Why I rent instead of buying

One of us owns a house and one of us doesn’t.  The one who doesn’t (me) is in a location where I *could* afford to buy, but I’m not.

Linda wanted a post on why I rent instead of buy, so here it is!  (Because Grumpy Rumblings aims to please!  Also, we needed a Monday Money post, so this seemed like a good idea.)

My first answer is, “Because I always planned on leaving this shit-hole of a state.”  I would like to own a house, but not here.

#2, however, points out that once I was more optimistic.  A little.  I thought that if my partner moved here we could buy a big house (instead of renting a tiny apartment) and we could try to be happy here.  After all I’ve always wanted to own my own house and paint my own walls and just own it.  (#2 thinks homeownership is over-rated, but #2 also doesn’t mind vertical blinds or wallpaper.)  It’s been so long since those days that I can’t remember them, but #2 swears we had those discussions.  [She may even have gchat proof that she’s too lazy to search for, but totally could if she cared enough which she doesn’t.]

At first I wasn’t living with my partner so there was no reason to buy.  Then I was saving up money.  Then, I never bought one because I didn’t want to have to sell it later, when I left.  By the time I had partner and down-payment, I wasn’t ready to commit to living in the house for at least 5 years.  And selling it later can be really obnoxious.  Who wants the hassle and the risk?

My friend did the buy-now-and-sell-when-you-leave route, and they took a bath on the finances because they had to unload it or else be long-distance landlords (NOOOOoooooo).  Personally, I would not have made the decision to buy when hir partner didn’t have a job here despite 2 years of looking, but oh well.  Now they are both employed and homeowners in a different state!

So, there you have it.

How did you make the rent vs. buy decision?

34 Responses to “Why I rent instead of buying”

  1. First Gen American Says:

    Maintenance and upkeep on houses can be a killer to a budget. I suppose buying a house in a place you don’t want to be long term kind of feels like giving up too.

    • nicoleandmaggie Says:

      In a certain way I think I would enjoy maintaining my own home (not in ALL ways, just a certain way). But it’s definitely too much work to put in in a place I don’t want to stay.

      • Rosa Says:

        My husband is super handy and super cheap and super over-scheduled and unable to delegate. That means that the person who feels the need to take over every project has no time and the person who has time has no interest in being micromanaged on house improvement projects. So nothing gets done until it’s super urgent.

        I am never being jointly responsible for a project of this scale with my husband ever again. We coparent OK but our kitchen has been mid-remodel for going on 5 years.

      • nicoleandmaggie Says:

        Yeah, that’s stressful! We’ve had to work out ways to cook together (for example) because we both keep trying to boss the other one around. We had to make our process explicit. Doing a remodel ourselves is RIGHT OUT.

  2. Liz Says:

    It can be a little frustrating to see people my age (~25) buying houses already. Jealousy factor. And I do want to own a home someday — with a lot of land, a hefty down-payment, and including acreage. But…. I don’t want a new-construction home because they aren’t as sturdy. I don’t want a condo. If I can absolutely help it, I don’t want HOA. (Own a home to have others tell me what I can and cannot do with it? No thank you!)

    I plan to buy one house to live in, ever. So I’m relatively content to wait 10+ years (or until a magical massive windfall happens; be careful what you wish for, knock on wood, etc.) to save for down-payment plus equal amount for repair fund. Assuming I can keep up with inflation and home price fluctuations. By then I assume I will have been forced back to hometown (or thereabouts) for love and/or declining parental units, or have made up my own mind about where I want to settle down.

    Pros of renting include all those maintenance things: if the water heater breaks, I call the landlord to fix it. That’s happened once, with one of the worst landlords I’ve ever had.
    Cons of renting: the little things that need fixing (can I get doors on my closets please?), and some of the big things (sh#!y old windows, because no outer storm=weathering, and not all have screens…) don’t get fixed no matter how much I bug him to fix them. Current landlord is a darling absent-minded doofus. Bless his heart.

    • nicoleandmaggie Says:

      I’ve seen almost no-one ever buy a house at 25. Certainly not in a place I’d want to live! I agree with you on new construction often being crappy, and I hate HOAs with a firey white-hot passion.

