By Dr. Erik Hofmeister, Guest Writer
My wife and I hit our financial independence (FI) target number this summer, in our early 40s. We are both professional academics and are currently renting, and we will continue to rent until we actually retire—at which point we will move into one of our current investment properties. I am often struck by people’s obsession with owning a home. We owned a home for 15 years, and it was a wonderful experience for that time in our lives. But owning a home should not be universally equivalent with financial success.
Here are seven reasons renting can be much better than owning. Residents, in particular, take heed.
#1 Owning a House Is Really Freaking Expensive
Everyone thinks renting is “throwing money down the drain” compared to owning. You know what’s throwing money down the drain? Buying over $10,000 of “stuff” the first few months of owning my first house, which rapidly depreciated. Lawnmower, toolset, dining room table, new paint, hedge trimmers. It was ridiculous. A lot of people just look at the mortgage rate per month and compare it with the rental rate. Obviously, you need to add taxes and insurance. And then all the other “stuff.”
There’s a reason that investment property owners tend to assume that about 45% of the rent will go to expenses. There are a lot of expenses of owning a home separate from the mortgage, taxes, and insurance. A new AC unit, a new refrigerator, dealing with flooding. There’s always something going wrong when you own a house. When we sold our first house, it was an incredible relief. I was constantly worried something serious would happen that would be expensive to repair.
#2 Renting May Be Better Financially
This is different from #1 because it depends on the market. We currently live in a college town that also happens to have an incredible school district. This means that buying a house is fairly expensive because all of the faculty want to be in the city limits so their kids can go to a good school. Simultaneously, renting is relatively inexpensive, because the student population keeps rental prices down.
There are many markets like this around the country (and the world). The Bay Area, Toronto, New York City, and Seattle come to mind. You’re actually better off renting and investing the savings. It’s just too expensive to buy a house.
#3 Less Hassle Renting
Not only do you not have to buy the toolset if you rent, but you don’t have to do the work! Just call up the rental company, and it's taken care of. On a website where people regularly discuss the cost of something that saves them time (hiring landscapers, cleaners, etc.), I am surprised people don’t calculate the value of the time they spend taking care of their house. Maybe they hire out those things, as well.
How is your experience hiring a contractor to do a $50 job? Mine is abysmal. They rarely actually show up and then you have to check them to make sure it’s actually done. I don’t even have to be home for the rental company maintenance to come take care of something. It has been literally life-changing to not have to take care of home maintenance and repairs personally. I hated cutting the grass (to the tune of two hours), and the cost for paying someone else was far more than I thought it was worth. Maybe I could have found a neighborhood kid, but I would still need to get fuel for the lawnmower and do its maintenance. At my rental, it’s just . . . all taken care of.
#4 Location, Location, Location
I really enjoy walking to work. I’ve been doing so regularly for the past three years, and I cannot imagine ever again living somewhere I couldn’t walk to work. You know what’s not within walking distance of my current workplace? Single-family homes or townhouses. There are some small condos, lots of mobile homes, and some fancy student apartments. So, if I want to walk, I’m either renting or buying something I don’t really want.
Maybe your thing is being on the water. Maybe it’s having a pool you don’t need to maintain. I loved living in apartments in Phoenix and always having access to a pool that I didn’t need to think about maintaining. Maybe it’s being around people (or away from people). There are dozens of reasons why a certain location may be better to rent than buy.
#5 Transaction Costs
Everyone seems to hand-wave this away. Yeah, yeah, you have to own it for more than five years because of “transaction costs.” But think about the math on this. The realtor takes 6% of the gross sale. You usually have to pay a lawyer and lots of little fees like title searching. There are potentially other transaction costs, though.
Paying Double Rent (or Mortgage)
Depending on your circumstances, you may move into your new place before you can sell your old one. You would have to pay for both locations. Although this is possible if you’re renting (it’s happened to me twice), it’s usually a lot easier to leave a rental than to sell a house.
