Supposed "risks" of renting - especially with children

[ReP]

We live in the Seattle area and there has probably been tons of posting about the crazy housing market here. I think we have a good grip on the rent vs buy question from a quantitative standpoint but are having a hard time finally "settling" at an answer - at least for the next ~5-10 years -  because of some qualitative (ok also a bit quantitative) questions that are eating at us:

• We have one child and will probably have another - what happens if we are forced to leave our rental due to a sale and can't find another rental in the same area? This matters because of school placement. I've read some scary stories in the forum about this.(Homeschooling will not work for us).
• If we decide to rent "forever" doesn't that increase our FIRE budget? Or is the theory that, due to extra (and better) savings/investment by not buying, we'll have more for retirement that will help cover rent?

Provided we stay in this area - even with a good income to savings ratio, the appreciation in the market is likely to far outstrip our savings. So it feels like a big decision because if we don't buy now (and it really doesn't feel like a good idea from a purely financial standpoint) we likely "never" will. From my understanding, because of the tech boom here, the rising home prices are definitely not a "bubble".

[Murse]

This is all individualized. You will get people who will say to just look at the numbers and do what makes more sense number wise. I disagree, I think you should look at the numbers, understand what the costs/risks are of both sides and make a fully informed decision.

Remember though, those housing prices can go down, if you buy a house for 700k, then a year later it's worth 550k how will you feel? I only say this to remind you buying comes with risks as well.

[ReP]

This is all individualized. You will get people who will say to just look at the numbers and do what makes more sense number wise. I disagree, I think you should look at the numbers, understand what the costs/risks are of both sides and make a fully informed decision.

Remember though, those housing prices can go down, if you buy a house for 700k, then a year later it's worth 550k how will you feel? I only say this to remind you buying comes with risks as well.

Yes, totally - although the particular risk you're siting doesn't seem to be likely in this particular area given what's going on in our economy, which I mentioned at the bottom of the post.

[Murse]

This is all individualized. You will get people who will say to just look at the numbers and do what makes more sense number wise. I disagree, I think you should look at the numbers, understand what the costs/risks are of both sides and make a fully informed decision.

Remember though, those housing prices can go down, if you buy a house for 700k, then a year later it's worth 550k how will you feel? I only say this to remind you buying comes with risks as well.

Yes, totally - although the particular risk you're siting doesn't seem to be likely in this particular area given what's going on in our economy, which I mentioned at the bottom of the post.

I have no knowledge of your market but don't fool yourself into believing there are no risks on the buying side.

[Helvegen]

Provided we stay in this area - even with a good income to savings ratio, the appreciation in the market is likely to far outstrip our savings. So it feels like a big decision because if we don't buy now (and it really doesn't feel like a good idea from a purely financial standpoint) we likely "never" will. From my understanding, because of the tech boom here, the rising home prices are definitely not a "bubble".

Buy now or be priced out forever was a pretty common refrain in 2005-06 too.

This time is always different...

[ReP]

This is all individualized. You will get people who will say to just look at the numbers and do what makes more sense number wise. I disagree, I think you should look at the numbers, understand what the costs/risks are of both sides and make a fully informed decision.

Remember though, those housing prices can go down, if you buy a house for 700k, then a year later it's worth 550k how will you feel? I only say this to remind you buying comes with risks as well.

Yes, totally - although the particular risk you're siting doesn't seem to be likely in this particular area given what's going on in our economy, which I mentioned at the bottom of the post.

I have no knowledge of your market but don't fool yourself into believing there are no risks on the buying side.

The reason we're leaning towards renting is precisely because of how many risks we associate with buying - but not all risks and benefits are weighed equally as I'm sure you know - and we're struggling to figure out where some of our qualitative concerns "rank". :)

[mm1970]

Provided we stay in this area - even with a good income to savings ratio, the appreciation in the market is likely to far outstrip our savings. So it feels like a big decision because if we don't buy now (and it really doesn't feel like a good idea from a purely financial standpoint) we likely "never" will. From my understanding, because of the tech boom here, the rising home prices are definitely not a "bubble".

Buy now or be priced out forever was a pretty common refrain in 2005-06 too.

This time is always different...

