO) a lifestyle decision. I just wanted to open up the idea that you really can reach FI as a lifelong renter (haven't seen this type of discussion on these boards).

I don't think anyone has ever said you can't reach FI as a lifelong renter. In fact when people come posting on the boards asking whether to rent or buy they're usually handed a calculator and told to figure it out. Since it's a roof over the head discussion and not an investment discussion it is advised to throw out all concepts of investment when making the decision and make it a financial decision. As in put a roof over your head in a cost effective manner.

That being said as long as I'm in my location I'll probably be a renter unless the numbers change. And that is key, unless you've got an emotional anchor to home-ownership or renting then it is just a numbers game.

happy

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Re: Any other planned lifelong renters?
« Reply #25 on: August 03, 2014, 07:53:00 AM »
Quote
I don't think anyone has ever said you can't reach FI as a lifelong renter. In fact when people come posting on the boards asking whether to rent or buy they're usually handed a calculator and told to figure it out. Since it's a roof over the head discussion and not an investment discussion it is advised to throw out all concepts of investment when making the decision and make it a financial decision. As in put a roof over your head in a cost effective manner.

This.

When I first got MMM I got all excited about selling my house and renting. Ran the figures where I am, and it didn't stack up, even with a substantial downsize to a cheaper location. So do your own figures.

If you are a nomad type, then better to rent than buy unless you wish to rent your property when you next move. Buying/selling/moving costs, at least in Australia are substantial.


MrsPete

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Re: Any other planned lifelong renters?
« Reply #26 on: August 04, 2014, 08:29:42 AM »
I disagree with several of your points:

The numbers that pop out of your calculator when you discuss ROI are important, but keep in mind that a home pays you in TWO WAYS:  (1) You get the practical use of living in it, and (2) your house is increasing in value.  Though exceptions exist, it's reasonable to think that you can live in a house for years . . . then sell it and get back what you've spent.  In contrast, at the end of a rental contract, you just get a nice goodbye from the landlord. 

The stock market may go up and down, and the value of your house may do the same . . . but it always remains a useful investment.  That is, if you chose poorly, your 150K house may decrease and now only be worth 100K, but you can still live in it.  In contrast, if your mutual fund dips, you're poorer than you were. 

The cost of buying vs. renting fluctuates wildly, but in my area buying a same-size house is usually slightly less expensive than renting an apartment.

Renting is NOT a fixed expense; rather, once your lease expires, your landlord may decide to increase your rent.  In contrast, if you have a fixed-mortgage, you're still going to be paying the same amount 10, 20 years from now (unless you pay it off earlier). 

Yes, owners do have to be prepared to replace a roof or a furnace, but the reality is that renters are paying these expenses too: It's just less transparent.  If you were a landlord, wouldn't you include the cost of future repairs in your rent?  You'd put X amount of each month's rent away into an account so that when the water heater quits working, you'd be ready to replace it! 

I agree that everyone should diversify his or her investments, and a house should not be the lion's share of anyone's portfolio; however, the better argument here is that you should buy a small, inexpensive house -- not that you should avoid real estate altogether!  Incidentally, my house makes up less than 5% of my total assets. 

6% realtor fees is outrageous (though that may vary from place to place).  The standard is 3%, and although I've owned two houses, I've never paid these fees.  It's not hard to buy a house without professional help.  However, you will need to go through a lawyer's office to make the transaction official (to protect yourself), and some other fees are unavoidable.


I have to agree with you on a couple things:

Home maintenance and repairs does take time and does require learning additional skills. 

Home ownership does reduce flexibility.  An apartment dweller who suddenly learns he's having triplets IS in a better position to move quickly than is a home owner. 


And I'll bring up a couple other points:

The big one first:  You're arguing the difference between renting and paying a mortgage.  You're ignoring the biggest benefit of all. Eventually the home owner gets to quit paying his mortgage, whereas the renter must pay every month . . . forever.  Take me for example:  When we married, we bought a small starter house and paid it off in eleven years.  Then we sold it and moved into a larger house in a more convenient neighborhood -- and because we'd lived frugally all those years, we were able to pay cash.  So we haven't paid rent or mortgage in more than a decade.  With that large line item removed from the budget, we were able to travel much more while all our kids were still at home, we are currently able to pay for their college educations without trouble, and we did those things without skimping on saving!  Yes, we do still pay maintenance and we do put in time on the house; however, we tend to spend about 3K a year on maintenance and a little over 1K a year on taxes and insurance. 