Upgrading the House
Some houses you may sell “as-is,” but you should expect to get a lower offer if you do so. You may need to do painting and other cosmetic repairs. You may need to roust vermin from your attic or under your porch (armadillos are surprisingly pernicious). You can DIY, saving money but costing you time and hassle. Or you can hire others, often at exorbitant rates. (Guess how much you’ll be charged to get rid of an armadillo. Triple that and you may be close to right.)
#6 Limited Downside
A key principle of successful financial management is to limit your downside—how much you might lose in a transaction. There’s a reason the term “money pit” exists for houses. Pretty much every house has hidden problems that can blossom into serious catastrophes. If you own, you’re on the hook for anything that happens. If you rent, the worst they can do is take your deposit and possibly bill you for damages you caused (e.g. carpet replacement due to cat urine). There is substantially less risk to your finances if you rent rather than own.
#7 Freedom!
For a blog dedicated to people being financially free, I’m curious why so many are excited with the idea of being bound to a house. I suppose you could theoretically walk away and stop paying the mortgage, but that has significant consequences. If you walk away from your rental, the worst thing that happens is you pay the rent until the lease runs out. More importantly, you have a lease. You KNOW when you can get out. In planning for an early retirement, it is nice to know that we can plan our transition away from this house at the exact same time we transition away from work.
More information here:
Owning a house can sometimes be good. I tell the vet students to whom I teach personal finances that if they really want to dig up the backyard and fill it with rocks, yes, you need to own a house. If they want to knock down walls and install a walk-in shower, they need to own. But renting has many benefits and I think everyone assumes that, once your finances are set, you should buy. I am here to tell you: you can be FI but be perfectly happy renting.
If you include it in your retirement budget, it can be just like health insurance, food, travel, or any other expense. Run the numbers, consider the intangibles, and don’t let anyone else tell you what you should do with your housing.
Do you agree? What other benefits have you experienced by renting instead of buying during your residence? Comment below!
[Editor's Note: Dr. Erik Hofmeister is a Professor of Veterinary Anesthesia at Auburn University and blogs about veterinary academics at vetducator.com. This article was submitted and approved according to our Guest Post Policy. We have no financial relationship.]
Excellent post! We’ve owned a house and now been renting for past 2 years while being FI. Agree with the freedom and peace of mind that comes with being a renter. It’s definitely not throwing away money, Especially in this crazy housing market. We rent a pretty decent place that is fully walkable everywhere. The properties we like that are listed on the market currently are easily north of $1.5 M. They require almost 250-500 k down payment to build a good equity. The property taxes, insurance and HOA alone will cost at least 2/3rd of what we’re paying now for rent.
Also most new buyers these days are waiving home inspection. I wonder what all added expenses are in store when they walk into their new 90 year old house that needs serious upkeep.
Thanks for presenting a case for this seemingly unpopular opinion. An often overstated benefit of homeownership is the “tax deduction.” I’m amazed at how often I hear this from people who are not actually receiving any incremental tax savings from the mortgage interest deduction, especially after the SALT cap and increase to the standard deduction from the Tax Cuts and Jobs Act of 2017.
True, lots of people don’t benefit from it anymore. I did not buy a house to get a tax break. I bought to capture appreciation and avoid rent increases. And also have more control (can’t get kicked out? Won’t get in trouble if we break something? LOL). Can keep it when I move and rent it (as an investment)…I do get to take the tax break [as I exceed the standard deduction typically], that’s just ancillary…and it’s not a lot of money…
We built our dream home in 2003, right after we could not sell our starter home and had to rent it out. We were stuck with that rental for over a decade due to the housing bubble burst of 2007-09.
Our current house cost a half million to build in 2003. The prior starter house was $100K. The main house was “under water” from 2007 to 2018 or so. It’s value has FINALLY recovered to close to what we have in it. The starter home turned rental was not worth the headaches and we sold it in 2019 for a few thousand over what it cost. Thank goodness we did not have it during the rent deferring COVID-19 times. We would have lost thousands.
