why buy when you can rent?
I love that the love affair with “home ownership” has come crashing down in the past few years.
Especially among 20-somethings. I’m obviously sympathetic to those that have lost their homes, but nonetheless glad “homeowner” isn’t such a golden term anymore.
Graduating from school in the heyday of the housing boom, there was a quiet and sometimes not so quiet “race to be the first homeowner” among my peers.
Why were we all chasing this American dream?
We got caught up in the hype. Caught up in the lie that owning a home is always a good investment.
I strongly believe now that owning a home in your 20’s is a bad idea for the majority of us
Why?
Most 20’s college grads live/work in urban, high priced areas. Rents may be high, but they are still much cheaper than the mortgage on comparable places for sale.
You pay a crapload of interest the first few years of even a traditional 30 year fixed mortgage.
Property Taxes.
Homeowners Fees.
If money buys freedom, why would I use it to tie myself down?
I understand the advantages of homeowners (tax deductions, pride, etc), but I just think for most urban 20-year olds, you’re much better off to rent than stretch to afford a condo that’s small and ties you down just so you can “buy a home”
I have a friend who’s girlfriend is upset because he can’t afford a house here in Seattle. He is 26 and in grad school. Are you kidding me? A decent single family house, in the city limits is going to start at 300K not falling apart.
By this time next year, I’m pretty sure I could be in a position to buy a nice place if I wanted….and I’m gonna pass.
{ 13 comments… read them below or add one }
I have to be honest, I LOVE living in my own home which I bought. There is an absolute PRICELESS feeling you get when the hone you come home to everyday is your own.
I bought my first place when I was 26, lived in it for 2 years, and have rented int out ever since. It’s one of the easiest ways to build wealth over the longer term.
Some of us like the freedom to own our own home. Money is only a tool to help us achieve the personal freedoms we want.
2008 Census reports say that only 7.5 percent of homeowners are 25-29 year olds anyway.
Right now, if I did not have a home, I would be jumping into the market. Prices are depressed, even in premium inner city neighborhoods, rates are low, and you are getting incentives from the government. Even if you don’t want to live in it yourself, you can rent it out and make money off of it while you wait for the economy to make a full recovery. All the stars are aligned and those that miss the boat on this one, even 20 year olds, are going to regret it. I wouldn’t buy it solely as a home, I would buy it with the idea of using it as rental property. A home is not an asset, but a rental property is because it generates monthly cash flow. This way you only buy a property that will fit criteria of a rental home: easily maintained, in a location people want, and that can generate more income than it costs to maintain. If you can’t rent it right away, live in it. Then, rent it as soon as possible.
Oh, I do believe the government incentives make you use the home as your own home for a period of time, and then you can rent it. So, you have to take that into account too.
Renting only makes sense if you are in a heavily urban area or are waiting for prices to be corrected.
I lived with my parents until I could afford a down payment on a home. I bought my first home a year ago at 22. I put 20% down instead of leaving that money in the stock market (which was at its peak). I pay the same amount that my peers pay for rent, I’m building equity, and the 80/20 mortgage is providing a lot of leverage in my area where homes go up in value at 4% a year like clockwork. I plan to move in a year or two for grad school, when I do I’ll just rent out the house and make a couple hundred extra bucks a month. As far as having to pay a lot of interest goes, it doesn’t matter because that money would also be wasted if you’d been renting. Besides, I got a 15 yr loan and last month was the first time I paid more in principle than in interest.
It’s all about timing, don’t bash owning a home just because the market is hot now and home prices have been correcting. People were crazy to buy in certain areas between 2000-2006, those idiots got what they deserved.
I do not want a house, I invest in mutual funds aggressively. My rent right now is roughly what I’d be paying in property taxes anyways.
I absolutely agree that the hype around home ownership was unhealthy. It got to the point that you felt that you had to buy a house because house prices were going up so fast.
Government needs to take away some of the incentives of home ownership. Housing pricing are going up unnaturally fast and this hurts younger people who don’t own a home yet.