The best deal isn't renting or owning a mortgage:  It's owning a house outright! That allows you to live on less so that your dollars stretch farther each month, which is a different way of looking at reaching FI.

With a house of your own, you tend to have more space and more control of that space.  I never lived in a rental that had more than one living area, yet when both our children were still at home we definitely enjoyed having a living room and a den.  I never lived in a rental that had adequate storage.  And in your own home you can paint your walls any color you want or have a trampoline and a dog. 
« Last Edit: August 04, 2014, 09:41:30 AM by MrsPete »

iris lily

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Re: Any other planned lifelong renters?
« Reply #27 on: August 04, 2014, 09:07:28 AM »
I am genetically resistant to buying SF, Seattle, Vancouver, NYC level real estate. And because I have craploads of pets, must have gardens, and paint my walls pink, I have to buy my own real estate in order to have the control I want. Ergo, this means I must live in fly-over land where real estate is cheap.

You guys who rent--that's is a perfectly valid choice, and it's even a perfectly valid choice in flyover land, given the right set of circumstances. It's financially sensible and in flyover land it is thinking outside of the box. But I admire the philosophy because I really think that renters can make the numbers work for FIRE.

I will miss out on all of the lovely things that SF and Vancouver and etc have to offer, and that makes me sad. I'd love to live in those places.

Guess that I will just have to visit.

frugalnacho

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Re: Any other planned lifelong renters?
« Reply #28 on: August 04, 2014, 10:39:16 AM »
I have been paying approximately the same amount of money for my house as I would for a small 1-2 bedroom apartment in my area.  For about the same price I get way more space, a yard, more privacy, more freedom to customize and do what I want, and thousands of dollars in equity built up.  I think it's a no brainer to own in my area.

AlanStache

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Re: Any other planned lifelong renters?
« Reply #29 on: August 04, 2014, 10:41:19 AM »
Re children and renting:  I suspect any negative effects are more from a financially insecure home environment than strictly from renting.  I remember growing up we always rented and over hearing my mom talk about moving and finding a good place we could afford every few years.  Would seem to be about the same for kids whose parents cant really afford the mortgage (for what ever reason).

Renting vs Buying: Yep, do your own math, figure out what you want.  YMMV.

Will just say getting sick of moving and thinking about what the landlord would do at the end of the lease was a BIG driver in me buying.  But I live in a medium COL area.

Eric

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Re: Any other planned lifelong renters?
« Reply #30 on: August 04, 2014, 10:54:53 AM »
The best deal isn't renting or owning a mortgage:  It's owning a house outright! That allows you to live on less so that your dollars stretch farther each month, which is a different way of looking at reaching FI.

This could be true, but it's not a universal truth.  You still have to run the numbers.  In very inflated real estate markets, it can be more advantageous to rent forever than to pay off a home after 30 years.

For example, take an initial down payment of $160K and invest it at 7% for 30 years, and you'll (almost) end up with an amount that will cover the equivalent of a $2000/mo rent today, increasing rent by 3% per year.  Forever.  And that doesn't even account for the difference between your PITI and cheaper rent payment that can be invested along the way. 

Essentially, having a huge down payment invested in the stock market versus investing it in a house can end up paying your rent forever.  So while it seems like a no brainer that not having a payment would be advantageous, it's not always the case.  But of course you have to run the numbers for your specific situation.

MrsPete

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Re: Any other planned lifelong renters?
« Reply #31 on: August 04, 2014, 11:03:26 AM »
The best deal isn't renting or owning a mortgage:  It's owning a house outright! That allows you to live on less so that your dollars stretch farther each month, which is a different way of looking at reaching FI.

This could be true, but it's not a universal truth.  You still have to run the numbers.  In very inflated real estate markets, it can be more advantageous to rent forever than to pay off a home after 30 years.

For example, take an initial down payment of $160K and invest it at 7% for 30 years, and you'll (almost) end up with an amount that will cover the equivalent of a $2000/mo rent today, increasing rent by 3% per year.  Forever.  And that doesn't even account for the difference between your PITI and cheaper rent payment that can be invested along the way. 