We will sell the big house this summer with zero capital gain after living there for almost 20 years. We put about $60K of improvements in it and the land cost $90K. I calculated that it cost me an extra decade of work. Lawn care, snow plowing, replaced broken appliances, paint, and taxes of $7500 a year.
It’s been incredibly expensive and my worst financial decision, ever.
Our retirement home, we bought in 2016 at a good price. That seems a good decision as it is in a growth area and has a lot of acreage with low taxes. The payment is $900 a month at 2.5%…and it would rent for $2200 a month.
On the big house, I’d like a Mulligan.
Great post! really refreshing to hear another point of view – and it sounds like you have made some really smart decisions. Thanks.
Great post
I do think it exaggerates the differences in maintenance costs. When you rent, the landlord does not provide all the maintenance as a gift to you. They include these costs in the rent. You are still paying for them, just not directly. Simple economics.
It is definitely true that one can lose a lot of money on real estate. As some of the comments have indicated it depends on things completely beyond your control, like overall changes in the local market and the national economy. But just as you can lose you can gain. Like stocks.
For the right price, you can turn the maintenance of your house over to someone else. Some people enjoy doing that work themselves and would not want others handling it, even if it were free. The only way they can indulge this hobby is by owning the property.
Note that rental rates can go up, forcing you to pay more money to stay in the same location. Once you buy a house, the purchase price is locked in. As is the interest rate if you have a fixed rate mortgage. If you own, you have to pay increases in taxes and insurance, as you would if you rent.
Owning may be particularly good in times of higher inflation since you are protected from some of the cost increases.
Hello Afan, I absolutely agree that the cost of maintenance gets plugged into the rental cost- it is NOT free! What I hear people say, though, is “Well I’m renting for $1000, and mortgage would be $800. So I’m just throwing money away!” What I think they should actually do is compare cost of rent + insurance vs. mortgage + insurance + taxes + maintenance + downside risk + transaction costs. I think sometimes people aren’t doing an apples-to-apples comparison when they look at the numbers. Good point about rental costs going up and that presenting a problem. Maintenance costs on a owned home will also go up, of course. Thanks for the contribution!
It’s rent it’s rent + more rent the next year + even more rent the next year. Also the landlord gain appreciation, the $800 mortgage includes paying of some principal, increasing equity. Tenant loses that. Landlord also gets to count “depreciation” FWIW…landlord’s do have to pay an increasing property tax, but that’s not too bad relative to rents, and they pass that cost on…cheers!
Definitely we should talk more about improved cash flow after the house is paid off. My reason for renting include that (1) I hate maintenance (2) I hate yard work (yay apartments!) (3) it’s hard to buy a 2bed/2bath house in my area, and that’s all I need (4) condo associations sound like a nightmare.
Biggest money saver for me, though, is that there’s no pressure to rent the “dream home.” Would I have picked these countertops or this floor color? No. Is it more than good enough? Definitely. Doesn’t quite fit “my asthetic,” but I can blame the landlord. Heheheh. Just saved $15k+ and weeks of dusty renovation.
One way to think about renting is putting a middleman (the landlord) between you and the house. Afan got it exactly right- maintenance costs while renting aren’t a gift, they are baked into the rent. So are transaction costs. The middleman expects to be compensated for his/her time and assumption of risks, and the landlord faces all the costs of ownership, so it’s reasonable to expect renting to be more expensive than owning in the long run. That general trend may not apply in all cases, and especially not over shorter time horizons. I agree there are plenty of situations when renting makes sense, such as: you can’t afford a down payment and/or can’t borrow on decent terms, think you may move within ~5 years, are too busy to deal with maintenance (although it’s not that much harder to hire your own contractors than to call the landlord), want to live in an area where renting is more practical (eg. downtown loft apartment). Also, if your rate of return on money that would have gone to a down payment is high enough compared to the leveraged rate of return on owning, renting may be financially superior even over long time horizons.
