Author Topic: Help Me Convince My Parents I'm Better Off Renting  (Read 1278 times)

Budgie

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Help Me Convince My Parents I'm Better Off Renting
« on: January 19, 2019, 11:08:09 PM »
Unless I'm not, of course. Be honest, even if it bursts my bubble.

Due to my high debt, average income and devastated savings, my prime directive right now is to be fiscally sound, not to live in my dream situation.

Basics:

Recently divorced and left the house with my spouse.
One child still at home, who lives primarily with me, walking distance from ex.
Income $70K plus another 6K in support, which will be reduced to 4K in three years.
Debt $70K in student loans, no other debt.
401K has just $110K because I only started working full time/contributing five years ago :(
Cash on hand less than 5K (emptied by paying attorneys for a year+, spouse not remotely mustachian. Hope to be done and start rebuilding that account soon.)
Live in an average COL area and no plans to relocate for at least 15 years as my career is very location-specific.

Currently renting 2/1 apartment for $780 per month plus average utilities of $100. I don't know that I want to stay in this particular apartment forever, but this is about the price range I would expect to stay in.

I'm 50. My parents are from the countryside and from the generation where the dream was to buy a home and not "waste money on rent". It really hurts them that I'm living in an apartment because they picture it as throwing cash out the window never to be seen again.

I originally considered the apartment an unpleasant stepping stone until the dust settled. But now I am loving it. I had a maintenance request last week and called from work around lunchtime. It was taken care of before I got home. After decades of arguing with a person who didn't want to spend $120 to have a plumber repair a leak that was costing $50 a month, that felt like I'd died and gone to heaven.

Anyway, when I was thinking of buying, I had my eye on some condos that cost about $130-150K for a "fixer upper" (which is what I would buy) and have monthly condo fees of $250. I do love those condos and if someone gave me one I'd be happy as a clam to live there, but I don't know that buying one makes better financial sense than renting.

An obvious alternative would be to buy a house for $130-$150K and not have the condo fee. A problem there is that the smallest/shabbiest houses in the neighborhoods I'm limited to* start at about 70K more than the condos.

I don't have the kind of brain to figure out whether it's better to pay $200K for a house and not have the condo fees, better to have the condo, or to keep renting. That's why I'm asking for help.

I'm hoping some of you math artists can help clarify which option is the most frugal and why, in a way that my folks can understand. They are bottom-liners at the heart, so if I can show them that renting is not throwing money away, maybe they will stop worrying.

On the other hand if buying makes better sense, I will plan for that and cry quietly in the corner about losing that speedy maintenance. Sigh.

What do you say?


englishteacheralex

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #1 on: January 19, 2019, 11:14:30 PM »
Google "rent vs buy New York Times". It'll give you a place to plug in all the numbers you say you're too afraid to crunch.

A quick glance at your situation screams "rent". Debt, recent huge life change, etc. Also, the title of the post is unnerving. What difference does it make what your parents think? Make your own decisions.

Dicey

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #2 on: January 19, 2019, 11:53:12 PM »
Look them straight in the eye and say, "I cannot afford to buy at this time." Practice in the mirror if you have to. Honestly, what worries me most in this scenario is that you are fifty years old.

Budgie

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #3 on: January 20, 2019, 11:17:33 AM »
Wow. Okay, to be clear I'm not asking my parents for permission and they don't expect me to. I was asking how to explain to them that renting is actually better, fiscally, so they could be less stressed about it. 

I have tried the NYT Rent vs. Buy calculator, both with and without condo fees it says I am better off buying, because there is no way I could rent for the "If you can rent a similar home for less than $X, then renting is better" amount.

I figured I was doing it wrong because I don't feel like I'd be better off, but didn't trust my figuring.






Miss Piggy

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #4 on: January 20, 2019, 11:29:22 AM »
I haven't used or seen that calculator, but does it take into account the whole "fixer upper" idea and its associated expenses, time, etc.?

Homeownership, as you know, has its pros and cons. Yeah, there's some stability to it. But it's expensive and a PITA to maintain. F the calculator. Life isn't always about the numbers, even though we here like to think it is. Sound like your current situation, renting is the way to go.

SmileAllDay

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #5 on: January 20, 2019, 11:40:31 AM »
The Millennial Revolution blog does a great job at breaking down the numbers. And, in straight Rich Dad, Poor Dad terms, a home is technically a liability (as opposed to an asset) since it never puts money back in your pocket.

