We live in a financial world where renters are looked down upon by their ‘superior’ house-owning friends.
They scoff, “You’re throwing your money away.”
They brag, “My house is worth $5,000 more than I paid for it.”
They exhort, “You really need to get into real estate. That’s where the money is.”
Unfortunately, before long renters start to listen to the lies homeowners tell.
Two False Reasons People Say You Must Buy a House
1. First Home-buyer tax credit of $8,000
Quick. Time is running out. Go buy a home and save $8,000. While that might sound like a Real Estate commercial, it is actually a stimulus program currently offered by the US government. While the $8,000 credit sounds appealing, you should only buy a house when the time it right.
How do you know the time is right? Ask your checkbook. If you make a preemptive move to buy a house before you are ready, you will pay more than $8,000 worth of regret, stress, and possibly even interest payments.
2. Homes make a good investment
Truth. Homes are only a good investment when the value of the home increases.
Truth. Home values occasionally decrease.
Your solution – make your home a home and make your investments an investment.
The primary function of a home is a place to live. If you make a profit when you sell your house that is great. But, if your home provided you with a good place to live and you lost money when you sold it, that is fine because it gave you want you needed – a home.
Too many homeowners become real estate speculators instead of house shoppers.
The decision to buy a home involves more than a good online calculator
I’m skeptical of any generic online information. Seriously, why do so many people entrust their lives to a few numbers that a calculator spits out? The lie is that if it makes sense on paper – if the math adds up – then it must be the best decision for you. This, however, is not true. People who only follow the advice of others will continually make bad money choices.
While there are other big ticket items you might want to buy, it is not bad to rent a house or apartment.
My Personal Experience:
My wife and I purchased our first home more than six years after we were married. In many ways we were in a unique situation because I was a youth minister so our housing was provided by the church. For that I am extremely thankful.
Some will say that I should have been building equity by owning my own home. However, having the parsonage for those those two years saved us from our own stupidity. Who knows what crazy thing we would have done if we started looking for our own housing?
Looking back I have absolutely no regrets about waiting six years after marriage to buy my first home. I love being a homeowner. I do, on the other hand, know a lot of people who bought a home early because it ‘made sense’, but now they have serious regrets.
The decision about renting or buying needs to be about your situation in life, your preferences, your dreams, and yes, even the math.
There are advantages of renting a house or apartment instead of buying.
6 Advantages of Renting
- You budget is more predictable. Homeownership lacks predictability. You do not know when the hot water heater will break, when termites will infest your home, or when your foundation will crack. Each of these emergencies require money to fix. When you rent you pay a set dollar amount every month. Regardless of the repairs needed you still pay the same amount.
- You have time to save up money for a down payment. You need to be disciplined in order to do this so perhaps every month you should set up an automatic deposit into a savings account. In the long run this could provide some significant interest payment savings.
- Flexibility. When you are first starting out your marriage it may be difficult to know where you will settle long term. Renting offers the opportunity to move as needed and when needed. You might not be planning to move, but as a renter that becomes a more viable option.
- Less Responsibility (apartment). This may only apply to apartments, but I miss the days when the lawn and the repairs were someone else’s responsibility. I enjoyed just leaving town without needing to find someone to watch the house.
- Emotional Peace. I have debt allergies. I love the debt-free lifestyle. The idea of having a debt (yes, even a “good debt”) doesn’t sound appealing. So many people have so much debt that they are upside down. So many people complained and suffered when housing prices dropped. These are all concerns that the renter avoids. How do you put a price tag on emotional peace?
- Time to get smart. I made some dumb money decisions when I was first married. Looking back now I’m actually amazed that I didn’t make worse choices. Renting gives you time to grow a brain before you buy a house. Renting allows couples to get a clear sense of what they want to own and how much they want to spend. Some lessons can only be learned with time.
Which do you think is better – homeownership or renting? Do you think there is a standard right answer for everyone?