Do you agree owning your own home isn't always worth it?

[ender]

97% of Thomas Stanley's Millionaires Next Door were homeowners... although I'm sure helloyou will find a way in his own mind to convince himself that they're all they're doing it wrong and he's doing it right.

...
I'm a little surprised you created a strawman in response after specifically calling out their argument as a strawman, though.

The home ownership rate in TMND is a fact. I don't think that counts as a strawman which is traditionally defined as an intentionally misrepresented proposition that is set up because it is easier to defeat than an opponent's real argument. So, while this fact might may or may not help us understand the home ownership discussion, I don't see how it is a strawman. It may however be a red herring.

The implication of what vand said was that people were enabled to become millionaires because of homeownership.

It can be a fact that 97% of millionaires were homeowners.

It's not necessarily a fact that owning a home was what they were "doing right" (using vand's language) to get them to becoming a millionaire.

[PDXTabs]

97% of Thomas Stanley's Millionaires Next Door were homeowners... although I'm sure helloyou will find a way in his own mind to convince himself that they're all they're doing it wrong and he's doing it right.

...
I'm a little surprised you created a strawman in response after specifically calling out their argument as a strawman, though.

The home ownership rate in TMND is a fact. I don't think that counts as a strawman which is traditionally defined as an intentionally misrepresented proposition that is set up because it is easier to defeat than an opponent's real argument. So, while this fact might may or may not help us understand the home ownership discussion, I don't see how it is a strawman. It may however be a red herring.

The implication of what vand said was that people were enabled to become millionaires because of homeownership.

It can be a fact that 97% of millionaires were homeowners.

It's not necessarily a fact that owning a home was what they were "doing right" (using vand's language) to get them to becoming a millionaire.

I completely agree, except for the part where you call it a strawman.

[ender]

97% of Thomas Stanley's Millionaires Next Door were homeowners... although I'm sure helloyou will find a way in his own mind to convince himself that they're all they're doing it wrong and he's doing it right.

...
I'm a little surprised you created a strawman in response after specifically calling out their argument as a strawman, though.

The home ownership rate in TMND is a fact. I don't think that counts as a strawman which is traditionally defined as an intentionally misrepresented proposition that is set up because it is easier to defeat than an opponent's real argument. So, while this fact might may or may not help us understand the home ownership discussion, I don't see how it is a strawman. It may however be a red herring.

The implication of what vand said was that people were enabled to become millionaires because of homeownership.

It can be a fact that 97% of millionaires were homeowners.

It's not necessarily a fact that owning a home was what they were "doing right" (using vand's language) to get them to becoming a millionaire.

I completely agree, except for the part where you call it a strawman.

Do you agree owning your own home isn't always worth it?

That's is why I only own stock and still renting so far. I do feel I made the right choice so far, many of my friend are absolutely trying to buy and some decided to buy hundred miles from where they live because they can't afford in london because they feel that property price will keep going up...

Are you in the same boat and think it makes sense to own your home? Or do you feel like me it would end up in cash badly allocated?

How does what vand was presenting remotely fairly represent what the OP was asking?

It doesn't. It creates a false argument, then mocks it. Which is why it's a strawman.

[kite]

Homeowners are paying less to service their mortgages while enjoying substantial, often leveraged, equity growth.

Bingo.
Homeownership is the safest way to build equity using leverage.  It's why most any schlump can get a mortgage. The right house, financed the right way, is a gold mine.

Is ownership for everyone? No.  That's a clown question.

[PDXTabs]

How does what vand was presenting remotely fairly represent what the OP was asking?

It doesn't. It creates a false argument, then mocks it. Which is why it's a strawman.

But that isn't the definition of a strawman. For it to be a strawman vand must unfairly/innacuratly reframe the OP's argument, then teardown the false reframing that he created, then claim victory.

https://www.youtube.com/watch?v=hfil34ayaEU

So again, I think that vand's argumentation is poor, but I don't see where he unfairly or inaccurately reframed the OPs original argument.

[vand]

Lets be clear: OP presents a straw man because he uses the Buffett article to misrepresent a proposition that it is more beneficial to rent your own home. Buffett has gone on record several times espousing the virtues of home ownership, especially all the good memories created in his own home that he has owned for 60 years.

Yes there are circumstances where renting works out better, but by and large ownership works works out much cheaper over the course of a lifetime, especially if you are able to take out cheap financing against the home.

The reason why Buffett doesn't invest in real estate are completely non-relevant to the average investor here who doesn't have the problem of finding something liquid enough to easily absorb a few billiom dollars at a time. 

[PDXTabs]

Lets be clear: OP presents a straw man because he uses the Buffett article to misrepresent a proposition that it is more beneficial to rent your own home. Buffett has gone on record several times espousing the virtues of home ownership, especially all the good memories created in his own home that he has owned for 60 years.
...
The reason why Buffett doesn't invest in real estate are completely non-relevant to the average investor here who doesn't have the problem of finding something liquid enough to easily absorb a few billiom dollars at a time.

I completely agree, in large part because half the video talks about how you shouldn't invest in real estate inside of a C-corp. I don't think that anyone on this forum is investing in real estate inside of a C-corp, but lots of people around here invest in real estate.