Cassie

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #6 on: January 20, 2019, 11:45:43 AM »
Owning is expensive. You can’t afford it. If the furnace dies , etc you need a lot more savings to deal with it. Start putting money into retire vehicles. At 50 my parents weren’t giving me any financial advice. They don’t need to understand your choices.

Car Jack

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #7 on: January 20, 2019, 03:26:13 PM »
Parents sometimes need to keep their expectations to themselves.  If you're happy in a rental, then you're happy, good for you.

My mother in law for several years kept on my wife and me about having a grandchild.  We were in infertility treatment and it was emotional enough without getting constantly bugged.  After one round, I finally said "If you want a baby so badly, why don't you have one?".  She stopped.  Some years later, we adopted.

Budgie

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #8 on: January 20, 2019, 04:21:15 PM »
Parents sometimes need to keep their expectations to themselves.  If you're happy in a rental, then you're happy, good for you.

My mother in law for several years kept on my wife and me about having a grandchild.  We were in infertility treatment and it was emotional enough without getting constantly bugged.  After one round, I finally said "If you want a baby so badly, why don't you have one?".  She stopped.  Some years later, we adopted.

Ouch, I can't imagine how awful that was for you both, and I'm sorry your MIL was that insensitive of your stress about that very personal process. I am happy for you that you adopted, it's a topic near and dear to me.

I feel like people are seeing my parents as pushy, but I didn't mean to portray them that way. They are worried, not intrusive. None of us expected that this would be my situation at this stage of life and everyone just wants to maximize my safety. I'm lucky in that I don't hate my work and I won't mind doing it for another 15 or even longer on a part-time basis, and I just want to make the best decisions I can to make the most of it.

Seadog

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #9 on: January 20, 2019, 09:14:09 PM »
The Millennial Revolution blog does a great job at breaking down the numbers. And, in straight Rich Dad, Poor Dad terms, a home is technically a liability (as opposed to an asset) since it never puts money back in your pocket.

Ug, this is one of my biggest pet peeves about RDPD given that there was some otherwise good advice in there. If a home is a liability, say like cancer or credit card debt, you should be doing everything in your power to get rid of it. Burn it down, give it to friends, but do whatever you can to rid yourself of that parasitic heap of wood and bricks.

By that measure cars, food, clothes and small farms are all liabilities too which you should do your best to avoid. If you take the leap that utility, time, and continuing to live are worthless, then I suppose those things are not assets, but for the rest of the world who values the stuff these assets generate, they are.

Returns are not purely financial.

Whats rich dad's brilliant plan to avoid freezing to death then? Set up a corp, buy a home through it, then have the corp rent to yourself? Added expense of setting up and running a corp, higher rent than costs if the corp is to be profitable, higher tax to the gov't since that profit will be subject to tax, and missing out on a great big capital gains exemption. So based on this, with even more money going out the door (with the balance going to gov't and accountants) how you're a craft financial consumer?

It's a alright paradigm to think of assets this way, as long as the real consideration/calculation is on value generation, not just cash. How much in dollar terms is having a roof over your head worth per month? How much is having a belly full of food worth? You can focus on the dollars going out, but ignoring the value generated simply because it bypasses the cash state is stupid.

Budgie

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #10 on: January 20, 2019, 10:32:57 PM »
The Millennial Revolution blog does a great job at breaking down the numbers. And, in straight Rich Dad, Poor Dad terms, a home is technically a liability (as opposed to an asset) since it never puts money back in your pocket.

Ug, this is one of my biggest pet peeves about RDPD given that there was some otherwise good advice in there. If a home is a liability, say like cancer or credit card debt, you should be doing everything in your power to get rid of it. Burn it down, give it to friends, but do whatever you can to rid yourself of that parasitic heap of wood and bricks...

..Whats rich dad's brilliant plan to avoid freezing to death then? Set up a corp, buy a home through it, then have the corp rent to yourself? Added expense of setting up and running a corp, higher rent than costs if the corp is to be profitable, higher tax to the gov't since that profit will be subject to tax, and missing out on a great big capital gains exemption. So based on this, with even more money going out the door (with the balance going to gov't and accountants) how you're a craft financial consumer?

It's a alright paradigm to think of assets this way, as long as the real consideration/calculation is on value generation, not just cash. How much in dollar terms is having a roof over your head worth per month? How much is having a belly full of food worth? You can focus on the dollars going out, but ignoring the value generated simply because it bypasses the cash state is stupid.