I see this argument in the FIRE community often and I don’t think it fully represents what it is really like to rent. I grew up with a single mom who never owned her home. I moved 19 times before I went away to college. Landlords would routinely raise rents or sell the houses we lived in. Moving is very expensive in itself and very stressful. This is likely why I bought in residency and have owned ever since. I just think we should acknowledge it is a privilege to even make this decision.
Agreed. I’ve often believed that renting is a good option for those who have the money to rent nice places. If you’re lower on the socioeconomic ladder, then you more than likely have to find cheaper accommodations when the landlord increases your rent. When your income is able to easily accommodate rent hikes, then you’re not forced to move due to your budget. You can stay in your home – your children can stay in their school(s) – you don’t have to pay fees to reconnect your utilities to a new location – you need not pay the expenses associated with moving. For those who have the economic elasticity to absorb rent increases, renting offers many of the benefits listed in this very persuasive post. From what I’ve observed, renting has a bad reputation only because everyone thinks of the negative effects it has on the lives of people at the bottom of the income scale. Most people don’t realize that renting doesn’t produce these negative effects for higher income people.
Rent from faceless corporations! Rent goes up, but generally only 3%/year if you always pay on time. By year 3, I’m usually way under market. I will likely never rent from an individual again. Too much drama from people who think their real estate is passive and that rent minus mortgage = profit. >D
Guest writer has investment property, that says a lot about his position on renting. He clearly believes real estate is a good investment and includes it in his FI portfolio. Home ownership is still part of the American dream, unfortunately just for those who can afford a mortgage. Most renters don’t have a choice but to rent in 2022.
Yep, sounds like their investments have panned out well, now they can afford to rent a house somewhere they “like”. Which sounds relaxing. It’s not the renting that got them to that point. In fact, when they were doing the heavy investing, they owned. They mention that they’ve also got a house purchased, and appreciating, for them to retire into. Perhaps they’re in favor of home ownership after all…also notice he teaches at a vet school. So a good job was probably useful. In “my” town, rents are higher near colleges, FWIW…
Can you say that a little louder for the people in the back.
Excellent observation
What a bias argument for renting. Most people do not live in your bubble. Owning a home is a real estate asset and for most people, it will be the only home they own. Unlike you, they are not as fortunate to be heading into retirement with tons of money in the bank. They will be happy to have paid off their home as they work to live in it the rest of their lives. Stop passing off your experiences as a baseline for others to follow as it is not achievable.
Buy a home everyone and don’t drink this guys kool-aid.
Hello Daltx, I generally agree that, for MOST people, owning their home is probably a good financial decision. However, this blog is aimed at high-income professionals who have a much higher income than “most people”. As a forced-savings system, the home is really no better than a “pay yourself first” approach, putting money automatically into your 401k, etc. If you need a bucket system, or a forced saving system, or some other way to manage your own psychology, then home ownership may be the way to go. But if you DON’T need those cognitive crutches, running the numbers to make the decision seems prudent to me. Investing the difference with what you save may be better in the long run.
I still think it’s unusual for renting to come out ahead IF you’re in the home 5-10+ years, no matter what your income.
I think this is true, but the reason isn’t necessarily obvious. Buying a home for most people represents an enormous change in their financial balance sheet/composition. They are now exposed to a large (return generating) real asset with significant leverage. Most do not adjust their stock/bond mix to account for this. In fact, many will have over 100% exposure to “risk assets” with the house included, whereas renters will have lower allocations. Over longer time periods, this additional risk generally pays off. A renter could replicate to a large extent the risk profile of a home owner by buying additional financial assets on margin, but that’s generally seen as irresponsible.
A home is an investment in some ways and a consumption items in others, but I wouldn’t put it into your retirement asset allocation nor assign it as a “risk asset” there.
https://www.whitecoatinvestor.com/a-home-is-an-investment/
You’re right that it generally adds leverage to the overall mix so one would expect higher performance (and higher risk) from doing so. Excellent point.