[windytrail]

Lets be clear: OP presents a straw man because he uses the Buffett article to misrepresent a proposition that it is more beneficial to rent your own home. Buffett has gone on record several times espousing the virtues of home ownership, especially all the good memories created in his own home that he has owned for 60 years.

Yes there are circumstances where renting works out better, but by and large ownership works works out much cheaper over the course of a lifetime, especially if you are able to take out cheap financing against the home.

The reason why Buffett doesn't invest in real estate are completely non-relevant to the average investor here who doesn't have the problem of finding something liquid enough to easily absorb a few billiom dollars at a time.

It sounds like you have missed OP's argument, which is in the title of this thread: "Owning a home isn't always worth it." In other words, for some people (such as myself and OP) renting is a better financial option, all things considered.

No one in this thread has presented evidence to disprove OP's argument.

[PDXTabs]

Lets be clear: OP presents a straw man because he uses the Buffett article to misrepresent a proposition that it is more beneficial to rent your own home. Buffett has gone on record several times espousing the virtues of home ownership, especially all the good memories created in his own home that he has owned for 60 years.

Yes there are circumstances where renting works out better, but by and large ownership works works out much cheaper over the course of a lifetime, especially if you are able to take out cheap financing against the home.

The reason why Buffett doesn't invest in real estate are completely non-relevant to the average investor here who doesn't have the problem of finding something liquid enough to easily absorb a few billiom dollars at a time.

It sounds like you have missed OP's argument, which is in the title of this thread: "Owning a home isn't always worth it." In other words, for some people (such as myself and OP) renting is a better financial option, all things considered.

No one in this thread has presented evidence to disprove OP's argument.

I'm firmly in the rent-forever camp, but the OP's post really misrepresents Buffett's actual stance on home ownership for individuals. To get Buffet's actual take on home ownership for individuals (Buffett and Munger both own their homes) he explains it here: https://www.youtube.com/watch?v=xG-VBXSRaTE

[Wrenchturner]

For the most part, in Canada anyway, policy makers have chosen to launder the moral hazard of housing downturns into general society, via low rates and "affordability" programs.  So for that reason I would say owning tends to win out.  Cap rates in Canada are terrible though, so there is that.

[Fomerly known as something]

I’m moving to San Francisco later this summer.  I will likely be renting for the first time in 16 years.  So I guess I have to agree.  I’m at 75% positive for good decisions on the homes I bought.  My first one not so good.

SF proper (aka The City) or the burbs? Supposedly rents in The City are down and the outlying areas are UP! Unless you've lived here before, be prepared for sticker shock either way.

Either the city proper or the “inner ring” burbs.  I know it’s going to be expensive compared to my most recent housing everywhere else but is it sticker shock when you already have it budgeted.  Basically I’m willing to pay 25% of income to rent plus have an additional 6% set aside for pet rent/parking wiggle room.  That 6% is from extra profit I’m getting from selling my current Midwestern home.  The next 4 years are kind of coast FIRE for me.  I’m heading out to the city because it sounds like fun.  I’m FI now but I’m eligible for an immediate pension and lifetime federal employee health benefits if I stick until July 2025.  (I’ll be 47 and 2 months at retirement)

ETA:  and there seems to be enough choices in my price range.

[Morning Glory]

Lets be clear: OP presents a straw man because he uses the Buffett article to misrepresent a proposition that it is more beneficial to rent your own home. Buffett has gone on record several times espousing the virtues of home ownership, especially all the good memories created in his own home that he has owned for 60 years.

Yes there are circumstances where renting works out better, but by and large ownership works works out much cheaper over the course of a lifetime, especially if you are able to take out cheap financing against the home.

The reason why Buffett doesn't invest in real estate are completely non-relevant to the average investor here who doesn't have the problem of finding something liquid enough to easily absorb a few billiom dollars at a time.

It sounds like you have missed OP's argument, which is in the title of this thread: "Owning a home isn't always worth it." In other words, for some people (such as myself and OP) renting is a better financial option, all things considered.

No one in this thread has presented evidence to disprove OP's argument.

It is a post hoc fallacy, or mixing correlation with causation. Lots of millionaires are homeowners. Lots of millionaires received the MMR vaccine as children too.

[Model96]

Most of us in this thread were appreciating the discussion on the OP subject.
Maybe the lawyers can take their argument and build their cases and deliver their verdict somewhere else??😁

[MrThatsDifferent]

OP, thought I’d share: I was fully on the never buy train. I was convinced by Go Curry Cracker and JL Collins articles. And then Covid happened and I realized that I was going to be stuck longer than I had planned and more than anything I wanted security and a space I could make and call my own. So, I adjusted and bought something. Is it more expensive? Absolutely but I’m ok with it all because I recognize those intangible benefits, as well as the tangible ones of keeping more of my money for myself. The property will increase in value and I don’t think I’ve sacrificed anything there. Also, worse case scenario, I can sell whenever and go back to renting. For now, I couldn’t be happier with my decision because everything worked out perfectly. I found a place I love that ticked all my boxes and has brought me immeasurable joy. There’s definitely something to be said for having a base of operations that is yours. Everyone has to do what’s right and comfortable for themselves.