      • kellen Says:

        I bought my house at 25, and I love it, but I wouldn’t recommend it to anyone my age as a good idea, in general. The maintenance on the house is significant, so even with saving a substantial portion of my income (~45%) and having the savings account to help out, it sucks to pay out large chunks of that savings for things like tree trimming, or water main repairs, when those don’t increase the value of your home, or even give you a nicely decorated living room to hang out in (spending on furniture is still low on the list.)

        The other issue with buying at 25 is that now I’m considering moving jobs, and the locations around the city with a decent commute are limited by my location. The ability to move to another apartment just a few miles in a different direction would be really awesome to have right now.

        Pros: The little things that need fixing still don’t get fixed, but they don’t bother me as much when it’s my responsibility to fix them.
        The dog really likes her back yard.

  3. Holly@ClubThrifty Says:

    If you plan on leaving your state, I wouldn’t buy either. Selling a house can be a huge nightmare, and you could obviously even lose money if the market tanks!

  4. hypatia cade Says:

    People make houses into super emotional things… Think of them like any other capitol investment and it gets a bit easier.

    Once you have a downpayment, it’s a math problem with a certain amount of associated risk. Cost of rent + utilities vs. Cost of mortgage + utilities + upkeep + closing/moving costs (x2 – don’t forget you’ll have to pay the realtor when you sell and that affects the break even point). In a town like mine – college town with exceedingly tight rental market — in the economy like it is, with currently low interest rates, – the math tips toward buying relatively quickly. In another town the math might tip the other way.

    That said, things that are tolerable in a (temporary) rental might be less tolerable in a (permanent) house, even if you live in both the same amount of time.

    When it’s time to sell, that’s also a math problem — how long on the market at price X vs how much is being paid in unrecoverable funds (interest) to the bank each month. Set/drop price accordingly. The question on breaking even in the end is did you pay out more in rent over that period of time than you would have paid in interest/real estate commissions/lost at the sale. (Not did you break even on the purchase price of the house, though that generally DOES mean you came out ahead!)

    • nicoleandmaggie Says:

      It’s not quite like any other investment because there’s more risk based on moving. The heuristic is don’t even think of buying unless you’re willing to stay five years (the heuristic time for not taking a huge bath if you accidentally buy at a market local maximum), so if #1 had had a downpayment and was living with her partner at the beginning and figured she’d stay until the tenure decision, it might make sense to buy. (And there’s calculators from the NYTimes etc. that will compare rent vs. buy decisions from a numerical standpoint) But there’s so much uncertainty with the housing issue than there is with index funds, since index funds won’t ever force you to become a landlord. Someone will always buy your index funds if you sent the price low enough. And you don’t have to sell 100% of your index funds all at once, just the amount you need, which helps with taxes.

      And remember that you’re generally paying lots of interest those first few years of owning because of the way amortization works. But there’s calculators that take that into account.

      Retire by 40 had a great post today on another reason that being a landlord sucks. http://retireby40.org/selling-rental-big-tax/

    • chacha1 Says:

      I think this is absolutely true:
      “things that are tolerable in a (temporary) rental might be less tolerable in a (permanent) house”

  5. bogart Says:

    I bought into my DH’s house when I married him, and we still live there. I tried briefly when we were dating to insist he should sell and rent to save money/free up capital post-divorce, but it just wasn’t true — there was no way he could have rented anything close to equivalent (and it’s a modest house — but, location, location, location) for less than he was paying in mortgage. Plus there is clearly a (good) argument for not selling out the house the (his) kids had grown up in and were still living in at a time when their lives were pretty topsy-turvy (recent divorce of parents).

    Overall, the house has more pluses than minuses (walkable to good public elementary/middle schools, on bus route, quiet neighborhood, smallish house, no HOA, walk/bikeable to retail if you’re committed, all on one level), so we’ve stayed in it (and had half of it remodeled, improving it dramatically). OTOH it has (only recently) occurred to me that we could “move up,” and I’ve started looking around a bit. But our search criteria are pretty stringent, and thus far nothing affordable that possesses them has presented itself.

  6. Leigh Says:

    I bought my condo fairly early (at 23). There’s no way I would have bought a house at that point and if I’d had to wait much longer (as in another year or two) to save up a down payment, I probably would have just kept renting until I wanted to buy a place with a significant other. As it was, I bought at what I think might be a fairly low price considering what similar units are selling for two years later and I’m really not opposed to selling if it makes sense life-wise.