Thank you for clarification. Congratulations
Instead of buying a personal home, I bought a nice investment property and rent where I live. That investment not only rapidly appreciated due to improvements, but my tenants pay my mortgage and cover my current rent. So is he wrong? What would You rather have? Best decision I could have made. Plus, because I rented it was super easy decision for me to move across the state for a job opportunity. Not as easy when you have to worry about selling and finding a new home. Selling may be easy now but it’s not always like that.
Good option, that initial down payment possibly being tricky depending….Though maybe easier for physicians? You could buy your house and your investment FWIW…save on increased rents. when you want to move just buy another house and rent the old…though renting expensive houses can be tricky-ish…cheers!
Alternate perspective: renting as a luxury move. I realized that if I owned my home, I would want to hire a property manager to deal with all the contractors and details. As a renter, I live like lords of yore with a full staff.
Renting an apartment, I get a clean pool, maintained gym equipment, lovely landscaping, an internet portal for all maintenance needs, and the deep security that comes from knowing that if everything goes to hickory in a handbasket, I am responsible only for my rent and I can move tomorrow with 3 months’ rent penalty.
I am very glad I did not listen to advice like this and bought a condo in residency. We live in SoCal and our condo is now about $300k+ more expensive than when we bought it 3.5 years ago. We purchased it with a phyiscian loan 5% down. Refinanced later and now have about 25% to 30% equity. Best investment of our lives. Leverage definitely helped us. Our non-physician friends who have rented during the same period have nothing and cannot afford a home anymore. This article provides poor advice in 90% of the situations. The only time one would have lost money buying a house would have been to buy it right before then 2008 crash. People investing in stocks love a crash because they can buy the dip. So same with housing. Keep buying when you can and rent it out down the line.
This is called hindsight bias and/or recency bias. You’re judging the decision not with the info available at the time, but with info not available at the time. Just because something worked out okay in the end doesn’t mean it was a good decision.
I bought a condo in 1999 and sold in 2003 and lost money on it. Clearly 2008 is not the only time real estate has flatlined/gone down in value in the past.
Any investment has risk. If you don’t want to take risk don’t invest. Simple. You are all about buying passively and investing any money for “time in the market” but when it comes to real estate, you are in the opposite camp. You actually proved your own hindsight bias. Just because you lost money in your investment, it doesn’t mean no one else should do it. Real estate and stocks are the greatest investments available. High ridk high return. Telling people to keep renting is poor advice. If you had kept your condo, you wouldn’t have lost money. I am surprised you don’t follow your own advice in real estate.
I think any 100% rule, such as “keep renting is poor advice” is unsound and unscientific. I have provided several examples where renting is superior to buying, most notably my current situation. Is this common? Maybe not. But it’s not 0% of the time. Sometimes, renting > buying.
What are you talking about? You know I personally my own home and millions of dollars of both investment real estate and stocks, right? I’m not anti buying real estate.
I’m pointing out the arguments you’re making are biased based on outcome. It’s like betting on the favorite in a sports game. The right move (assuming no one is giving you points or better odds) is to bet on the favorite. That doesn’t guarantee the favorite will win. If you bet on the other team and even if somehow the other team squeaked out a win, you still made the wrong bet. That’s the bias. You have to make a decision with the information you have at the time.
In addition To WCI comment, imagine instead of buying your condo you bought an investment property. Now you not only have your appreciation you’re so happy about but your tenants paid your mortgage and paid part of your monthly rent money. Which would you rather have?
You’re missing the point that rent money is lost. Gone. You rent $2000/month for 3 years, that’s $72k down the drain. When owning a home, you build equity and get appreciation. Again, rarely you may lose money if you sell, keyword being “sell.” You don’t stop investing in the stock market because of 2008 crash, so why would one stop investing in real estate? If one cannot afford buying a home, that’s a different story. Otherwise, buying always beats renting.
Buying doesn’t always beat renting. Always and never are dangerous words to use. Does buying USUALLY beat renting if you stay there for 5+ years? Absolutely. But not always. And sometimes buying works out even if you’re only there a year or two. But that’s not the way to bet.
People who are uneducated will forget this rule and illuminati and Hollywood and educational and government will always censor this rule as well.