[Zikoris]

I can provide another data point as an example where renting can come out ahead.

We rent a studio, $847/month including utilities. And this is by far the most expensive place we've ever rented - we previously had places much cheaper, but moved to our current building for the lifestyle upgrade. That's for a 100% walkable/bikeable area where we don't even need transit passes, let alone any sort of vehicle. Properties in my area start at about 300K for an old, shitty condo with $300/month strata fees, on top of all the other expenses (property tax, utilities, maintenance, water/sewage/garbage, legal fees, mortgage interest, special levies). You can't even get around it by moving further out, because the additional transportation costs would more than cover any savings. Do the math on that and see what you find.

So basically, in our city if you are comparing to rent at the lower end of the rental price spectrum, it is virtually impossible to come out ahead by buying, as there is literally nothing on the market that comes anywhere close. You have to be paying a LOT of rent before the two options even break even financially.

[marion10]

I like owning for a sense of permanence- maybe in NYC people stay for years and years in the same apartment- but as you get older or have kids it gets harder. A friend of mine rented half a duplex for 20 years. Owner decided to sell. ( gave him a year’s notice)- it’s harder to move when you are 70 and missing a leg. We are in a condo ( at age 60) that will hope will be our last stop. Except for assessments, we know what our costs will be. Even if you are in a big rental complex, it might get converted to condos or get sold for redevelopment.

[shelivesthedream]

Lets be clear: OP presents a straw man because he uses the Buffett article to misrepresent a proposition that it is more beneficial to rent your own home. Buffett has gone on record several times espousing the virtues of home ownership, especially all the good memories created in his own home that he has owned for 60 years.

Yes there are circumstances where renting works out better, but by and large ownership works works out much cheaper over the course of a lifetime, especially if you are able to take out cheap financing against the home.

The reason why Buffett doesn't invest in real estate are completely non-relevant to the average investor here who doesn't have the problem of finding something liquid enough to easily absorb a few billiom dollars at a time.

It sounds like you have missed OP's argument, which is in the title of this thread: "Owning a home isn't always worth it." In other words, for some people (such as myself and OP) renting is a better financial option, all things considered.

No one in this thread has presented evidence to disprove OP's argument.

Because no one in this thread disagrees with the premise that "owning isn't always cheaper than renting". Any contrary opinions have been "I am happy to pay more for the additional benefits I get from owning - e.g. ability to customise the property". That rent vs buy depends on the situation is a very mainstream opinion on this forum and I'm not sure why the OP thinks they needed to start a thread about it.

[Metalcat]

I like owning for a sense of permanence- maybe in NYC people stay for years and years in the same apartment- but as you get older or have kids it gets harder. A friend of mine rented half a duplex for 20 years. Owner decided to sell. ( gave him a year’s notice)- it’s harder to move when you are 70 and missing a leg. We are in a condo ( at age 60) that will hope will be our last stop. Except for assessments, we know what our costs will be. Even if you are in a big rental complex, it might get converted to condos or get sold for redevelopment.

It's actually quite common in my family for people to rent in apartment buildings long-term. We really only have two types in my family, those who live in high-rises and those who own country homes with land. No one in my immediate family just owns a normal detached home.

Some raise kids in the country, others in apartments, both seem to manage just fine.

The renters all choose high-rises because you can stay there pretty much indefinitely, because the unit won't be sold and no owner can move themselves or their family in. Jurisdictions are different, but where I live, the laws are quite in favour of a long-term tenant in a commercial building.

[Panly]

I can provide another data point as an example where renting can come out ahead.

We rent a studio, $847/month including utilities. And this is by far the most expensive place we've ever rented - we previously had places much cheaper, but moved to our current building for the lifestyle upgrade. That's for a 100% walkable/bikeable area where we don't even need transit passes, let alone any sort of vehicle. Properties in my area start at about 300K for an old, shitty condo with $300/month strata fees, on top of all the other expenses (property tax, utilities, maintenance, water/sewage/garbage, legal fees, mortgage interest, special levies). You can't even get around it by moving further out, because the additional transportation costs would more than cover any savings. Do the math on that and see what you find.

So basically, in our city if you are comparing to rent at the lower end of the rental price spectrum, it is virtually impossible to come out ahead by buying, as there is literally nothing on the market that comes anywhere close. You have to be paying a LOT of rent before the two options even break even financially.

I agree, having made the same calculations and buying absolutely never "made sense".   

But then that 300k  doubled in price almost overnight.    That hurt "the math".   

And before anyone realised, interest rates halved again, ...and again....   soon that shithole was at 900k, as starting point for the bidding war.

And then covid knocks,  and prices take off again, faster than ever.   


Although I haven't done badly with my investments,   I 'm nowhere close to anybody who bought the ugliest houses in my neighbourhood 10y ago. 

Even though the math said it was "virtually impossible".















 

[shelivesthedream]

@Panly Thing is, though, in a FIRE context then speculating on the value of your own home doesn't make a lot of sense unless you have a specific plan to cash out and downsize. Otherwise, even if your home is "worth" £900k... how are you going to spend that money at the grocery store? Cashflow is more of an issue than own-home-included NW if you want to FIRE and move from accumulation to spending.