    I made the rent vs buy decision by seeing that I had a down payment, then looking at the math and realizing that I would basically be paying the same per month to own a two bedroom condo versus renting a 1+den apartment and part of that would be going to principal. Rent has been going up so insanely here that I’m now spending (mortgage + HOA dues + property taxes) about $300/month less than my boyfriend is for his 1+den apartment that is about half the size of my place. Overall, I’ve been happy with my decision. I like that I can change things, like the thermostats that are as old as me or that if something goes wrong, I can call someone rather than waiting for a landlord to actually get around to that (some friends were without a fridge for a month because their landlord was so slow at fixing it). My life evaluation on the buy vs rent was that I felt I wanted to live in my apartment for the next 5 years, so I figured buying one similar wasn’t a terrible plan. It seems to have worked out well so far!

  7. Linda Says:

    Thanks for writing this post. It seems that the majority of PF blogs/posts make renting sound like a bad financial decision, so it’s nice to hear viewpoint that is different. I read RB40’s post, too, and am familiar with his blog. It seems to me that it is more difficult these days than it used to be to plan on staying in one place for a long period of time and this complicates the decision to buy vs. rent. Employment isn’t as long term as it used to be (who works at a place 30 years anymore?), and the need for more or less space and specific features/amenities varies over time, too.

    I’ve been in my house nearly 13 years. When I got divorced five years ago (hard to believe it has been that long!) I had to make a decision to sell or buy out my ex; I decided to stay. Now I’m contemplating a move and would return to being a renter for a while. It seems like a relief to me after dealing with yearly maintenance costs for 13 years.

    RB40’s experience as a landlord hasn’t exactly matched mine. Maybe that’s because I’m a live-in landlord (I rent rooms in my house). I’m not sure what rental depreciation will do to my taxes when I sell, but since this is my primary residence I can gain up to $250k and not have to pay capital gains. I’m hoping I have some sort of gain, but it would be a miracle for me to make that much off the sale of the house.

  8. Foscavista Says:

    It was easy for me – favorable job (most of the time), housing market crash, found a house I loved/still love, short sale, and the first-time home buying tax credit (that I don’t have to pay back). PITI was $25 more expensive than rent (that did not include utilities). I was paying rent before partner moved down, so I bought the house on my income, not his.

  9. chacha1 Says:

    Rent vs Buy was a decision mostly made for me by circumstances. My first long-term relationship/partnership began in a state I was strongly motivated to leave. I wouldn’t have bought property there for a dime, and nothing that’s happened since then has changed my mind. :-)

    Then when we moved it was to Los Angeles, where rents were not that much higher (amazingly) than those in the city I left; but house prices were close to twice as high (and have since gone higher). It made no sense at all to pay 2x or 3x as much per month for a given amount of square footage in a given neighborhood, just to be able to say we “owned” something. For one thing, when you owe $400,000 to a bank you do not own anything.

    We recently bought (correction for accuracy: *started to buy*) empty land, on which we intend to build a house to live in when we retire. That property is in a rural HOA, which is not at all the same animal as an urban HOA. So I would encourage people to not automatically strike something off the list until you know what an HOA actually requires AND what it provides. For us, the amount of the annual association fee was relatively trivial compared to the benefits it conveys, chief among them enforceable restrictions on the number of vehicles, animals, and people per square foot of residence.

    • Liz Says:

      Good to know about rural HOAs. I don’t know of any in my neck of the woods, so I didn’t even know it was a thing.

      • chacha1 Says:

        I had no idea either. :-) Fortunately this particular association is sufficiently sophisticated that it has a website permitting the interested person to download the entire covenants & restrictions document. Highly useful for the prospective buyer.

        Since I grew up in a rural area mostly distinguished by free-roaming dogs, free-shooting rednecks, and front-yard junkyards, a community set up to deter those things was attractive for buying into.

      • Dana Says:

        I agree about HOA in rural areas being more useful. I pay less than $200 per year in dues and they cover getting all the streets plowed all winter long. Since I live at the top of a steep hill that is SO worth it! They don’t do much else and I have the impression most of the agreement is not enforcible. Very little bother for a nice communal benefit.