#8 RENOVCTION, EVICTION AND RENT RAISE higher than minimum wage.
?
Maybe Nixon could be the Guest Writer for Friday, April 1st? 😉
Jim wouldn’t need to check spelling or syntax
Already got plans for that. Hope you enjoy it.
Great post, especially in these times.
In 1993 I built our first “real” house on an acre of prime lakefront in central Florida. $500,000 for initial build, sunk another $100-150,000 over the next 22 years. Sold for $480,000 in 2015 after more than a year marketing and staging. Missed opportunity costs and 15-20,000/year taxes and maintenance.
Condo #1. Purchased new in 1988 for $89000. Allowed in-laws to live in until their passing. Was completely renovated in 2010. Sold for $88000 in 2014 after rental
Condo#2 Purchased in LBK Florida in 2003 for $699,000. Penthouse, beautiful water views 360 degrees. Renovated in 2011 for $50,000. Sold in 2016 for $599,000 after 18 months. The HOA alone at sale was almost $20,000/year
Is there a moral to my story?
Real estate doesn’t always go up? Even over long time periods?
You seem to have made bad purchases
This is a good article that presented solid arguments for renting over buying. However, I think if you are willing to have roommate(s) and house hack, buying a property in a good location can be a very good investment that will outweigh renting down the line.
My wife and I bough a property in SoCal 2 years ago, for around $300k, in the middle of my residency training. We live in one room and airbnb out the other room. We were able to reduce our monthly fixed expenses (mortgage, utilities, HOA, etc.) to almost zero and there were months where we made money. Because of this, I was able to maxed out my roth IRA and roth 401k from residency during the years that we live in the house. We are leaving California in a few months for my new job in another state.The property has appreciated about $100k since we bought it, and now we have a rental property that will cashflow when we leave. For us, this was the best investment we did during my residency years, and we just simply followed something that worked with countless other people in the past.
You can definitely lose money buying a house, but I think if people are willing to make some sacrifices and “house hack” with the right property, it will work out really well in the end.
I think the region you are in makes a huge difference. We’ve been quite lucky… our first house, in California, had an IRR of 20.9% after insurance, maintenance, imputed rent, etc. Our second house, in Colorado, had an IRR around 0% through the first ten years. However, with these past 7 years that skyrocketed to around 6% for the entire 17 years, assuming we sold it now and using estimates from the big 3 RE sites and knocking off 5% from the avg price estimate. However, I’m sure there have been times and places where the investment not have turned out to even match inflation.
I thought this was an excellent guest post that offered a contrarian viewpoint without being too provocative. Based on the comments I guess I was wrong about that last part. To me, the indignant replies and comments about home ownership being the American dream only prove why this and the WCI post link in the “Residents…take heed” line are so important.
The concluding statement tells people to “run the numbers” and “consider the intangibles.” I don’t really understand how anyone can argue with that advice. If, early in your career, your careful deliberations have led to the conclusion that you’ll be happy doing some combination of house-hacking with roommates, running an AirBnB in your spare time, and/or being an out-of-state landlord in the future, then it’s reasonable to consider buying some type of property. It’s better to have a mindset that you are buying an investment property that you don’t mind living in for the first few years.
From what I’ve seen, the majority of home purchases are driven by emotion, FOMO, and a false assumption that buying is always a smart move. New homebuyers are frequently blind to the downsides of ownership and would be wise to at least consider the author’s points. As another person commented, in hot markets right now many homes are being sold “as-is” and are often bought with all cash offers. Risks for buyers seems as high or higher than ever. Caveat emptor.
“Renting is better” says the person who already owns multiple properties.
For most people renting is not a good experience: no stability, no ability to stay in a good school district, no equity building, careless landlords who don’t repair the house or who do shoddy work.
Most people would greatly benefit from owning at least one property, just like the author.
Renting is not what for the author to where they are. It is a perk of already being in a good financial situation.