[Morning Glory]

I can provide another data point as an example where renting can come out ahead.

We rent a studio, $847/month including utilities. And this is by far the most expensive place we've ever rented - we previously had places much cheaper, but moved to our current building for the lifestyle upgrade. That's for a 100% walkable/bikeable area where we don't even need transit passes, let alone any sort of vehicle. Properties in my area start at about 300K for an old, shitty condo with $300/month strata fees, on top of all the other expenses (property tax, utilities, maintenance, water/sewage/garbage, legal fees, mortgage interest, special levies). You can't even get around it by moving further out, because the additional transportation costs would more than cover any savings. Do the math on that and see what you find.

So basically, in our city if you are comparing to rent at the lower end of the rental price spectrum, it is virtually impossible to come out ahead by buying, as there is literally nothing on the market that comes anywhere close. You have to be paying a LOT of rent before the two options even break even financially.

I agree, having made the same calculations and buying absolutely never "made sense".   

But then that 300k  doubled in price almost overnight.    That hurt "the math".   

And before anyone realised, interest rates halved again, ...and again....   soon that shithole was at 900k, as starting point for the bidding war.

And then covid knocks,  and prices take off again, faster than ever.   


Although I haven't done badly with my investments,   I 'm nowhere close to anybody who bought the ugliest houses in my neighbourhood 10y ago. 

Even though the math said it was "virtually impossible".

Ok but if you'd bought those ugly houses 15 years ago and sold 5 years ago you would be telling a totally different story.

[Metalcat]

@Panly Thing is, though, in a FIRE context then speculating on the value of your own home doesn't make a lot of sense unless you have a specific plan to cash out and downsize. Otherwise, even if your home is "worth" £900k... how are you going to spend that money at the grocery store? Cashflow is more of an issue than own-home-included NW if you want to FIRE and move from accumulation to spending.

Exactly, here our property taxes are tethered to home values, so as long as you live in your home, an increase in value is actually an expense.

I live in a very ugly, dated building, so the value of my apartment will probably never keep pace with the surrounding area, that means that even if I were to cash in on the fact that my unit is now worth about double what I paid for it in 2019, it wouldn't mean anything because the whole market is like that.

I would have to do a cash-out refi to get any benefit from these gains.

[ohio4life]

I am considering moving to a more expensive home and this thread has some really good information in it, so I am glad OP posed the question. My number 1 reason for wanting a more expensive home is to be done with remodeling and repairs. I have never not had a project at my current home and after 11 years of either working on or thinking about home projects I am ready for a break. They built some new homes on some old park land very close to my current home and while these homes are 50% more expensive than my current home. I think I could move in and do nothing for several years and spend roughly the same amount of money per month. My current home has cost an average of 10k a year to keep up with the remodeling and maintenance. I don't think I would spend anywhere near that on a new home for years. I also would be happy to move into an apartment. There are many new apartments around me, but they are expensive and tend to be full of younger people who likely will party from time to time. I live on a street full of AirBnBs and the partying doesn't bother me much. I used to be one of the loud people on the street and still am once a year or so, but not being able to escape the noise may drive me crazy. Renting a free standing home would be too expensive for what it is worth. If I bought a "fixed" home of equal or lesser value than my current home I would have to move to a more transitional neighborhood or about 10 miles away from the city center.

[afox]

I can provide another data point as an example where renting can come out ahead.

We rent a studio, $847/month including utilities. And this is by far the most expensive place we've ever rented - we previously had places much cheaper, but moved to our current building for the lifestyle upgrade. That's for a 100% walkable/bikeable area where we don't even need transit passes, let alone any sort of vehicle. Properties in my area start at about 300K for an old, shitty condo with $300/month strata fees, on top of all the other expenses (property tax, utilities, maintenance, water/sewage/garbage, legal fees, mortgage interest, special levies). You can't even get around it by moving further out, because the additional transportation costs would more than cover any savings. Do the math on that and see what you find.

So basically, in our city if you are comparing to rent at the lower end of the rental price spectrum, it is virtually impossible to come out ahead by buying, as there is literally nothing on the market that comes anywhere close. You have to be paying a LOT of rent before the two options even break even financially.

I agree, having made the same calculations and buying absolutely never "made sense".   

But then that 300k  doubled in price almost overnight.    That hurt "the math".   

And before anyone realised, interest rates halved again, ...and again....   soon that shithole was at 900k, as starting point for the bidding war.

And then covid knocks,  and prices take off again, faster than ever.   


Although I haven't done badly with my investments,   I 'm nowhere close to anybody who bought the ugliest houses in my neighbourhood 10y ago. 

Even though the math said it was "virtually impossible".

Ok but if you'd bought those ugly houses 15 years ago and sold 5 years ago you would be telling a totally different story.

Yes, good point. Not to mention the cap gains that flippers pay.

The problem with escalating home prices is that you need a place to live and "cashing out" doesnt do you any good if you just need to buy another house. Its why I dont consider home equity as part of my net worth, no way to spend the money. Reverse mortgage maybe but that would really be for the absolute last years of life, not really an ER option.