For financial reasons I agree being in my mid 20’s, I have no interest in even looking at buying a home for a long time. Not only that buying a house means settling down. Being in mid 20’s that’s not usually the mentality we have and could want to change jobs/area to live/personal lives at any moment which would make that difficult.
Canadian Here…
I’m mid-twenties and am planning on buying a home in a few years. It’s a lifestyle choice, and one I am eager to jump into!
Absolutly nothing wrong with purchasing a home as soon as you are comfortable doing so. The most important thing is to know it’s not an investment, it’s a damn house. When you build equity over many years, or decide to convert it to a rental, then it becomes an investment. There is nothing better than owning the home you live in, if that is where you want to be living. Don’t knock it because it doesn’t work out 100% of the time. How about young (I’m 26) renters who might be facing 10%+ increases in their rent? It’s a home, you live there, it protects you, enjoy it. One of my successful clients told me “never sell anything you own”, and I am doing my best to live that mantra.
My husband and I bought our home when we were 23 and 24. I think that homeownership can be an excellent investment for relatively stable young family or a single who is independent.
However the 20s are a decade of INTENSE change for a young person. Marriage, children, graduate school, jockeying to find the perfect career, etc.
In the years we’ve had our townhouse (we bought small knowing we didn’t want to be overextended) has paid dividends. It’s doubled in property value. It’s provided us with a good investment and a sense of security and stability.
we haven’t dealt with annually increasing rents. we’ve grown our nest egg–and are scheduled to pay off our home in just seven years from now.
That said, we’re growing out of our house–with two children now and being 29 and 30, we’re getting itchy for a yard and more space for the kids to play. We’d intended to have one baby here and then find a larger home–instead we adopted and have an eleven year old and a toddler bouncing off our tight little walls.
If I had it to do again, I would. We bought at a good time, and the equity we’ve built between appreciation and aggressive payment on the mortgage will allow us to take a big step up in house without a big step up in costs when the time comes. But yes, it’s not for everyone. I can’t imagine owning a house in Seattle (and all it’s “house maintenance” hassle and expense) while being a student. The financial and time demands would be too much for me. For us, a townhouse has proven to be the perfect balance of equity-building investment and expense stability.
I am actually in a similar situation that my roommate and I (both 27 now) got caught up in the hype and purchased a townhouse together after graduating school going along with the logic that why pay rent when you can OWN?!?! Then well rent it out and build up lots of equity! (Luckily real estate values have remained steady in our market!)
4 years later a lot of things have changed. We’ve had a great four years here but there have been lots of new challenges that come with home ownership (taxes, maintenance, insurance, furniture). Now he wants to move in with his girlfriend and I want to live in a downtown area and possibly another city. Our lifestyle and desires have changed. I would potentially like to move in 1-2 months but due to our mortgage we need to wait until June. Of course we could always rent it out but I am not sure either of us wants to be landlords either. Luckily, similar townhomes in our neighborhood have been selling strongly so potentially we could make a small profit.
A friend recently moved to California and received great incentives to purchase a home and could receive a great deal on the property. But then he would be locked into that job or at least that area for a while. Guys in his same position that moved 2 years earlier did purchase homes and are now stuck there because they have houses worth $200,000 that they purchased for $350,000.
Owning a home has lots of upsides but really needs to be a lifestyle choice not just a financial decision because you don’t want to “waste” money on rent. I have enjoyed it but ready to try something new.
I understand that renting while you’re young can be a good idea, especially if you don’t know where you are going to put down roots. But in the long run renting is a bad idea. Find me one landlord that, after 30 years, will stop taking your rent payments.
A wisely bought house you can pay off with a predictable payment and be done with the mortgage forever. Rent will always be there and goes up with inflation. Owning a home has even more benefits. You benefit from the appreciation(historically LOL), you can paint the walls, tear up flooring, make it your own. You also don’t have to worry about a landlord kicking you out because he wants his daughter to live there.