Uh huh.  Or 2004.  My house finally worth what I paid for it, whee!

[catccc]

you could try a longer term lease to avoid school changing problems.  But chances are you could find something to work for you, even if temporarily, if you need to vacate your current rental.

Yes, the idea is that you'll have more invested in the market, which is accessible, as opposed to home equity, which is more difficult to access.

We want to own someday.  I think.  But I've been renting my whole life and it's worked out pretty well.  37 now, kids are 5 & 7.  We only had to move once when we didn't want to and it was a very weird situation.  (Landlord was a friend that had gotten married and moved in w/ new spouse and new in laws.  surprise surprise, living with in-laws wasn't so great.  The gave us the boot and moved back in to save their marriage.  Ended up getting divorced anyway and asked us multiple times if we wanted to rent from them again, but moving isn't easy, so we stayed in our current rental.)

[therethere]

If you have an active lease on a house or condo that gets sold, the lease is transferred to the new owner. They cannot cancel the lease just because they want to live there. Just make sure the start/end of your lease goes along with the school year. Other than that you can opt to sign multi-year leases maybe with defined rent increases to help lower the effect of a sale on you. The biggest worry about a potential sale on a place you're renting is not getting kicked out (because you have every right to say NO) but rather the hassle of having to comply with showings. These are a huge hassle because its almost like you are selling the place instead of the owner. Rentals that are being marketed as a home rather than income producing don't typically sell very easily so there will be LOTS of showings. Trust me. Lived through it for 11mos. They may offer you a cash for keys type of deal where they assist you in moving out and breaking the lease. But this would all be from good faith only and not required.

Your other big worry would be them forcing you out at a lease renewal by drastically increasing the rent. Again, only thing you can really do is be a good tenant and sign long term leases.

[ReP]

you could try a longer term lease to avoid school changing problems.  But chances are you could find something to work for you, even if temporarily, if you need to vacate your current rental.

Yes, the idea is that you'll have more invested in the market, which is accessible, as opposed to home equity, which is more difficult to access.

We want to own someday.  I think.  But I've been renting my whole life and it's worked out pretty well.  37 now, kids are 5 & 7.  We only had to move once when we didn't want to and it was a very weird situation.  (Landlord was a friend that had gotten married and moved in w/ new spouse and new in laws.  surprise surprise, living with in-laws wasn't so great.  The gave us the boot and moved back in to save their marriage.  Ended up getting divorced anyway and asked us multiple times if we wanted to rent from them again, but moving isn't easy, so we stayed in our current rental.)

It's nice to hear from someone who is renting with kids (albeit in a different market). I hadn't considered long term leases so I will look into that. I guess we'll just avoid renting from any friends who are crazy enough to move in with their in-laws (although we could all be saving a bundle if that practice was more common in "the west"!)

[englishteacheralex]

We live in a HCOL (Honolulu) and for a few years vowed never to buy a house because the median home price is something like $700k here. But on top of retirement maxes, we saved a pretty good chunk of money ($40k) in our first two years of marriage, and we started looking at what we could get for that as a down payment. We didn't think we'd find anything acceptable, but then there was a 3/2 condo in a neighborhood we liked for $365k, and we decided to go for it.

We closed on the place on our two year anniversary, with a 1.5 year old toddler who had already moved twice in his life. I'll tell you what: as a parent, I really like owning our place. I was a renter for almost 20 years of my life. My husband, too. Both of us have had to move lots of times.

We were subject to the whims of landlords, and even though we generally had ok experiences, it was a hassle. People always say that it's great being a renter because when appliances go out it's not your problem, but for us, it was actually a much worse problem because we had to get the landlord to do something about whatever problem came up. We would have rather just fixed the problem ourselves on our own timeframe with our own money.

I don't really look at our place as an investment because I know the risk involved in buying. But rent here was going up and up. A comparable 3/2 condo in our neighborhood rents for just about the same as our mortgage and HOA fee. We were renting dumpy places for below-market value, which was nice because we could save money, but not much fun with a baby (and now we have another on the way). To get the screaming rent deals we were having to put up with a lot of inconveniences.

There's nothing like having young children to make a person hate inconveniences like no parking/laundromat/horrible attic apartment heat/barking dogs.