[lutorm]

Whether owning your home is worth it depends on ... what you value. Completely different question from whether it's economically advantageous over renting.

So agreed, if you don't value the things that owning your home gives you over what renting gives you, it's not worth it to you.

[Morning Glory]

Whether owning your home is worth it depends on ... what you value. Completely different question from whether it's economically advantageous over renting.

So agreed, if you don't value the things that owning your home gives you over what renting gives you, it's not worth it to you.

We are on this forum because being economically advantageous is something we value.

[Metalcat]

Whether owning your home is worth it depends on ... what you value. Completely different question from whether it's economically advantageous over renting.

So agreed, if you don't value the things that owning your home gives you over what renting gives you, it's not worth it to you.

We are on this forum because being economically advantageous is something we value.

Sure, but that doesn't take away from the point you quoted.

Most people here have given non-economical reasons for wanting to own, and many of us have stated that it's primarily a lifestyle decision with financial impacts, not a primarily financial decision, which amounts to pretty much exactly the point that you quoted.

[windytrail]

How many people here can truly say that buying a home shortened their FIRE date?

Maybe some, but definitely not all.

In other words, renting is sometimes economically advantageous, in addition to being advantageous for lifestyle reasons.

[ender]

How many people here can truly say that buying a home shortened their FIRE date?

Maybe some, but definitely not all.

In other words, renting is sometimes economically advantageous, in addition to being advantageous for lifestyle reasons.

It's certainly lengthening mine.

[Zikoris]

How many people here can truly say that buying a home shortened their FIRE date?

Maybe some, but definitely not all.

In other words, renting is sometimes economically advantageous, in addition to being advantageous for lifestyle reasons.

In my case it would have eliminated the possibility of FIRE altogether, at least without pursuing some sort of actual career rather than slacking and taking it easy.

[deborah]

There are many people on the forum who have paid off their home prior to FIRE - myself included. Some of these people would feel vulnerable if they hadn’t. For us, a paid off home was one of the mandatory precursors to FIRE. This isn’t a financial reason to buy, but for some it’s part of retirement calculations.

However, our suburban home, on a normal sized block does give some financial benefits. We are self sufficient in fruit, and grow many of our vegetables. Our country gives pensions to poor elderly people, and although people who rent get a rental assistance allowance, because of the tapering of the pension and the fact that the family home is exempt from pension entitlement calculations, people who own their homes are better off overall. We are unlikely to ever get these benefits, but if everything goes pear shaped with our investments, the safety net is there.

We love where we live, and each night at dusk sit there admiring the view. We spend much of our time on our block pursuing our hobbies (which we couldn’t do if we rented). We go for walks around the neighbourhood most mornings. We walk to the local shops which include many health services, so we rarely use our car when we’re home. Although all these are lifestyle choices, the choice of house has significantly lowered our retirement expenses.

[Cassie]

It’s very important to me to be able to remodel my house to exactly what I want. I would never rent. I just got divorced and downsized to a condo. I had it remodeled before moving in. Locally it’s also the smart financial choice. Rents are crazy. After moving close to 30 times I find it very appealing to never have to move again.

[Dicey]

OP, thought I’d share: I was fully on the never buy train. I was convinced by Go Curry Cracker and JL Collins articles. And then Covid happened and I realized that I was going to be stuck longer than I had planned and more than anything I wanted security and a space I could make and call my own. So, I adjusted and bought something. Is it more expensive? Absolutely but I’m ok with it all because I recognize those intangible benefits, as well as the tangible ones of keeping more of my money for myself. The property will increase in value and I don’t think I’ve sacrificed anything there. Also, worse case scenario, I can sell whenever and go back to renting. For now, I couldn’t be happier with my decision because everything worked out perfectly. I found a place I love that ticked all my boxes and has brought me immeasurable joy. There’s definitely something to be said for having a base of operations that is yours. Everyone has to do what’s right and comfortable for themselves.

Not naysaying you, @MrThatsDifferent, just want to comment on the bolded.

Everyone knows that JL bought a house since then, right? He named it Kibanda. He also bought - gasp - a brand new car! (Lol, I'm sure he can afford it, but y'all know how we feel about not buying used.)

I saw a video that GCC made in his Seattle kitchen. OMG, it was a hot mess! People buy houses (and pay top dollar) for kitchens and baths. His was totally outdated. I wonder what his experience would have been had he updated it? Even if he continued to do nothing, the Seattle run up would have changed his calculations and conclusions dramatically.

Jeremy's whole position is based on owning a single property [Feel free to correct me if I'm wrong, but I find no mention of any others.] I'm FIRE, in large measure due to Real Estate. However, I made virtually nothing on my first house. I'm so glad I took what I learned and built on it instead of calling it a bust.

Oh, and Jeremy posted a while back about joining a Country Club. No lie. It wasn't even April 1st.

[kite]

Own versus rent analyses often gloss over salient points.