Essentially, having a huge down payment invested in the stock market versus investing it in a house can end up paying your rent forever.  So while it seems like a no brainer that not having a payment would be advantageous, it's not always the case.  But of course you have to run the numbers for your specific situation.
Yes, I can see that in specific pockets of highly inflated real estate, you'd be in danger of being a housing-bubble victim -- Detroit homeowners would agree -- but those areas aren't representative of the majority of the country.

A "downpayment" of 160K in my area would buy a house . . . plus all the furniture.  Gotta love the South.  My 2400 sf, all-brick house in a quiet, established neighborhood on a 1+ fenced lot is worth about 150K. 

In contrast, if invested, that 160K could be lost, and a 7% return isn't always guaranteed. 

Beric01

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Re: Any other planned lifelong renters?
« Reply #32 on: August 04, 2014, 11:44:03 AM »
This is a great topic. But I think each one of the points needs investigation, especially if the goal is early retirement.

1. ROI of investments is NOT always on average higher, if you are looking at risk adjusted return--the stdev of housing is less than half that of the stock market--this matters a lot.
2. Buying is more expensive then renting (initially)--but can you sustain FI when renting? Is your rent somehow controlled so you can predict the inflation?  Referencing point 1, you eliminate you risk to the housing market by owning, and since a large portion of your income will go to housing in ER, reducing this risk has huge option value.
3. You pay your landlord to do this work--you could pay other individuals to take care of your house as well. Trust me, you do pay for this while renting
4. You are incorrect that your house is not a diversified investment. As you utilize your home, and you need to utilize real estate to live, owning what you consume is not an investment. If you know there is a 100% chance that you will live in the home you bought for a long time, and you own that home, you are taking on 0 market risk (because the market is 100% correlated to your consumption). If on the other hand you own a diversified index fund, and you are relying on its income to pay your rent, the housing market and the stock market are not 100% correlated, and you have now increased the risk that you may not meet your payments.
5. Good point--and if you are not in ER, then you are absolutely correct. Housing markets are not nearly as liquid as others, but if you pick the right neighborhood, it may not take you as long to sell your house as you think.

  • I'm not going to argue with you that investing in housing is less risky than with an index fund. You're likely correct. However, housing does carry other risks.
  • Renting IS controlled over your lease. You sign a 1-year lease, your rent is stable over that 1 year. If at the end of the year, your landlord wants to raise your rent by 50%, you can just leave and find a cheaper place. That's the thing about renting. It's a market that's is fairly easy to change your situation, unlike housing, where you're stuck.
  • Landlords can use their volume and negotiating power to get cheaper repairs than a homeowner. Surely my landlord pays less than I would on their 150 units in my building. Also, it's insurance by spreading the cost over everyone. If the roof above my unit alone needs to be repaired, I pay no more. If rent will go up at the end of my lease due to expensive repairs, I can move.
  • Recognize here it's just different kinds of risk we're talking about. You could go bankrupt and need to sell, or get your home foreclosed on. Property taxes could rise. An earthquake/tornado/hurricane could take out your home (depending on where you live). And can I forget eminent domain? Everything has its own set of risks. The problem is, a homeowner can't always just move.
  • And you'll also pay more for that neighborhood. It's also a risk. Your home could not sell, or you need to sell it for tens or hundred of thousands of dollars less than you thought it was worth. It's also a risk.

The best deal isn't renting or owning a mortgage:  It's owning a house outright! That allows you to live on less so that your dollars stretch farther each month, which is a different way of looking at reaching FI.

This could be true, but it's not a universal truth.  You still have to run the numbers.  In very inflated real estate markets, it can be more advantageous to rent forever than to pay off a home after 30 years.

For example, take an initial down payment of $160K and invest it at 7% for 30 years, and you'll (almost) end up with an amount that will cover the equivalent of a $2000/mo rent today, increasing rent by 3% per year.  Forever.  And that doesn't even account for the difference between your PITI and cheaper rent payment that can be invested along the way. 

Essentially, having a huge down payment invested in the stock market versus investing it in a house can end up paying your rent forever.  So while it seems like a no brainer that not having a payment would be advantageous, it's not always the case.  But of course you have to run the numbers for your specific situation.

This is the calculation I ran.

Take the value of your home. Would you prefer to have that money, earning a return on its investment year after year, or a house, roughly increasing with inflation, while you pay rent. The answer will vary widely depending on where you live. I live in the Bay Area and ran the math and it came out for renting, but this is an expensive market. I'm sure in the middle of nowhere, renting is more expensive, and the only people who rent are those who can't save for a down payment.