Bottom line: if it's possible to stay well within your means (we were approved for an 800K mortgage! Can you imagine?), I think it's worth it to buy a place if you have kids. It's really nice not to have all the renters' problems that we used to. I mean, really nice.

[tooqk4u22]

There should always be something available - it just might not be the quality or cost you want. 

Good landlords love good tenants so if you are a good one that reduces your risk. Also, as already said they lease can't be voided but they can give you notice as required by law and probably your lease that the lease will not be renewed and you will have to vacate - typically 60 days before the lease ends.

People live and rent in HCOL areas all over the world and most HCOL areas have more renters than owners, so keep that in mind too.

Personally, we own primarily because I wanted my kids to be in same place, but it certainly isn't/hasn't been the best economical choice but I am ok with that.

[Beriberi]

We've been renters with kids and its hard (everywhere probably, but in Seattle especially).
The biggest downsides:
-kids are hard on houses (not all kids, not all houses - but most landlords probably wouldn't allow them if they could legally refuse).  We've spent money fixing crayon marks and other such crap that we wouldn't have it we'd been long term in our own house. 
-Preschool/childcare is not readily available everywhere. Schools have to accept you if you live in bounds. However, the areas with the best public schools in Seattle tend to have very few rental houses - you couldn't necessarily stay at Bryant if you needed a new rental in bounds. We were renting and found out in June we would need to move in August (end of a one year lease).  In June (in Redmond) we could not find part-time preschools with openings for our child. 
-Seattle specific - there are not a lot of permanent rentals (apartments, etc.). Most are houses that people are renting for various reasons. As the market continues to climb, people will continue to pull them off the market (why we had to move from Redmond - owner decided to sell the place). 
-Community - we have rented in nice areas and I find neighbors are not that friendly (that's kind of Seattle, though) - I think they are wary to invest in people who are short-term tenants.  Having a great community on your street really makes your life better, especially as a parent, so this is a big downside.

We own now and I think it has really improved our quality of life - a lot of that is neighborhood and control.  However, we also bought in 2007 (thus why we were renters for several years).  Of course the property values would never go down!  There are areas (Burien, Tacoma) that have still not fully recovered from the downturn 9 years ago.  Buy if it makes sense, but the 20% drop in prices is coming (and if I keep saying that once a week, some day I will be right).

[Helvegen]

My kid is 10 and we have been renters her whole life. Instability isn't caused by the landlord in our case, some who practically begged us not to leave. Rather, jobs are the biggest source of uncertainty. We have had to move town, city, county, state, country for work. Not buying anything affords us the flexibility to follow work.

To me, I grew up moving. I went to 10 different schools. It was neither positive or negative. It just was what it was. My daughter has been to three schools. In her opinion, she prefers the second district school and so do we. However, going back there before at least I am ready to quit this job is not an option. The commute is over 90 minutes one way, the whole reason we had to move in the first place. But moving back is on the table because we haven't bought.

Eventually, my husband and I would like to buy, but at this rate, doesn't look like we can anytime soon. At least not here. Whatever.

Just anecdote, but our next door neighbors have been in that rental for 16-17 years over the course of 5 children. So it isn't necessarily a given either that you'll be kicked out by landlords every second year.

[seattlecyclone]

The biggest risk in my mind would be the possibility of continued price increases. I've had several friends in the past few years whose landlords raised the rent high enough that the place that was well within their budget one year is no longer in their budget the next. They had to scramble for a new place, only to find nothing they could afford in their neighborhood, so they had to move to a different neighborhood. This could happen for you.

When you buy, you lock in your price. This can make you feel like an idiot if prices go down, but it doesn't change how well you can afford your mortgage that you agreed to when you bought the place.

[Helvegen]

When you buy, you lock in your price. This can make you feel like an idiot if prices go down, but it doesn't change how well you can afford your mortgage that you agreed to when you bought the place.

Property taxes.

My co-worker has to pay $300 a month more in property taxes because the value of her house keeps going up and up forever and ever apparently. That's not what she signed up for exactly, but there it is. And there is no control so she hopes the value stabilizes!

Not arguing that rent increases aren't a thing. Bizarrely enough though, every time we have moved, our rent has decreased for the same space.