Firstly -- It's not mere owning. It's buying on a margin, using a bank's money as leverage. 
Second -- Your age. The age at which you buy and comfortably pay off the mortgage relative to your life expectancy is a significant contributor to whether or not it is financially worthwhile. 
Third -- Racism. Racism in real estate and banking practices, enabled via redlining, prevented Black families from homeownership. Coates' The Case for Reparations, published in 2014 barely scratches the surface, but it's a good starting point. There is no understanding racial disparities in net worth without accounting for who was and was not allowed to buy.  The driver of the wealth gap and segregation and the resultant effects on generations of Black families is directly traceable to redlining.

Still, owning is not for everyone. Depending on your career, age & family situation you might already have passed the window where it makes long term financial sense to buy. 


Edited to correct spelling of Ta-Nehisi Coates

[L8_apex]

Racism. Racism in real estate and banking practices, enabled via redlining, prevented Black families from homeownership. Coats' The Case for Reparations, published in 2014 barely scratches the surface, but it's a good starting point. There is no understanding racial disparities in net worth without accounting for who was and was not allowed to buy.  The driver of the wealth gap and segregation and the resultant effects on generations of Black families is directly traceable to redlining.

And when did this redlining stop?  For your next act, can I hear all about reparations? 

[GuitarStv]

According to the valuations we've been getting, my home has well over doubled in value since buying about 10 years ago.  Renting is totally the right choice for some and I'd always encourage someone to do what seems to make the most sense for them after analysis . . . but it would have cost me a tremendous amount of money and I'm glad I didn't go down that path.

Racism. Racism in real estate and banking practices, enabled via redlining, prevented Black families from homeownership. Coats' The Case for Reparations, published in 2014 barely scratches the surface, but it's a good starting point. There is no understanding racial disparities in net worth without accounting for who was and was not allowed to buy.  The driver of the wealth gap and segregation and the resultant effects on generations of Black families is directly traceable to redlining.

And when did this redlining stop?  For your next act, can I hear all about reparations? 

1968 was when the first law to prevent discrimination in housing and commercial markets was passed, but the practice likely considered for some time afterwards as these social habits tend to be hard to break.  Some might remember that ex-President Trump was sued by the Justice department for refusing to rent to black people in '73.

[kite]

Racism. Racism in real estate and banking practices, enabled via redlining, prevented Black families from homeownership. Coats' The Case for Reparations, published in 2014 barely scratches the surface, but it's a good starting point. There is no understanding racial disparities in net worth without accounting for who was and was not allowed to buy.  The driver of the wealth gap and segregation and the resultant effects on generations of Black families is directly traceable to redlining.

And when did this redlining stop?  For your next act, can I hear all about reparations?

You can probably Google as well as anyone.  And you will find things that support the view you already have.
The question of reparations is complex, and I don't presume to have a satisfactory answer. 

[shelivesthedream]

Racism. Racism in real estate and banking practices, enabled via redlining, prevented Black families from homeownership. Coats' The Case for Reparations, published in 2014 barely scratches the surface, but it's a good starting point. There is no understanding racial disparities in net worth without accounting for who was and was not allowed to buy.  The driver of the wealth gap and segregation and the resultant effects on generations of Black families is directly traceable to redlining.

And when did this redlining stop?  For your next act, can I hear all about reparations?

You can probably Google as well as anyone.  And you will find things that support the view you already have.
The question of reparations is complex, and I don't presume to have a satisfactory answer.

To be fair to L8_apex, I feel like I'm missing something here. Are you explaining redlining to give additional context around people's past choices to explain why some people were forced into making financially suboptimal decisions in ye olden days? Which is a fair point to make. Or are you saying it's a factor in the rent/own debate for individuals these days? In which case, I'm afraid not seeing how. (I'm British, if that might mean I'm missing some obvious context here.)

[windytrail]

Also, exclusionary zoning is the modern day redlining. The express intent of the first zoning law in this country was to keep out people of color.

Duncan McDuffie, a prominent real estate developer in Berkeley who built the Claremont Court and Uplands neighborhoods in the early 1900s, was a big champion of single-family zoning. His developments all came with racial covenants, which barred homeowners from selling or renting their homes to people of color.

But he also wanted to make sure that neighborhoods next to Claremont, including Elmwood, wouldn't allow families of color to move in, because he thought it would lower property values. And he was especially worried about a Black-owned dance hall that was looking to move into the neighborhood next to his subdivision.

The single-family zoning designation in Elmwood prohibited the dance hall from moving in, and it also made the neighborhood more exclusive, because developers could charge more for single-family homes than they could for duplexes or cottage apartments.
https://www.kqed.org/news/11840548/the-racist-history-of-single-family-home-zoning

Single family zoning is still in place in 75% of urban areas in this country. Despite its "race neutral" appearance, single family zoning is racist to its core.

Laws that ban multifamily housing are a primary cause of the overheated home market today.

[Dicey]

Speaking of redlining, I posted this recent story on another thread. This woman is a total badass, but what she experienced simply Should. Not. Happen.

https://www.yahoo.com/news/black-homeowner-launches-legal-fight-145615953.html

[kite]

Racism. Racism in real estate and banking practices, enabled via redlining, prevented Black families from homeownership. Coats' The Case for Reparations, published in 2014 barely scratches the surface, but it's a good starting point. There is no understanding racial disparities in net worth without accounting for who was and was not allowed to buy.  The driver of the wealth gap and segregation and the resultant effects on generations of Black families is directly traceable to redlining.