  10. hush Says:

    Great post. Renting sounds like it makes total sense in your shoes.

    About ten years ago, I owned my first house in the Big City for a mere 38 months. Which sounds crazy/ill-advised in today’s world. In terms of jobs, I got extremely lucky with the timing of things. Owning made economic and personal sense at the time. While there was the silly emotional reason of wanting to own a home before I had my first baby, there was also the notion that if I lost my job/became disabled/etc I could sell the house in under 2 months from start to finish with a reasonable expectation of a modest profit. Gone are those days. On the same facts, my former self would almost certainly be a renter now.

    I’m now in my second (and hopefully penultimate) home in the country, which I plan to live in until I’m at least in my 70s if not longer. We own again in large part because there is not much of a rental market in the rural town we call home, and we have loads of job security.

  11. Leah Says:

    I’ve only ever rented. I like the flexibility of being able to move if needed. And I definitely put up with more in a rental than I would in a house I owned; I think I’d be spending a lot more to furnish and improve an owned house. In a rental, not only do I not fix stuff there, but it is also easy to not buy new furniture. What if that fancy couch wouldn’t fit in a new place? The hand-me-down couch still functions, even if it’s not pretty.

    Another perk comes if the rented place is smaller than what one would buy. I could see buying a place a little bigger (or a lot bigger) than one needs if the cost is more or less the same, but I usually rent places just the size I need to save money. In a smaller place, there’s less need for furnishings and other stuff to fill up the apartment.

    Now, of course, housing is provided with my pay. That’s an entirely different set of decisions, because buying (or even renting) would definitely mean adding cost. That said, we are saving up money each paycheck in order to someday buy a house (maybe when we leave here, or maybe when we get sick of living in a dorm/tiny apartment). My hope is that having enough saved will swing the math in the buy direction when we are ready to make a 5+ year commitment to a location.

  12. j Says:

    I got divorced and moved to a location where rentals are 50-100% higher than a mortgage. I wasn’t planning on buying, since I’m not sure I’ll stay her for a very long time, but the kids and wanting space and a yard for them, not wanting to rent in the locations that were available (or with college students as the dominant tenants), and the cost difference (I’m not making enough on my own to actually afford any of those rents!) made it a no-brainer. Luckily it is a hot market in a good school district, and I have a very reasonably priced house (on kind of the starter street), so I don’t think I’ll have trouble selling if need be. I figured if I lost money on the deal, as long as I didn’t lose more than I’d have spent paying so much more rent, I’d come out even or ahead.

  13. Rosa Says:

    We were young and stupid (22 and 25 – he had been working full time in his lucrative professions while going to school and sleeping on the pantry floor of a shared rent house, so he had a heap of money to put down. My family gave us $15,000 too, between parents & grandparents)

    As soon as I can talk him into unloading this heap – probably about the time kiddo graduates high school at the rate of change my partner prefers – we are never owning again, I swear it. If we’d put the repair costs & accelerated mortgage payments into the stock market instead we’d be RICH. Instead, the supposed value of the place tanked and now has nearly recovered after eating a lot of cash and time and energy.

    It’s a lovely house, though. I fell in love with it at first sight. The joy has worn off under the pressure of a decade of shoveling and weeding and repairing and remodeling.

      • Rosa Says:

        It’s not terrible. I just think the work/reward ratio is not high enough on the reward side. It turns out, I really like change and going out and not owning stuff more than I like stability, yard work, and having a giant attic full of things. I didn’t know that when I was 25!

        Also, despite the chorus of “you should own a house if you’re going to have a kid” – I had a lot more time and energy for all this house fixing (and for having roomates, which we did for six years and which made the finances of ownership way better than renting) when we did NOT have a kid. Now I’d rather hang with kiddo than reroof the house.

        Also the economics are different than when we were growing up. Our parents lived about like we do – lots of sweat equity, lots of extra mortgage payments – and it was very rewarding financially. We hit the time when the stock market was a better bet.