There is another concept of renting money. Take intrest only loan on the house you stay now the cost is cheaper compared to renting. Home value grows which you can cash in when you sell and don’t stay in the house for more than 6 years
Great article and I absolutely agree most people would be better off renting versus buying.
Why are people making such a poor financial decision?
The ideology of the American Dream.
The biggest propoganda lie in recent history IMO.
Is it coincidence that a 30 year traditional mortgage is more or less the lifespan of the American workers prime labor years?
Keep the worker bee working
“you’ll own nothing and be happy about it” where did I hear that before?
Renting IS throwing money away. Thousands and thousands down the drain. Owning a house (especially one that does or might go up in value significantly) gives you equity. Owning possessions for your house maintenance is not throwing money away
All of the “points” mentioned in this article can be swept away by that simple argument
Please identify which of the following is NOT throwing money away:
Mortgage interest
Property taxes
Homeowner’s insurance
Utilities
Home maintenance
Lawn care
Snow removal
Realtor fees
Go ahead. I’ll wait.
I think it’s pretty obvious that your “simple argument” is not very convincing. The only thing going to equity is the principal payments, and that’s not a very high percentage of the payment (much less all the costs of homeownership) in the beginning of a 30 year mortgage.
As the post says, you’ve got to run the numbers. Most of the time if you stay there long enough, homeownership works out. But not all the time and especially not for short time periods.
But you are paying for all those things as a renter! Just because it’s hidden in the somewhat stable monthly rent amount doesn’t mean that your money is not paying for all of those items. If the rent was not high enough to cover all of those items the owner would not be renting…
I agree. So do you now agree that it isn’t “throwing money away” but “exchanging money for housing?”
The last line of #2 is crucial. “…investing the difference”. This needs to be bolded, and perhaps expanded upon IMO.
I’m in the bay area and have long ago given up on buying a house. Also, my apartment is rent controlled, so why move?
I assume the author does not have any kids. That should be enough to explain why he’s biased against buying a house.
The author isn’t biased against home ownership, but many of the commenters (and many people in the US generally) are pretty clearly biased against renting. The point of the post (which people keep missing) is that you shouldn’t assume that buying is the smart bet 100% of the time. The author tries to give examples of how “renting can be much better than owning” which isn’t the same as saying it’s always (or even usually) better.
There are obviously situations when it makes sense to purchase your home, just as there are situations when it makes more sense to rent. I agree that renting is less desirable with kids in the picture. I would argue that with kids doing stuff like turning a spare room into an AirBnB or house-hacking with roommates is also much less desirable. Most people would be better off thinking hard about the alternative even if, in the end, they decide buying is the right move in their situation.
“… at which point we will move into one of our current investment properties.”
Clearly the writer thinks buying is a pretty good financial idea. Perhaps the argument is just not living in the property you own?
For sure you need to account for a lot more when buying, but the vast majority of the time it is the better long term financial decision.
I think the rent vs buy decision should be made based on lifestyle concerns. If this decision significantly affects your long term finances then that is a big problem which should be the focus of your attention. You should live well below your means and regularly contribute enough to a reasonable investment portfolio that the rent vs buy decision doesn’t really move the needle on finances much.
That’s an excellent point.
So owning rental properties doesn’t count as being a home owner?
Taking advantage of first time home buyer programs then renting the home out if you want “freedom” later is perfectly viable.
I always find it hilarious when landlords make blogs about how it’s so much better to be a renter. Hmm I wonder if you might have some ulterior motives?? 😂
I was going to make the exact same point. The article from the academic is silly
The number one determinant of whether owning financially wins out is location. And secondarily real estate trends. I’ve owned 2 houses, 3 condos and one business location in Florida over 35 years. All except for the business sale would have been better financially served if I had rented comparable and invested in the S&P. And Not by a small margin. Similar properties in California, different story. For Now. That is where trends take precedence. My father was an owner/ investor in multiple downtown Boulder, Colorado properties in the 60s- 70s. He couldn’t give them away when he needed to liquidate. It bankrupted one of his partners. Now they would be centimillionaires.