And when did this redlining stop?  For your next act, can I hear all about reparations?

You can probably Google as well as anyone.  And you will find things that support the view you already have.
The question of reparations is complex, and I don't presume to have a satisfactory answer.

To be fair to L8_apex, I feel like I'm missing something here. Are you explaining redlining to give additional context around people's past choices to explain why some people were forced into making financially suboptimal decisions in ye olden days? Which is a fair point to make. Or are you saying it's a factor in the rent/own debate for individuals these days? In which case, I'm afraid not seeing how. (I'm British, if that might mean I'm missing some obvious context here.)

Rent versus own is a math problem. Most of the explanations in Own vs. Rent analyses risk coming to the wrong conclusion because a few relevant inputs are overlooked. It's not really "should I OWN X versus rent X?"  It's "Should I BUY this home using leveraged financing and garnering all available tax advantages or should I rent for the rest of my life?" 
We can't dismiss a mountain of evidence that shows how being shut out of buying left millions with less wealth.  Holding all else equal, those who rented over the course of a lifetime were far worse off than those who were permitted to buy at exactly the age where buying would have made all the difference. No projection of future value in either equities or real-estate that ignores an extensive real world example should be held up as reliable.
It's still a math problem. The ROI when you can purchase a home with leveraged financing has been an incredible wealth builder. It's not for everyone. But it continues to be an incredible wealth builder.

[Zikoris]

Rent versus own is a math problem. Most of the explanations in Own vs. Rent analyses risk coming to the wrong conclusion because a few relevant inputs are overlooked. It's not really "should I OWN X versus rent X?"  It's "Should I BUY this home using leveraged financing and garnering all available tax advantages or should I rent for the rest of my life?" 
We can't dismiss a mountain of evidence that shows how being shut out of buying left millions with less wealth.  Holding all else equal, those who rented over the course of a lifetime were far worse off than those who were permitted to buy at exactly the age where buying would have made all the difference. No projection of future value in either equities or real-estate that ignores an extensive real world example should be held up as reliable.
It's still a math problem. The ROI when you can purchase a home with leveraged financing has been an incredible wealth builder. It's not for everyone. But it continues to be an incredible wealth builder.

The big issue here is that the rent-and-invest-the-difference system was not feasible until fairly recently (at least on a large scale), because decent, low-fee investing did not used to be commercially available to the masses. There were no ETFs, discount brokerages, or Vanguard - if people had the ability to invest at all (meaning they already had a fairly high net worth and access to a broker), their options were absolute shit. Obviously if you do the math comparing real estate to shitty garbage investments, the real estate would come out ahead.

So yes, for someone looking at buying or renting TODAY in 2021, we can safely ignore things like you mentioned above for the purposes of the calculation.

[Wrenchturner]

It's my understanding that the recent trend of real estate appreciation is unprecedented, so your math problem may have a sampling bias.

[Morning Glory]

It's my understanding that the recent trend of real estate appreciation is unprecedented, so your math problem may have a sampling bias.

There are still many places where owning comes out ahead even when you ignore appreciation. If this were not the case then a cash flowing rental would be a mathematical impossibility.  Of course it's not true everywhere, although I'm not quite sure how landlords make money if it's cheaper to rent than own. Economy of scale maybe???

[Just Joe]

Locally (MCOL area) rent is higher than mortgage payments on something nicer. Our eldest aspires to move out on their own. Their friends rents on very ordinary (and worn) properties is higher than the mortgage was on our last home.

Back when we were younger we rented like everyone else. One place had a fire in an adjoining unit's bathroom b/c the owner got high and caught the bath towels on fire with candles. And then moved out in the middle of the night leaving behind a trashed apartment and a fridge full of rotting food. There were several episodes at that address. 

Our next address came with a drug dealer next door. Replaced with trouble makers that attracted the police from time to time.

For $50 more per month (and maintenance) we bought our first home. So quiet. And out of date carpet! When we sold it, we didn't profit but we did break even-ish. Sweat equity. Plus skills we applied to every property since.

We have zero desire in ever rent again. When we are old and decrepit we'll buy (rent?) something maintenance free. ;)

[Metalcat]

^ sounds like you rented some shitty places

One of my most recent rentals was in a Hilton, which had certain floors as regular rental apartments. It was by far the nicest place I've ever lived. 24hr staff and I could even order room service.

Plus I never had to worry about anything. Spiders on my balcony? Call the front desk staff and they'll send up the hot Aussie to get rid of them. Light bulb burnt out? Of course they have tons lying around, they'll just send one up. Locked out 3am? No problem, it's a hotel key card system, we'll just make you a new one and deactivate the old one.

In reality, I've pretty much been slumming it since I moved from there. Owning makes everything my problem, and I'm not a fan. I spent an entire afternoon fixing a leaky faucet last week trying to track down vintage plumbing parts because I didn't want to pay a plumber for the 5th time since buying in 2019.

The hedonic adaptation of that rental was real.

[FIPurpose]

It's my understanding that the recent trend of real estate appreciation is unprecedented, so your math problem may have a sampling bias.

