Sometimes Renting Makes Sense
I have been preaching this for a long time. I am sure that since the real estate market just blew itself up maybe a few more people will actually pay attention to this. There is this old piece of advice that many parents tell their kids that goes something like “rent is a waste of money” or “paying rent is paying another persons mortgage.” The idea is that you should always be paying off your own mortgage so that you can have equity and sell it for a profit and blah blah blah. I am not going to sit here and try to tell you that is a bad idea. But, it isn’t the only answer. There are times when renting just makes sense. And just because you rent doesn’t mean you are giving up your financial future. When is renting a good idea? When you can’t commit to a home for a minimum of 5 years. I don’t need to get into details about this. Anybody who assumed real estate always goes up just got a tough lesson pimp-slapped into them. Yes, real estate will go up, but only when you can look at things in 10 year spans. Welcome to the ass end of the real estate cycle. People who bought homes and thought they would flip them for an easy profit are now sitting on massive losses. There is no excuse for not paying more attention to the market. This keeps happening and every time it does people act like it is new information. I find it shocking that people will research like hell when buying a $2,000 TV but wont spend any time learning some real estate history on a $300,000 purchase! I can go on about that stuff forever so I will save it for another post. Another reason that owning isn’t all it’s cracked up to be is the cost of ownership. If you can barely pay the mortgage what the hell are you going to do when the plumbing backs up? Owning isn’t all glory. Unexpected repairs can really mess you up if you are on a fairly tight budget. And, for condo owners, those maintenance fees can go up a dramatic amount with very little notice. Unless you can plan for these events in your budget you probably should be renting. OK, so now you realize that you are destined to be a renter. You are going to die a poor person, right? HELL NO! You now have the luxury of being able to make your living expenses fixed for the year. That means any extra money can be invested. Say you pay $1500 a month for rent. Let’s say to own the same condo would cost you $1300 mortgage plus $700 in property taxes and maintenance fees. You are pocketing $500 a month. Sure you don’t have any equity. Who gives a shit if you are paying someone else’s mortgage. That is $6000 saved for the year. What the hell is wrong with that? Before you people freak out and tell me about how you can gain so much more than $6000 a year with your real estate deal: I KNOW! What I am saying is that the current market proves that as easy as it is to gain 10 grand in a year you can lose 25 grand the next! That 6 grand saved was calculated out of your own earnings. Unless you piss it away it is guaranteed, even if you don’t invest it. Everything you spend on doesn’t have to be an investment. Being able to walk away from your home can be a good thing depending on your situation. Open your mind and do your research. There can be value in renting if you know what you are doing.