I have not read RDPD, so I'm not clear on this idea either. We bought our first house for $98K and sold it 7 years later for $193K. Even considering paying the real estate agent at purchase and sale, I feel like that house did put money in our pocket. We did put about $30K over the years in repairs and updates over the years, and I worked hard at the level of DIY stuff I can do myself (painting, gardening). We had property taxes and mortgage payments but if we didn't have those we'd have been paying rent, so I'm not sure how the house was a net zero or a loss?

Linea_Norway

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #11 on: January 21, 2019, 02:41:28 AM »
The whole idea about home ownership is that is forces you to save every month, as part of the mortgage paydown. A non-Mustachian person will normally have paid down their mortgage in 20-30 years, if he/she doesn't move to a more expensive house with higher mortgage in that period. The whole value of the house is then their savings. The cost of that form of saving is:
  • mortgage interest over 20-30 years
  • maintenance costs of the house
  • HOA costs
  • property taxes

If you keep renting a place, you will need to save money in some other method to end up with some private capital after 20 years. Instead of paying down a mortgage, you can build up an emergency fund, pay down you student loans and put money into your 401. That is as good as paying down a mortgage. Your cost of saving is paying your rent.

pbkmaine

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #12 on: January 21, 2019, 02:50:24 AM »
Rent. You like your place and it’s reasonable.

Malkynn

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #13 on: January 21, 2019, 04:31:26 AM »
Owning is crazy expensive and a "fixer upper" can easily become a money pit. Plus with a condo, you can get hit with a special assessment at any time.

You've gone through some huge life changes recently, and I think the last thing you need to do is make a major financial commitment to a home you aren't totally sure about that requires significant work, knowing that renos are insanely stressful.

Renting can be wonderful. Your expenses are consistent, your maintenance is done for you. If you aren't a gardener, don't mind sharing walls, and don't have an overwhelming need to customize your living space, then renting is often the way to go.

The numbers don't need to come out exactly right to justify either decision. If the numbers are relatively close, then just pick the situation you would  rather be in.
There are non-financial factors of both renting and buying that are pros and cons for everyone. Personally, for me, buying has to come out WAAAAAAY ahead financially to lure me away from renting.

Your parents' worry comes from a well meaning but misguided place based on very outdated values. If it's not that they are pushing you, then I imagine that your motivation isn't to get them to back off, but to reassure them so they won't worry.

Well, you may never get them to stop worrying and you may never convince them to change their perception that renting is "throwing away money" since that generation is pretty fixated on home ownership as the ONLY smart financial decision.

Just focus on figuring out what *you* want and what *you* need and be confident in that decision and your parents will eventually see that you are happy with your decisions.

LadyMaWhiskers

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #14 on: January 21, 2019, 06:59:37 AM »
You don’t have the time or the cash cushion to own a house right now.

As for your parents, tell them that home ownership is beneficial over very long stretches, in some areas. Mortgage interest is “throwing away money” so that’s what you need to compare to rent, along with property taxes, insurance, and maintenance. It very often is better to rent, especially if you plan to move often. (Of course thy may have stars in their eyes, thinking it can be both ways: lots of appreciation, cashing out often. That’s the exception, not the rule.)

As a single divorced parent, I think you want to minimize the probability of drama in your life. Renting has lower stakes in that way...if something is awful, you can always move.


Budgie

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #15 on: January 21, 2019, 09:00:01 AM »
The whole idea about home ownership is that is forces you to save every month, as part of the mortgage paydown. A non-Mustachian person will normally have paid down their mortgage in 20-30 years, if he/she doesn't move to a more expensive house with higher mortgage in that period. The whole value of the house is then their savings. The cost of that form of saving is:
  • mortgage interest over 20-30 years
  • maintenance costs of the house
  • HOA costs
  • property taxes

If you keep renting a place, you will need to save money in some other method to end up with some private capital after 20 years. Instead of paying down a mortgage, you can build up an emergency fund, pay down you student loans and put money into your 401. That is as good as paying down a mortgage. Your cost of saving is paying your rent.

Thank you, Linda. I think yours is the explanation that they will understand and you stated it very neatly. And adding to my emergency fund, throwing everything possible at my loans and retirement savings is exactly my plan.