There are still many places where owning comes out ahead even when you ignore appreciation. If this were not the case then a cash flowing rental would be a mathematical impossibility.  Of course it's not true everywhere, although I'm not quite sure how landlords make money if it's cheaper to rent than own. Economy of scale maybe???

If you ignore appreciation, then I would think owning would require a 10-20 year time horizon to pay off. Even longer if you live in an area with depreciating home values.

I think most of us live in well populated areas, but there are lots of places where people have owned their homes for 40 years where the towns have died around them, and no one is willing to buy their house for anything that would allow them to move to a more populated town.

My guess is actually that most landlords make far less on their properties than they think. I've seen enough threads even on MMM from people who think they have great cash-flowing rentals only for people to point out exactly how poorly they've truly done on their properties compared to passive investing.

Small landlords tend to overlook how much repairs have costed them, the amount of depreciation they're building up, the number of hours of labor they've personally put into managing rentals, vacancy rates, etc. In order to maintain their belief in their investment choices, they downplay how many hours they really put into it or fail to compare their outcomes against passive investing.

RE's current speculation prices hide a lot of bad investment choices. The US could very easily see population decreases in the next decade, and there will be some cities that become real estate losers. For people in their 30's and 40's now, I could easily see a population bust 30 years from now ruining a lot RE markets. The big cities will survive, but smaller towns of 30-50k? I think we'll continue to see less of them.

[Dicey]

Rent versus own is a math problem. Most of the explanations in Own vs. Rent analyses risk coming to the wrong conclusion because a few relevant inputs are overlooked. It's not really "should I OWN X versus rent X?"  It's "Should I BUY this home using leveraged financing and garnering all available tax advantages or should I rent for the rest of my life?" 
We can't dismiss a mountain of evidence that shows how being shut out of buying left millions with less wealth.  Holding all else equal, those who rented over the course of a lifetime were far worse off than those who were permitted to buy at exactly the age where buying would have made all the difference. No projection of future value in either equities or real-estate that ignores an extensive real world example should be held up as reliable.
It's still a math problem. The ROI when you can purchase a home with leveraged financing has been an incredible wealth builder. It's not for everyone. But it continues to be an incredible wealth builder.

The big issue here is that the rent-and-invest-the-difference system was not feasible until fairly recently (at least on a large scale), because decent, low-fee investing did not used to be commercially available to the masses. There were no ETFs, discount brokerages, or Vanguard - if people had the ability to invest at all (meaning they already had a fairly high net worth and access to a broker), their options were absolute shit. Obviously if you do the math comparing real estate to shitty garbage investments, the real estate would come out ahead.

So yes, for someone looking at buying or renting TODAY in 2021, we can safely ignore things like you mentioned above for the purposes of the calculation.

True, but there's more to it than that. Most people simply can't or won't save the difference. Those that do may not manage it wisely. We mustachians like to think we're different (We are.). For their sake, I hope the rent-not-own crowd invest the difference and then some. If they do it consistently, they'll be fine.

@Malcat, we have three single family home rentals, all in the same large Senior Community. We look for long-time homeowners who get to the point where they just don't want the hassle of home maintenance, or they simply can't any more. We keep the homes in great shape and fix anything that breaks promptly. In turn our tenants take care of things, live in the houses lightly and stay. I imagine that someday we will feel the same way, hopefully a very long time from now.

[soccerluvof4]

I would only rent if I could from @Dicey , though that would be hard unless she bought something for me to rent outside of CA :-)

I am with those that think Owning is a lifestyle choice and there are way to many variables to say one is right over the other. I have lived in a house that was totally maintenance free, smaller square footage though was more than an apartment but guess I could of rented a house the same size, could walk to most anything to get what I needed and so on. Made perfect sense financially to own but I was bored because for my lifestyle I like to make things feel like my own and keep things updated. Now we went to the other extreme after being fired for 4 years and going on two years have lived on a lake. The work is a bit overwhelming BUT half of that is because I am redoing it. The property value is increasing at a faster rate than I am putting money into it and we have a beautiful view as well as fun on the lake. I could not rent a house anywhere near what would make sense for what I own it for. Being mortgage free I do see at some point down the line selling the house and taking half the money and buying a house like I was bored in or renting from Dicey.

Having a good landlord would be the biggest difference in the world to me. You can get some great rentals but I like my privacy to much and as I said for now at least I choose the lifestyle of owning my own place but I get the renting as a good fit for others.

[shelivesthedream]

@kite Thanks for the additional explanation. I understand the point you were driving at now.

It's my understanding that the recent trend of real estate appreciation is unprecedented, so your math problem may have a sampling bias.

There are still many places where owning comes out ahead even when you ignore appreciation. If this were not the case then a cash flowing rental would be a mathematical impossibility.  Of course it's not true everywhere, although I'm not quite sure how landlords make money if it's cheaper to rent than own. Economy of scale maybe???

We've moved city every three years or so for a decade. If we bought and sold every time, we'd be wayyyy down due to all the associated fees, not to mention potentially having to buy high and sell low because we HAD to move. Timescale is very important in the maths problem, even ignoring lifestyle factors.