For me, I determined the fastest way to FI was to rent as cheap of an apartment as possible in a high COL city, for the salary increase. Then, when I hit FI I'll move somewhere else and reevaluate the situation. If I like the area and plan to stick around, maybe I might even buy if the math makes sense.

The other factor here is that I don't need much space. You can't generally buy ~250 square-foot houses the size of my apartment. Condos have more space than I need, and I'd end up paying for that.
« Last Edit: August 04, 2014, 11:46:27 AM by Beric01 »

NoraLenderbee

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Re: Any other planned lifelong renters?
« Reply #33 on: August 04, 2014, 12:10:54 PM »
  • Renting IS controlled over your lease. You sign a 1-year lease, your rent is stable over that 1 year. If at the end of the year, your landlord wants to raise your rent by 50%, you can just leave and find a cheaper place.
You can't say that renting is stable and also that you can "just leave." You do not have stability if you face the real possibility of having to move at the end of each lease term. The flip side to the freedom and flexibility of renting is that you may have to move when you don't want to, more often than you want to, and not necessarily to a better situation. And you face that uncertainty every year (or more often, depending on your lease term), which in itself can be quite disruptive. The flip side to being "stuck" as a homeowner is that you don't arbitrarily have to move. Both options have the risks associated with their advantages.





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AlanStache

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Re: Any other planned lifelong renters?
« Reply #34 on: August 04, 2014, 01:41:40 PM »
  • Renting IS controlled over your lease. You sign a 1-year lease, your rent is stable over that 1 year. If at the end of the year, your landlord wants to raise your rent by 50%, you can just leave and find a cheaper place.
You can't say that renting is stable and also that you can "just leave." You do not have stability if you face the real possibility of having to move at the end of each lease term. The flip side to the freedom and flexibility of renting is that you may have to move when you don't want to, more often than you want to, and not necessarily to a better situation. And you face that uncertainty every year (or more often, depending on your lease term), which in itself can be quite disruptive. The flip side to being "stuck" as a homeowner is that you don't arbitrarily have to move. Both options have the risks associated with their advantages.
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mjs111

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Re: Any other planned lifelong renters?
« Reply #35 on: August 04, 2014, 02:11:07 PM »
I'm a renter.  I'm single, no kids, don't need much space, and dislike home maintenance tasks. Where I live (Irvine, CA) homes are going for about 250 times rent, so prices are a bit out of control.  Makes some sense to rent in a market like that. I reached FI a few years ago without ever owning a house. It can be done. 

Nothing against owning a house. I think it can be a decent investment if bought on the cheap. Unfortunately people's reasons for buying and selling personal residences are only occasionally tied to local market cycles, and are more tied to job gain/loss or to the misunderstanding that housing is always a good investment.


Mike


rocksinmyhead

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Re: Any other planned lifelong renters?
« Reply #36 on: August 04, 2014, 02:12:55 PM »
I'm sure a lot of it depends on where you're renting/buying. personally, I'm really looking forward to the time when we're confident enough that we'll be somewhere for several years and are willing to buy. there are two major reasons:

- we have two dogs, which really limits rental options. I thought it was bad enough looking for a rental when we had one 45-lb dog... I am nervous for when we have to look again now that we have two. at least the new one isn't any bigger!
- so goddamn sick of landlords/property managers that never fix or maintain anything. I will gladly spend the time and money to fix my own shit but I'm not putting money into someone else's property!

these two items, to me, are...  not priceless, I guess, but pretty important. man I can't wait to own a house. Tulsa is pretty cheap for both buying and renting, so if we wanted to stay here long term we would definitely buy.

Beric01

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Re: Any other planned lifelong renters?
« Reply #37 on: August 04, 2014, 02:59:14 PM »
You can't say that renting is stable and also that you can "just leave." You do not have stability if you face the real possibility of having to move at the end of each lease term. The flip side to the freedom and flexibility of renting is that you may have to move when you don't want to, more often than you want to, and not necessarily to a better situation. And you face that uncertainty every year (or more often, depending on your lease term), which in itself can be quite disruptive. The flip side to being "stuck" as a homeowner is that you don't arbitrarily have to move. Both options have the risks associated with their advantages.