[Bliss]

If you have an active lease on a house or condo that gets sold, the lease is transferred to the new owner. They cannot cancel the lease just because they want to live there.

I actually think it depends on the terms of your lease. I have long-term tenants and the lease is written in a way that I can sell the house and terminate the lease with 60 days notice with no penalties for me. I can't believe they signed it. 

[seattlecyclone]

When you buy, you lock in your price. This can make you feel like an idiot if prices go down, but it doesn't change how well you can afford your mortgage that you agreed to when you bought the place.

Property taxes.

My co-worker has to pay $300 a month more in property taxes because the value of her house keeps going up and up forever and ever apparently. That's not what she signed up for exactly, but there it is. And there is no control so she hopes the value stabilizes!

Not arguing that rent increases aren't a thing. Bizarrely enough though, every time we have moved, our rent has decreased for the same space.

Yes, property taxes can increase. Every place does it a bit differently though. Here in Washington we passed an initiative a while back that basically says the county can't raise the total amount collected (the "levy amount") by more than 1% each year, plus an adjustment for new construction. Everyone's property is supposed to be assessed at market rates, and the tax rate varies each year: the levy amount divided by the total value of everyone's property. As long as your property isn't appreciating much faster than the county average, your taxes won't change much.

[Paul der Krake]

The fears of children not adapting well to a new school are vastly overblown. Moving to another neighborhood in the same metro area where people speak the same language and wear the same football jerseys is not a hardship by any stretch of the imagination.

Renting is awesome because you get to cut your losses with minimal drama, but you can't complain when the terms change every 12 months (see also: complaints about gentrification). The best way to win at this game is to not get too attached to any particular area.

[frugaliknowit]

I think the most important question to ask yourself is IF we buy, what is the minimum amount of time we can commit to staying.  If there's any doubt that it would be 10+ years, don't buy.

Other than that, "cheap rent" (meaning nothing fancy and no bigger than necessary), can be a good deal.

The risk with renting is that your costs are not in any way anchored.  When you own, a PORTION of your costs are anchored, but there are lots of other risks (depreciation, employment issues, taxes and expenses going up, etc.).

[cchrissyy]

I find kids to be entirely happy and flexible about moving. My youngest, age 10, has lived in 6 houses. But, I've never done the kind of move where you leave friends behind. My reason is always a better price or better neighborhood. I have never been asked to leave or had a house sold out from under me.

I don't know about Seattle but in Berkeley, once you have your school assignment, you are free to keep it when you move anywhere else in the city, or you can transfer to a closer school if you want.  So, if you have a kid start K and 1st grade, then move across town, they have every right to stick with that school until 5th grade graduation.

Once, we even moved out of the city limits for part of a year, since they only cared about the address at registration time and it was allowed to keep your kid in the school for the remainder of the year.

[ReP]

If you have an active lease on a house or condo that gets sold, the lease is transferred to the new owner. They cannot cancel the lease just because they want to live there.

I actually think it depends on the terms of your lease. I have long-term tenants and the lease is written in a way that I can sell the house and terminate the lease with 60 days notice with no penalties for me. I can't believe they signed it.

Yes I think the terms can vary quite a bit. My sister-in-law managed a huge building here that had been owned for ages and ages by some frugal bad asses. But they finally sold in and when the new company came in, gave hundreds of people only 60 days notice as well.

[ReP]

Personally, we own primarily because I wanted my kids to be in same place, but it certainly isn't/hasn't been the best economical choice but I am ok with that.

This is kind of our philosophy. Along with many other things as another poster commented, housing isn't the only thing that's hard to find here. Availability of child-care is incredibly variable. While we don't want buying to effect our ability to max out our excellent 401K match and still save at a high rate compared to most Americans - we're still interested in owning even if it is slightly less "optimal" from a numbers standpoint. If we buy, we're looking to find something that forces us to compromise on material values while maintaining the highest qualify of life possible.

[ReP]

I find kids to be entirely happy and flexible about moving. My youngest, age 10, has lived in 6 houses. But, I've never done the kind of move where you leave friends behind. My reason is always a better price or better neighborhood. I have never been asked to leave or had a house sold out from under me.