  14. Thisbe Says:

    We’re in the middle of closing on our second owned home – we sold the first a little while ago after living in it for a relatively short period. I am pretty sure that most people would say it was a bad financial decision to own that house and that we should have rented (and they may be right), but we don’t regret it at all. The rental market in Previous Town is extremely annoying in many ways – overpriced, landlords are high-maintenance, and it’s really seasonal because it’s a college town. We ended up having to hold onto the house for about six months while it stood empty in order to hit the peak of the seasonal real-estate sales market, but that was fine for us since we weren’t trying to buy anywhere else during that time.

    We thought about just being renters for at least the next little while – we’re two-body-problemed just now, so in some ways renting seems easier. However, the pets make it complicated. I have some extremely well-behaved dogs (they don’t quite live up to my standards, but the consensus opinion is that my standards are unreasonable and my dogs are amazing) and I have run out of patience for dealing with landlords who are obnoxious about pets. (I also have cats, naturally, and occasionally some pocket pets or whatever rotate through the menagerie – honestly for a vet I am pretty restrained in my animal acquisition.) Which is most landlords, in my experience.

    So we ended up deciding to buy in my Current Town, perhaps counterintuitively since the intended solution to the two-body problem involves the partner’s Tenure-Track Town (w00t). But, I grew up in this town so I knew exactly what neighborhood to buy in, and the rental market here is … overpriced and competitive, I guess I would say, due to being both a college town and an overall wonderful town for various other reasons … so we think we’ll eventually end up being long-distance landlords. That idea seemed too annoying in Previous Town, but that’s because we don’t want to have a long-term connection to that town other than returning to visit friends occasionally. Here we will continue to have a long-term connection regardless. Plus I want to retire into the little house we are just closing on.

    Long comment, but I guess in summary I am seeing buying instead of renting as another case of being able to throw money at a situation to make it go the way I want it to.

    • Linda Says:

      The pet issue is one challenge I foresee with moving from owner to renter. I have an impeccably house-trained dog that I love to pieces. She’s 11-years old and I can not/will not re-home her. Unfortunately, she is 50 pounds and most apartments/rentals seem to have rules about the size of pets. :-(

      Also, while she is fantastic with adults and children, she does not get along with other dogs. If anyone saw how she reacts to another dog, they may get the impression she is dangerous to people, too, which has never, ever been the case.

      I’m going to get a breed test kit so I have some documentation of her breed just in case that comes up as an issue, too.

      • Thisbe Says:

        I understand why landlords or management companies can be nervous about dogs – there are lots of bad dogs out there with various behaviors that might be undesirable in a rental. But a mass-of-dog limit is pretty much the stupidest kind of policy. Have these people never heard of Jack Russell terriers? Beagles? Nasty little chihuahuas?

        Somewhat related, I think it’s amusing that rentals will charge an extra “pet rent” but don’t (maybe they can’t?) charge an extra “child rent”. I think the two are at least as likely to be destructive to a home.

        Anyways I hope you and your dogfriend find something.

      • nicoleandmaggie Says:

        That would be because the child rent thing is illegal (I can’t remember if discriminating against parents in housing is state or federal law, but it’s a law in at least some places in the US… my guess is federal but that could be wrong). They would if they could.

      • nicoleandmaggie Says:

        The internet tells me it is federal under the fair housing act.

      • Linda Says:

        Yeah, no kidding! Size of pet does not reflect the amount of destruction one can cause! A badly trained/behaved pet (dog or cat) can really mess up a place.

      • Thisbe Says:

        I know it’s illegal to discriminate in rentals against people with children, but I don’t believe it’s illegal to charge rent based on number of occupants, and it’s just surprising to me that more people don’t do that. (Additional $XXX.XX per month for each additional person living in the property beyond n, for instance)

        But regardless, yes, destructive capability (or propensity to cause a nuisance to neighbors) is really not proportional to size. The magical 30-pound limit for a dog kind of cracks me up, too, because it potentially allows a teething puppy but not a middle-aged retriever (or an obese cockapoo or whatever, for that matter).

      • Rosa Says:

        It seems like some landlords specialize (and I assume charge a premium for) tenants with dogs. We have a new landlord neighbor in the triplex next door and each unit has a very large dog. I know there was one landlord in the college town where my best friend went to college who allowed dogs, and therefore had a monopoly on dog-owning tenants in town. And in that case it seems like a total win – dogs can’t be more destructive than undergrads.

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