I didn't say that the feeling was stable, I said that the price was stable. If you look at my original post, I said that owning a home was a lifestyle decision. It may be that the feeling of stability is the number one priority to you, and thus you'd like to own a home. That's fine.

As a renter, I can control the price after every lease ends. If the price raises and I don't like it, I can pack my bags in less than a day and move somewhere else that has a better price (even if it's not in the same city, or even country). Homeowners can't do that. If your government suddenly doubles your property taxes on your home, what can you do about it?

That's the point I'm trying to make about renting. I sign a lease, and the pricing is rock solid for that lease period. If they try to increase the price, they have to wait until the end of the lease period, or I can sue them. And if the rent increases and I don't like it, I'm out of there. No commission fees or spending months on the market, depending on the housing market conditions. There's countless other landlords out there vying for my business.

dodojojo

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Re: Any other planned lifelong renters?
« Reply #38 on: August 04, 2014, 03:42:26 PM »
I'm in my early 40's and have rented all my life (mom is lifelong renter too so this goes back to childhood) and I've never had to move due to not being renewed by a landlord or some other non-voluntary reason.  All my moves have been self-initiated.  Of course it happens but just because the chance is there doesn't mean it's something that happens all that often.  There are always outliers, but generally I think if you're a good tenant, landlords are happy to keep you around.

NoraLenderbee

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Re: Any other planned lifelong renters?
« Reply #39 on: August 04, 2014, 04:44:56 PM »
You can't say that renting is stable and also that you can "just leave." You do not have stability if you face the real possibility of having to move at the end of each lease term. The flip side to the freedom and flexibility of renting is that you may have to move when you don't want to, more often than you want to, and not necessarily to a better situation. And you face that uncertainty every year (or more often, depending on your lease term), which in itself can be quite disruptive. The flip side to being "stuck" as a homeowner is that you don't arbitrarily have to move. Both options have the risks associated with their advantages.

I didn't say that the feeling was stable, I said that the price was stable. If you look at my original post, I said that owning a home was a lifestyle decision. It may be that the feeling of stability is the number one priority to you, and thus you'd like to own a home. That's fine.

As a renter, I can control the price after every lease ends. If the price raises and I don't like it, I can pack my bags in less than a day and move somewhere else that has a better price (even if it's not in the same city, or even country). Homeowners can't do that. If your government suddenly doubles your property taxes on your home, what can you do about it?

That's the point I'm trying to make about renting. I sign a lease, and the pricing is rock solid for that lease period. If they try to increase the price, they have to wait until the end of the lease period, or I can sue them. And if the rent increases and I don't like it, I'm out of there. No commission fees or spending months on the market, depending on the housing market conditions. There's countless other landlords out there vying for my business.

No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.

I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.



Beric01

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Re: Any other planned lifelong renters?
« Reply #40 on: August 04, 2014, 05:08:35 PM »
No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.

I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.

I don't see how those are not both true. What I am saying is that I get stability in pricing by choosing between different options in housing. If the pricing is stable, I can stay there. If it's not, I can move. It's the free market.

I'm not saying that you have stability in your lifestyle. Of course you can always live in your house if you own it, precluding natural disasters or eminent domain (which I won't go into). But as a renter, the entire world is open to me. I can choose to move to any apartment in the world I want, and, if I don't sign a lease (which helps me due to locking in the price), move the next month.

So basically, I really can get both flexibility AND the best pricing.

Moving is only a pain if you have too many possessions. Finding a suitable apartment is only a pain if you don't know how to look (they are hundreds of websites at your disposal), or if you're too picky.

I'm not saying renting is better than buying. I'm just saying that renting really does have stability in pricing and flexibility. I fully agree that there are pros and cons and one is not absolutely the superior choice.

Sarita

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Re: Any other planned lifelong renters?
« Reply #41 on: August 04, 2014, 06:56:20 PM »
I totally understand where you are coming from.  Live in NYC, and no way in hell would I ever consider buying.  The maintenance fees would be about 50% of what I pay in rent.
I love feeling like I always have choices-- can up and go anywhere I want.  I was able to move to NYC for my dream job in 2008 during the crash because I didn't have a house to sell in a down market.
Plus I hate maintenance chores.

frugalnacho

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Re: Any other planned lifelong renters?
« Reply #42 on: August 04, 2014, 10:21:44 PM »
No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.

I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.

