An ‘Owning vs. Renting’ Battle Ignites!

owning-renting-debateI’m a passionate defender of renting in the “Rent vs. Own” debate. Before you head for the comments to tell me I’m wrong, I’ll admit: I think renting and owning are both perfectly okay financial, and it depends on your living situation and preferences. But, recently, I noticed that someone posted a response to my post on why renting is better than owning on Adaptu. It was written by Greg and is called “Why Owning Will Always Beat Renting.” Always?! I gotta see this.

To his credit, I think Greg makes some good points in his post, and I appreciate his tactful response. Many of his arguments are debatable and there’s no right or wrong answer. Greg even admits that a few of my points are true in his mind, too. While I see where he is coming from on some of his counter-arguments, he didn’t do so great refuting other points. Here’s my response to some of his points:

Point 1. While Greg likes to point out that learning home repair skills are “valuable,” it seems he’s not arguing that renting is better when it comes down to paying for maintenance and repairs.

Point 2. Greg points out that, as a landlord, he’s never lowered rent. That’s fine. But renters always have the option to move if they want to lower their rent by living elsewhere.

Point 3. I don’t think Greg’s response makes any sense here. First off, good luck selling a home in this housing market, especially in a place like Las Vegas (which is where it appears Greg lives). It depends on where you live, but it can be impossible in some regions. Secondly, Greg is throwing the old “you’re throwing your rent money away” argument out there. He doesn’t have much to back up his reasoning for this, as you see in Point #8.

Point 4. Greg has some good points here, but I don’t think what he’s saying is true in all cases. I’ve lived in cheap places where hot water was included. Yes, it was probably factored in to the rent, but, honestly, I can’t imagine paying a much lower rent than I did where I was living.

Point 5. Greg has clearly never lived in Manhattan or anywhere else where lots of people want to live but can’t (or don’t want to) buy. Perhaps it’s costing more of your budget than it needs to to live in these places, but what if you’re 25 (like me) and want to live in a trendy urban location for a year or two?

Point 6. Greg admits I am right.

Point 7. Greg has some good points here, but I still think that, in most cases, rent will be cheaper. Maybe if we’re just talking rent vs. mortgage payment there could be an argument. But extra costs for home ownership almost certainly push it over the cost of renting.

Point 8. Greg doesn’t seem to be interested in arguing with my point here.

Point 9. Greg agrees with me.

I’m guessing Greg lives in a totally different part of the country than me (judging from Twitter, looks like Las Vegas), and he probably has much different preferences about how and where he wants to live. These things inevitably shaped Greg’s responses, and just as mine are somewhat biased towards renting.

I know renting isn’t better in all cases, but there are a lot of cases where owning isn’t “always better.” I think Greg made some good points, but the evidence he presented is far from conclusive.  I never claimed that renting is “always better,” and I think there are definitely cases where renting is better financially.

What do you think? In terms of money alone, what are your opinions on which is more economic?

And be sure to check out JT’s comment!

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photo by: wlcutler

Comments

  1. Jenna from Adaptu says:

     Love this response!  Thanks for mentioning Adaptu!

  2. You’re both entrenched.  You have a positive experience in renting which cost you several thousand dollars, and Greg is holding a property worth 30% less than it was before.   You’ve both paid for your opinion, and naturally, neither of you will give it up for free.

    Owning a home isn’t for everyone, neither is renting.  I error on the side of renting, because most people can’t and shouldn’t try to handle the responsibilities that come with owning a home.  Additionally, labor is now mobile than ever before, and homes are incredibly illiquid.   It’s personal preference, but neither choice is always better than another.  

    If I’m going to get on my high horse, real estate investors tend to get on my nerves, anyway.  Real estate is not as easy as a business as they’d all leave you to think, and it isn’t just a game of buying a home and letting someone else pay for it.  The macro elements of the market come into play with real estate too, it’s just that they’re easier to avoid because RE investors don’t turn on the TV each day to hear “the real estate market is down .5% today on X factor” like you do with financial securities.   You don’t pass 100 stock certificates on your way to work, but you may pass that many homes.  It’s easy to be way too comfortable with something when you’re constantly exposed to it.

    I still think there are uglier days ahead for real estate, especially when the “shadow inventory” comes back into both the rental and homes for sale market.  It’s easy to claim short-sided victory when home supplies are artificially held lower.  Rents necessarily rise, and so do home values.  There still hasn’t been a market clearing event, despite a vicious downturn in real estate.  Until that happens, it’s hard to say the real estate is a good/bad investment.  

    Either way, ask Greg how much you saved by renting instead of buying.   Whatever he lost in holding his property is a net gain to you, should you decide to go out and buy rental housing.   That should put the argument to rest. 

    • Wow, I think this is the greatest comment I’ve ever had, JT! I agree with a lot of what you’ve said. I like you’re point at the end, too.

      Thanks for the insight. I even linked to your comment above so hopefully everyone takes a minute to read it.

  3. It’s really cool to have a rebuttal to one of your posts, on Adaptu no less, and now you have countered, even better.

    It’s situation specific for me, and I don’t think you can say that either one is better for every circumstance. 

  4. I certainly don’t think renting is throwing money away.  It’s trading money for a place to live.  That’s not worth nothing.  I’m throwing money away too… it’s called interest and I pay about $650 a month for it on my mortgage.  Which BTW is about what I was paying in rent, albeit for a much smaller place. 

    To me it all comes down the term.  Owning is cheaper over the long term… they say 5 years.  Renting is cheaper over the short term.  If you aren’t sure that you want to stay where you are then renting is better.

    I wanted to buy for two reasons.  One, as rent goes up but my mortgage payment stays the same. Two, someday I will have this house paid off. 

  5. I rather rent because I feel like I would have my money locked away in safe and could not use it until I sell my property

  6. Nice article.  And I share your renting perspective.  I am new to Yakezie and wanted to say hi.  I also live on a low budget and enjoy life such as yourself.  Happy Budgeting. 🙂

  7. Here in Houston, TX, owning is better financially than renting if you will be living here for 3 years or more.  The housing is simply cheap enough that most mortgages beat rent and within 3 years, you will have enough equity to justify the taxes and maintenance too.  But I know we are in a lucky owner area.  🙂

  8. Owning vs renting is definitely something that needs to be decided on a case by case basis.  There’s so much variation in costs and preferences between people and real estate markets that I think a rule of thumb, much less a hard and fast rule, is hard to stand by.

  9. @ JT : I agree.  I don’t know what market you’re observing first hand, but in Orlando & central Florida, the foreclosure filings ground to a halt largely because of the fraudulent affidavits of assignment but also because the banks are struggling to “manage” their earnings by cancelling foreclosure sales after the judge sets a sale date.  The Case-Schiller index is still well above the long term trends.  Nationally, I expect a 33 to 50 % decline from present levels.  Until employment improves and credit standards are erh “relaxed”, prices will continue to fall to sustainable levels.

    • I actually work with foreclosures, Don, and constantly review the stats for Connecticut. The same is true here – foreclosure filings are down already this year. Part of this seems to be because existing cases are taking much longer to proceed to foreclosure than before. However, I think the whole crisis is far from over and expect that there are still many more foreclosures to come.

  10. Judging from money alone, I’d say renting is better.  You can move more easily for a new job.  The downside is if you don’t like your living conditions your main way to change it is to move.  That’s a pain & costs money too.  I’ve seen too many rental units that are just not that nice to live in.  You have to pay way too much in rent to get a nice place.  That’s my experience anyway.  My bottom line?  If you are under 30, rent.  Over 40, buy.  In your 30’s?  Judge by your job security when is a good time to buy. 

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