Why We Decided Not to Buy a House….

by Mike on March 1, 2012

home

Many people think that homeownership is the American dream, but I disagree.

I’m a proud renter, and it’s not that I can’t afford a house – I can actually afford a really nice, big house. I just choose to rent a nice big house instead. Here’s why…

Staying Debt Free

I am very anti-debt and so is my wife, and we’ve agreed to be debt free. When thinking about buying a house and looking at how much I can borrow, it made me pretty uncomfortable. It was scary to think that for just a few signatures, I could borrow over $500,000 for a home, which could lose value! We used a mortgage calculator to figure out how much out monthly payments would be, and found out that it was quite a bit more than our rent for a similar sized property.

In addition, if we’re to buy a home we’d have to take a huge chunk out of our savings for a down payment. And unless you qualify for one of those “buy to let mortgages,” most lenders are requiring 10-20% down right now.

Keeping Out Expenses Down

Beyond the mortgage, owning a home involved so many more expenses that we just don’t have a renters. First, we don’t pay any property taxes and that is great! I couldn’t image having to pay another $5,000 to $6,000 per year in taxes beyond my regular income tax.

Also, we pay a lot less insurance, since we keep our renters policy to just cover our possessions. If we had a home, our insurance payments would increase substantially.

Finally, forget maintenance. When the toilet clogged, I don’t have to deal with it. I just call the landlord, and he takes care of it. If I was a homeowner, I would have to deal with both the hassles of problems arising, as well as the monetary cost.

Saving More

Renting also just allows us to continue saving and live the lifestyle we want. By avoiding those expenses, we have saved and feel comfortable traveling whenever we want, and we don’t sweat going out to dinner if we feel like it. I couldn’t imagine the burden of a home at this point, both the financial cost and emotional stress of having to make so many different payments.

We may change our minds in the future, but for now – we are perfectly happy renting! :)

Photo by Universal Pops**

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{ 7 comments… read them below or add one }

Matt March 1, 2012 at 11:14 pm

Nothing wrong with renting. Yes, a home “could” lose value, and many did in the past 4 years. But, historically, homes have proven to be a great investment and they will appreciate over the long term. The thing about owning a home… you have a goal of one day getting it paid off and owning it free and clear! With rent, it is a never-ending expense. You didn’t say so, but perhaps you are doing both? Rent until you can afford to pay cash for a house?! That would be the best plan, as long as it didn’t take you most of your working lifetime.

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John | Married (with Debt) March 2, 2012 at 3:28 pm

I don’t always think buying is better than renting, and I am envious of the freedom it brings. But I am worried by the prospect that rent is essentially a bill you can never pay off. I still view it as a debt, just one that you can never get away from.

Then again, a $750,000 house could be a debt that might never be repaid. I prefer to live in an area where nice houses can be had for $200,000. Then you have the opportunity to pay if off in 5-10 years, move and rent it out if you want, and have an income stream.

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101 Centavos March 2, 2012 at 3:44 pm

If renting is appropriate for your circumstances, that’s OK. I have relatives who live in ares where real estate costs are astronomical, and they choose to rent as well. Have done so, all their lives.

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Andi @ MealPlanRescue March 5, 2012 at 2:13 am

We actually had the reverse situation. It was far cheaper for us to purchase our house than continue renting. Portland has the lowest vacancy rate it’s had in a long time, and as a result, our complex wanted to charge us $900 to continue renting our 480 sf studio. Instead we pay less than that for our 1200 sf house, including homeowner’s insurance and property taxes. We also mitigated repairs by requesting a home warranty from the seller. I lived in my childhood home for 20 years, so I don’t look at homes as investments; it’s my home, one that will eventually cost me only taxes and insurance. And I’m very happy to be here. We were able to provide a place to live for a family member and we wouldn’t have been able to do that in our apartment. It’s been a real blessing for our family.

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Jeff Ehrlich March 5, 2012 at 8:53 pm

Kyle,
You have some very good points for the short term but what would scare me if I were renting would be the cost of rent when you retire. When Robin and I rented our 1st apartment in 1974 the cost was $165 a month in Orange County, California. That same place rents for $1500 per month today. Almost a 10 times increase in 35+ years. The 1st home we purchased in 1975 was 30,000 and we sold it 9 months later for $65,000. We then bought a home for $80,000 in 1976 and sold it 23 years later for $300,000. It eventually went up to $750,000 then back down to about $500,000. When we sold the home in 1999 we had refinanced several times and our mortgage would have been paid off in 11 years. Had we not purchased another home with a 30 year mortgage in 2000 we would be completely debt free. (Call us stupid) The mistake we made and many others with home purchases is refinancing and not getting a 15-year loan. I know today you can live in a nicer home if you were to rent it vs. buy it but you need to look at the long term – when you retire. I don’t care how much money you save if your rent is 10 times higher in your retirement age it could be more than you can afford. I can see rent realistically being over $5000 a month in 15 years when you could have no mortgage at that time if you settle for a little less home.. Just my two cents.
Jeff
Debt Free Squad

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MJ March 21, 2012 at 12:08 pm

Some of what you wrote makes sense.. to an extent.
No, you don’t pay taxes, insurance, maintenance costs, etc… up front. But you DO pay them. They’re part of what your rent covers. If your landlord wasn’t including those things in what you pay in your rent, they’d be losing money every single month.
So, no, you’re not paying the plumber to come fix the toilet right then, but you are paying a part of your rent so the landlord has the money to pay the plumber. You’re also paying for the next renter after you to have a nice house to live in. I guess I’m a person who’d prefer to be paying for something I own instead of paying for a landlord and future tenants to have a nice place.

Out of curiosity, is there a need for such a large home?

We live in a 900sqft home, with one child and another on the way. And we’re thinking of moving into a smaller home because we’re not really using all the space we currently have. We rent while we’re saving up to pay cash to have a home built (which will be identical to the rental property we’re in now). Doing that, we’ll pay- for both house and land, about what we’ll pay to rent this house for 3 years. Seems silly to be paying someone else’s mortgage.

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Kody @ Financial Money Tips March 24, 2012 at 2:48 pm

You definitely provide some good points here kyle. However, there is also some pretty good comments above. Renting will always have its benefits and you give good examples of just that. But renting will never be better than actually owning a house. I say this because it really is the Americans dream (including mine) to own real estate. Not just one or two but an entire empire of them :)

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