I don't see how those are not both true. What I am saying is that I get stability in pricing by choosing between different options in housing. If the pricing is stable, I can stay there. If it's not, I can move. It's the free market.

I'm not saying that you have stability in your lifestyle. Of course you can always live in your house if you own it, precluding natural disasters or eminent domain (which I won't go into). But as a renter, the entire world is open to me. I can choose to move to any apartment in the world I want, and, if I don't sign a lease (which helps me due to locking in the price), move the next month.

So basically, I really can get both flexibility AND the best pricing.

Moving is only a pain if you have too many possessions. Finding a suitable apartment is only a pain if you don't know how to look (they are hundreds of websites at your disposal), or if you're too picky.

I'm not saying renting is better than buying. I'm just saying that renting really does have stability in pricing and flexibility. I fully agree that there are pros and cons and one is not absolutely the superior choice.

Moving is a huge pain in the ass.   Even if you have only a few possessions you have to actually move them all to a new location, change your voting registry, change the address on all your accounts, potentially change school districts, find new stores to shop at, re optimize all your routes, etc.  You can dismiss it if you like but it's a huge pain in the ass.  Multiple people have already posted saying how much of a pain in the ass it was, and I tend to agree.  All of my moves were voluntary and it was still a huge pain in the ass, I can't imagine having that thrust on me on a regular basis through out my life for various circumstances outside of my control.

Also there is no way in hell you are getting comparable pricing in rents now vs 25 years from now, where as a mortgage payment can be locked in for 30 years.   

pdxvandal

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Re: Any other planned lifelong renters?
« Reply #43 on: August 04, 2014, 10:40:20 PM »
If you're in a HCOL area, renting usually makes sense. I got lucky and bought my first house (with 3% down) in Eugene, Oregon, in 2001 and sold it in 2007 for a nice profit. Then I bought my next primary residence in PDX during the real estate bubble, lost a bit at the beginning, but have since more than made up for it. The great thing about selling a house with appreciation is the tax-free capital gains (250k single, 500k married).

Anyway, renting makes sense for HCOL or short-term stays. My plan now is to stay in my house in PDX for 10 years and rent the final 4-5 years in a good high school district before leaving town. PDX is (and will be) too expensive in the long term.

Good luck.

Beric01

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Re: Any other planned lifelong renters?
« Reply #44 on: August 05, 2014, 01:36:02 AM »
No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.

I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.

I don't see how those are not both true. What I am saying is that I get stability in pricing by choosing between different options in housing. If the pricing is stable, I can stay there. If it's not, I can move. It's the free market.

I'm not saying that you have stability in your lifestyle. Of course you can always live in your house if you own it, precluding natural disasters or eminent domain (which I won't go into). But as a renter, the entire world is open to me. I can choose to move to any apartment in the world I want, and, if I don't sign a lease (which helps me due to locking in the price), move the next month.

So basically, I really can get both flexibility AND the best pricing.

Moving is only a pain if you have too many possessions. Finding a suitable apartment is only a pain if you don't know how to look (they are hundreds of websites at your disposal), or if you're too picky.

I'm not saying renting is better than buying. I'm just saying that renting really does have stability in pricing and flexibility. I fully agree that there are pros and cons and one is not absolutely the superior choice.

Moving is a huge pain in the ass.   Even if you have only a few possessions you have to actually move them all to a new location, change your voting registry, change the address on all your accounts, potentially change school districts, find new stores to shop at, re optimize all your routes, etc.  You can dismiss it if you like but it's a huge pain in the ass.  Multiple people have already posted saying how much of a pain in the ass it was, and I tend to agree.  All of my moves were voluntary and it was still a huge pain in the ass, I can't imagine having that thrust on me on a regular basis through out my life for various circumstances outside of my control.

Also there is no way in hell you are getting comparable pricing in rents now vs 25 years from now, where as a mortgage payment can be locked in for 30 years.   

You can't grantee property taxes (or renting from the government) won't go up. If fact, I'll bet you they will.

I intend to FIRE outside the US in a cheaper COL country (renting, of course). So yes, I will be able to keep my costs constant.

frugalnacho

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Re: Any other planned lifelong renters?
« Reply #45 on: August 05, 2014, 07:31:55 AM »
No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.

I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.

I don't see how those are not both true. What I am saying is that I get stability in pricing by choosing between different options in housing. If the pricing is stable, I can stay there. If it's not, I can move. It's the free market.

