The own vs. rent conundrum my wife and I confronted early in our marriage (33 years this coming year) is well behind us, what with both a primary home and a vacation home in our real estate portfolio today. But with a daughter about to be a university graduate with stable job prospects, we are into the discussion all over again. She and her boyfriend have been blunt: “We don’t want to waste money on renting.”
My first instinct is to mutter, “Youth is wasted on the young” and then make the case for patience, establishing a career first, maybe investing excess earnings in the stock market or some other money-grower. And yet, when I think about it, I remember the charge I got when I figured out that buying my first home and paying monthly principal, interest and taxes would save me $100 a month compared with my “wasted” rent at the time. (Note: The home was a brand new cedar and stone contemporary on a beautiful, sloping treed lot north of Atlanta that I bought for $43,000. It was 1978. If I had stayed in that home during the full duration of my 30-year mortgage, it would be worth more than $500,000 today.)
Most of us are a lot older now, but as I consider the debate, there are a few more reasons to own than to rent. The best reasons to rent are if you are unsure you will like your new golf community, if you want nothing to do with the maintenance of your property (landscaping outside, mechanicals inside) or if you think you expect you might be called back home permanently for family or other reasons (it is easier to break a lease or let it expire than, in many cases, to sell a house).
Home ownership is a better financial deal, generally, unless it is 2007 and you are about to buy in Miami or Las Vegas; and you continue to build equity, assuming we continue to experience modest or better market improvements. Also, if you need or want to borrow money, now’s the time to do it, with mortgage rates only about 1 percentage point higher than their historical lows. And, in many cases, you will pay about the same in rental costs as you will in monthly mortgage and tax payments for comparable homes.
The Motley Fool financial advisory web site states the case for home ownership over renting pretty well. If you read their article, make sure to read the comment after it by a reader who has never owned a home, and believes strongly in the other side of the argument. Regarding his last piece of advice, to young people, about solidifying a career before buying a home, I’ll be passing that along to my daughter, no matter how much I am in the owners’ camp.
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Happy Holidays to All