I don't know about Seattle but in Berkeley, once you have your school assignment, you are free to keep it when you move anywhere else in the city, or you can transfer to a closer school if you want.  So, if you have a kid start K and 1st grade, then move across town, they have every right to stick with that school until 5th grade graduation.

Once, we even moved out of the city limits for part of a year, since they only cared about the address at registration time and it was allowed to keep your kid in the school for the remainder of the year.

Yeah, we're not concerned particularly about moving houses so much as schools. I would imagine this is true in Berkeley, but our district (not Seattle - we're in a suburb) is one of the best in the state, population is booming here (we're near Microsoft) and they are getting really rigid. You can fill out a transfer form if you move homes but there is not a guarantee it will be granted.

[ReP]

The biggest risk in my mind would be the possibility of continued price increases.

At our last place, the rent increased in $50 increments per month per year (so the first year, +$50, by the fourth year, +200).Not fun. The only reason we stayed was because when we moved in, it was way below market value. The owners obviously realized this...and that is one more reason why (ONLY) if we can find a place that's not too fancy but suits our needs, we would like to buy.

[catccc]

you could try a longer term lease to avoid school changing problems.  But chances are you could find something to work for you, even if temporarily, if you need to vacate your current rental.

Yes, the idea is that you'll have more invested in the market, which is accessible, as opposed to home equity, which is more difficult to access.

We want to own someday.  I think.  But I've been renting my whole life and it's worked out pretty well.  37 now, kids are 5 & 7.  We only had to move once when we didn't want to and it was a very weird situation.  (Landlord was a friend that had gotten married and moved in w/ new spouse and new in laws.  surprise surprise, living with in-laws wasn't so great.  The gave us the boot and moved back in to save their marriage.  Ended up getting divorced anyway and asked us multiple times if we wanted to rent from them again, but moving isn't easy, so we stayed in our current rental.)

It's nice to hear from someone who is renting with kids (albeit in a different market). I hadn't considered long term leases so I will look into that. I guess we'll just avoid renting from any friends who are crazy enough to move in with their in-laws (although we could all be saving a bundle if that practice was more common in "the west"!)

I don't think this is a common practice anywhere in the US... like I said, definitely a weird situation.  But since we were in the same circles, we also knew from a 3rd party that it was a number of years before the owner's mom sold her place to move into our place.  She now knows that if she ever changes her mind, we are would like to buy it.  It's a shame, we really loved the house and when we first started renting it, the owner wanted to do a rent-to-own thing, but we didn't at the time.  It helps to know the details if you can get them.  Our current rental is a twin (really 2/3rds of a SFH that has been converted to an uneven twin...).  The owner has multiple rental properties in our town, and the place we live in is the house he grew up in.  The last tenants were there for 14 years.  So I am not worried about getting booted anytime.  The more likely case is that our dream home finally hits the market at some point.  Until then, renting is nice, renting is easy.  We basically outsource all the repairs and maintenance, it's quite posh.  (joking, we don't really need posh, I understand it is a tradeoff of R&M v. equity, equity v. investments, etc...)

I understand on the school thing.  I love my kids' school and I realize that it is illogical for me to worry about transferring them to the elementary school next door.  It would be the same district and that elem. school would feed into the same middle and high school that they are slated to attend.  There's every reason to believe the other elem. school is just as good as ours.  But I still don't want to do it.  I can only imagine how against it I would be if it was an entirely different district that didn't seem as good as our current one!

[ReP]

Re schools, I moved schools as a kid and it was a big deal. I don't think parents are monsters by any stretch for moving their kids around, but its something we want to avoid on a personal level.

We talked about it a bit more and decided to opt for renting. I agree with what people are saying about locking in your housing costs in a HCOL area - but this comment got me thinking about our particular renting situation. The owners have owned it forever, the last tenants lived here for 14 years as well and the owners just got a big income increase from raising the rent when we moved in. Plus, if they do want to sell it, we ARE in a position to buy it.

 We do have some concerns about the Seattle housing market but I don't think it'll get as bad as SF for instance which is so geographically fenced in. The idea of buying high, plus having to pay PMI b/c we don't have 20% down feels to "chumpy" to us.

Thanks everyone for the advice! It's a hard call to make.