I'm not saying that you have stability in your lifestyle. Of course you can always live in your house if you own it, precluding natural disasters or eminent domain (which I won't go into). But as a renter, the entire world is open to me. I can choose to move to any apartment in the world I want, and, if I don't sign a lease (which helps me due to locking in the price), move the next month.

So basically, I really can get both flexibility AND the best pricing.

Moving is only a pain if you have too many possessions. Finding a suitable apartment is only a pain if you don't know how to look (they are hundreds of websites at your disposal), or if you're too picky.

I'm not saying renting is better than buying. I'm just saying that renting really does have stability in pricing and flexibility. I fully agree that there are pros and cons and one is not absolutely the superior choice.

Moving is a huge pain in the ass.   Even if you have only a few possessions you have to actually move them all to a new location, change your voting registry, change the address on all your accounts, potentially change school districts, find new stores to shop at, re optimize all your routes, etc.  You can dismiss it if you like but it's a huge pain in the ass.  Multiple people have already posted saying how much of a pain in the ass it was, and I tend to agree.  All of my moves were voluntary and it was still a huge pain in the ass, I can't imagine having that thrust on me on a regular basis through out my life for various circumstances outside of my control.

Also there is no way in hell you are getting comparable pricing in rents now vs 25 years from now, where as a mortgage payment can be locked in for 30 years.   

You can't grantee property taxes (or renting from the government) won't go up. If fact, I'll bet you they will.

I intend to FIRE outside the US in a cheaper COL country (renting, of course). So yes, I will be able to keep my costs constant.

How does your landlord guarantee the property taxes won't increase?  You think you aren't going to get charged for things like that? Property taxes increase, and somehow you find properties for the next 40 years that don't include that increase into their rents?

I can always sell my house.  Selling your house and moving is only a pain if you have too many possessions. Finding a suitable house is only a pain if you don't know how to look (there are hundreds of websites at your disposal), or if you're too picky.

MrsPete

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Re: Any other planned lifelong renters?
« Reply #46 on: August 05, 2014, 08:17:51 AM »
I'm a renter.  I'm single, no kids, don't need much space, and dislike home maintenance tasks. Where I live (Irvine, CA) homes are going for about 250 times rent, so prices are a bit out of control.
You recognize, of course, that this crazy, outrageous price isn't representative of the country as a whole -- and it's going to end at some point, then those homeowners will lose money like crazy.  But that has little to do with the rest of us.  It's a unique situation. 
I didn't say that the feeling was stable, I said that the price was stable. If you look at my original post, I said that owning a home was a lifestyle decision. It may be that the feeling of stability is the number one priority to you, and thus you'd like to own a home. That's fine.

As a renter, I can control the price after every lease ends. If the price raises and I don't like it, I can pack my bags in less than a day and move somewhere else that has a better price (even if it's not in the same city, or even country). Homeowners can't do that. If your government suddenly doubles your property taxes on your home, what can you do about it?

That's the point I'm trying to make about renting. I sign a lease, and the pricing is rock solid for that lease period. If they try to increase the price, they have to wait until the end of the lease period, or I can sue them. And if the rent increases and I don't like it, I'm out of there. No commission fees or spending months on the market, depending on the housing market conditions. There's countless other landlords out there vying for my business.
But that's not true -- not long term.  Yes, you're locked into your rent for one year (the likely lease period), but after that the rent can (and probably will) increase.  Year after year after year.  Example:  My daughter is about to move into a college apartment.  She and her roommate will EACH be paying roughly what my college roommates and I paid TOTAL 25 years ago.  And we're in the same area.  Prices definitely will go up. 

Are you sure you can find a new rental any time you please?  A place in a good location with reasonable rent?  If you want just a one-bedroom, it might be easier than if you need something to house a family.  And if you have special requests like a good-sized pantry, proximity to public transportation, or a specific school district, you're limited to a very small number of rentals.  Once you find a place, will it be available when you want it?  To give an example, in January my above-mentioned daughter committed to a two-bedroom apartment starting in August -- people who wait 'til school's out typically can't get a place.  Almost before the ink was dry on her lease, her roommate learned that a high school friend is transferring to their school next year, and the two girls agreed that they'd love to switch their two-bedroom for a three-bedroom /include the third girl.  NOPE.  They were open to taking a four-bedroom and searching for a fourth person.  NOPE.  Though the complex had just "opened the dates" for the fall semester a week before, they were already sold out -- no three bedrooms were available.  The moral:  Rentals aren't all that easy to find just anywhere. 