Budgie

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #16 on: January 21, 2019, 09:10:25 AM »
Owning is crazy expensive and a "fixer upper" can easily become a money pit. Plus with a condo, you can get hit with a special assessment at any time...

...Renting can be wonderful. Your expenses are consistent, your maintenance is done for you. If you aren't a gardener, don't mind sharing walls, and don't have an overwhelming need to customize your living space, then renting is often the way to go.

Yes, looking at the fixer uppers I could afford on the real estate website made me queasy. I can do a lot of DIY and have done so in the past, but I feel overwhelmed when I think about it--back then I felt invigorated by the challenge and really enjoyed most of it. Even if it wasn't a money pit it would be an energy pit and this doesn't feel like the time. I'd rather put that energy into working more to pay off those loans. Maybe in five years with everything else squared away I'll feel reinvigorated when I look at fixer uppers, or my geographical restrictions will be lifted and I can consider a turn-key situation in a less pricey area.

I am a dedicated gardener so having space for that really did enter my calculations, but not for long. I don't feel like I'm in a position to take out a mortgage so I can enjoy my hobby. I hope to find a community garden where I can get a plot to grow my flowers, but even if I don't, I'm sure my friends won't mind if I come over and do a little weeding for them to restore my soul.

Thanks for helping me clarify what goes on the scale.

Malkynn

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #17 on: January 21, 2019, 09:18:35 AM »
Owning is crazy expensive and a "fixer upper" can easily become a money pit. Plus with a condo, you can get hit with a special assessment at any time...

...Renting can be wonderful. Your expenses are consistent, your maintenance is done for you. If you aren't a gardener, don't mind sharing walls, and don't have an overwhelming need to customize your living space, then renting is often the way to go.

Yes, looking at the fixer uppers I could afford on the real estate website made me queasy. I can do a lot of DIY and have done so in the past, but I feel overwhelmed when I think about it--back then I felt invigorated by the challenge and really enjoyed most of it. Even if it wasn't a money pit it would be an energy pit and this doesn't feel like the time. I'd rather put that energy into working more to pay off those loans. Maybe in five years with everything else squared away I'll feel reinvigorated when I look at fixer uppers, or my geographical restrictions will be lifted and I can consider a turn-key situation in a less pricey area.

I am a dedicated gardener so having space for that really did enter my calculations, but not for long. I don't feel like I'm in a position to take out a mortgage so I can enjoy my hobby. I hope to find a community garden where I can get a plot to grow my flowers, but even if I don't, I'm sure my friends won't mind if I come over and do a little weeding for them to restore my soul.

Thanks for helping me clarify what goes on the scale.

It sounds like you intuitively know what you want right now and what is best, but your parents being worried and not being able to assuage their worry has made you second guess yourself.
I get that.

Hopefully all of the input you have gotten makes you feel more reassured that, at least for now, you are on the right path.

As for your parents, very simply explain that the only way that you could afford to own would be to invest an enormous amount of money and energy into a fixer-upper. That you've crunched the numbers and evaluated the effort it would take to get ahead financially and that it just doesn't work for you at this time, but that you are planning to own as soon as it financially makes sense to do so and when the right property comes along. Say that you don't want to rush and make a mistake buying the wrong place at the wrong time. That will show them that you are being mindful and not just aimlessly "throwing money away on rent" just because it's easier.


Boll weevil

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #18 on: January 22, 2019, 02:59:30 PM »
Try looking at a mortgage amortization table. For the first few years you may be paying more in interest than you would be paying in rent. If you are saving the difference, you're building wealth faster than if you were living in a property you owned. You can use the money to put down a larger down payment to further reduce the amount of interest you pay.

SmileAllDay

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #19 on: January 23, 2019, 09:18:54 AM »
Yeah, I don't have a horse in this race @Seadog  and won't try to talk you out of your pet peeves :)


clarkfan1979

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Re: Help Me Convince My Parents I'm Better Off Renting
« Reply #20 on: January 23, 2019, 12:44:39 PM »
I think you are correct that you should be renting right now. I would focus on my kids right now. They are going to need you more now than ever with the recent split up. You can revisit the house situation in 2 years.

When my parents give me advice, they give me advice on how I can achieve their lifestyle. I have zero interest in trying to replicate their life. I have to continually explain to them that my values are different.

Tell them that you agree that buying is the best long term solution financially. However, you need to focus on family relationship right now, not long term wealth.