In contrast, I own the house I'm sitting in right now.  Its value may fluctuate, but it's still MINE.  This year, next year, and the year after that -- until I decide to sell it. 
Moving is a huge pain in the ass.   Even if you have only a few possessions you have to actually move them all to a new location, change your voting registry, change the address on all your accounts, potentially change school districts, find new stores to shop at, re optimize all your routes, etc.  You can dismiss it if you like but it's a huge pain in the ass.  Multiple people have already posted saying how much of a pain in the ass it was, and I tend to agree.  All of my moves were voluntary and it was still a huge pain in the ass, I can't imagine having that thrust on me on a regular basis through out my life for various circumstances outside of my control
I hate moving.  Hate, hate, hate, hate, hate it.  If you're young and single, it's awful finding a truck and moving the furniture . . . but if you have kids, it's beyond awful.  All their stuff, all your stuff -- and oh, the pantry -- then arranging things in the new place.  Finding that your favorite chair doesn't fit into the bedroom, and somehow your shower curtain was left behind at the old place.  And then there's the transferring of utilities, changing your address, and the little things you forget -- voting registration type stuff, which slips your mind because it's not an everyday thing.  No thanks. 
You can't grantee property taxes (or renting from the government) won't go up. If fact, I'll bet you they will.
Yes, taxes will go up -- insurance too -- but you'll pay it one way or the other.  If you're a homeowner, you'll pay it directly.  If you're a renter, you'll pay it a bit at a time each month in your rent.  Your landlord isn't going to pick up those charges for you! 


Eric

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Re: Any other planned lifelong renters?
« Reply #47 on: August 05, 2014, 10:19:57 AM »
Also there is no way in hell you are getting comparable pricing in rents now vs 25 years from now, where as a mortgage payment can be locked in for 30 years.   

You can't grantee property taxes (or renting from the government) won't go up. If fact, I'll bet you they will.

I intend to FIRE outside the US in a cheaper COL country (renting, of course). So yes, I will be able to keep my costs constant.

How does your landlord guarantee the property taxes won't increase?  You think you aren't going to get charged for things like that? Property taxes increase, and somehow you find properties for the next 40 years that don't include that increase into their rents?

We're already aware that rents will rise.  Your claim was that your mortgage payment is "locked in", but Beric is pointing out that's not true because your property taxes will increase.  So your payment will also rise.  There's no free lunch here.

And as I pointed out above, when you invest the large difference between a mortgage payment and a rent payment, your investments should easily be able to cover these rent increases.  (note - may not apply to the area where you live, but definitely applies to the high COL areas where a 2br condo starts at $400K+)

usmarine1975

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Re: Any other planned lifelong renters?
« Reply #48 on: August 05, 2014, 10:30:36 AM »
I will forever Rent from myself and one day from my Children.  When I actually was in a property I didn't own I rented from my father.  I hope to eventually add his properties to my portfolio.

Eric

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Re: Any other planned lifelong renters?
« Reply #49 on: August 05, 2014, 11:23:22 AM »
Are you sure you can find a new rental any time you please?  A place in a good location with reasonable rent?  If you want just a one-bedroom, it might be easier than if you need something to house a family.  And if you have special requests like a good-sized pantry, proximity to public transportation, or a specific school district, you're limited to a very small number of rentals.  Once you find a place, will it be available when you want it?  To give an example, in January my above-mentioned daughter committed to a two-bedroom apartment starting in August -- people who wait 'til school's out typically can't get a place.  Almost before the ink was dry on her lease, her roommate learned that a high school friend is transferring to their school next year, and the two girls agreed that they'd love to switch their two-bedroom for a three-bedroom /include the third girl.  NOPE.  They were open to taking a four-bedroom and searching for a fourth person.  NOPE.  Though the complex had just "opened the dates" for the fall semester a week before, they were already sold out -- no three bedrooms were available.  The moral:  Rentals aren't all that easy to find just anywhere. 

I think that's a college town specific problem.  I remember doing that too back in the day (signing in the winter for next fall), but in my experience, that just doesn't happen in a major city.  I can't imagine signing a lease even a month before moving, and I'd think two weeks or less is closer to the norm.