The Case for Renting

[marimara]

Do any of you mamas rent on purpose? Or rather do you rent to simplify your lives? I ask because we own a home with significant equity that we made off the sale of our first home, that we put down on the mortgage. The market is very unstable right now as we all know-and all our life's savings basically are in the house.

To make things worse, we are military, and usually move every 3-4 years. Now, in an UP market, this wasn't a big deal, but in a DOWN market it makes me nervous. In our last house (this is our third home we've bought) we had to move before the house sold and ended up paying rent and mortgage until we sold the house (for significantly less that we listed it for).

Now, I am an ex-Real Estate agent, and am very well versed in the benefits of home ownership, but have only recently thought that maybe renting might be better for us in this period of our lives especially considering the dismal state of the housing market.

Also to consider, the area we live in isn't really that bad right now in terms of houses still selling. Sooooo, we are thinking we might wait till spring (we will have owned the house 2 years then) and then put it up for sale, cash out our money and rent until we know more about our future living situation (we we will be getting stationed, etc.). We still have a pretty good chance of selling our house for at least what we paid for it, come springtime. I hate to watch our life's savings possibly dwindle away with every new trauma to the economy.

So, back to the original idea: Renting seems like so much less hassle, if something breaks, just call the landlord. We have rented before so it's not like I have no idea about renting. It's just I'm feeling some resistance wrapping my head around giving up the American Dream (home ownership) on purpose, in favor of renting.

Anyone have experience here? Support, idea, suggestions....

[Arduinna]

Yes, and I used to work in real estate also ( although I wasn't in sales).

My personal opinion is that most of the hype for owning is emotional. In our culture owning is seen as something that responsible, smart people do and it's seen as a right of passage and sign of becoming an adult. You are seen as more stable and part of the establishment.

[cristeen]

In your situation, I would probably just rent, until such time as you can settle down. I would talk to your accountant though about any possible tax ramifications.

In the long term, if you're planning on staying in one place, I'm still about ownership. In 30 years (or less) I can stop paying "rent". Sure, I'll still have property taxes and insurance to pay for, but I won't have that monthly "rent" to come up with. In addition, the amount of my rent stays steady (with a fixed mortgage) over those 30 years, while a renter will see their rent going up every year or two, and at the end of 30 years is still paying it.

[lifeguard]

Personally I think owning something smaller, more modest that doesn't require all your money to be tied up in it would be wiser than renting. But that said, I'm not in a situation where I would be forced to sell at a time that may not be beneficial.

[Tradd]

Originally Posted by Arduinna

My personal opinion is that most of the hype for owning is emotional. In our culture owning is seen as something that responsible, smart people do and it's seen as a right of passage and sign of becoming an adult. You are seen as more stable and part of the establishment.

ITA! Also, it depends on the part of the country you're in, here in Chicago and I assume also in NYC, many people rent for years and years and no one thinks twice about it.

However, I'm from suburban Detroit originally, and renting (in my family - working and middle class) was considered a bad thing. So now I make a point of bluntly saying to people, "Renting is not evil and it's not a sin, it doesn't meant you're not a grown-up."

Given the way I've moved around (every 1-3 years), it would be STUPID to buy. Plus, even THINKING about the responsibility of it just makes me nuts. Very expensive here, too!

At 39, I'm considered a freak by many in my family for only ever renting.

[marimara]

Yes, I have been doing a little bit of research on the internet and it seems there is a case for renting, especially in the last few years. Basically what I've come up with, is that unless someone plans to be in a home for many years (5 or more) it doesn't make sense to buy (or in our case, continue to own in a declining market) right now. The costs of home ownership is significantly more than any equity gain you would make. Here is an article I've been reading. http://www.nytimes.com/2007/04/11/re...=1&oref=slogin

Plus, there's the added bonus of living with less of a footprint, by going from a 2000+ sq ft home in a large subdivision to a smaller apartment closer to town.

So I'm slowly coming around, but I think it's the best decision for us. It just seems so Un-American, I called it our anti-American Dream plan. Since the American Dream is to own a house but since we've owned three houses, at least we've been on that side.

Then we are going to have to sell off our lawnmower, weedwacker, power washer, shovels, etc. In fact, we are going to have to do alot of downsizing. But I have been decluttering and simplifying for a year so that won't be that difficult. Well dd is calling so, signing off for now....

[Malva]

Love the graphic:
http://www.nytimes.com/2007/04/10/bu..._GRAPHIC.html#

[Juvysen]

My mom's husband was in the military (he got out last year) and they were renting each place. I think mostly because the amount he got paid, he could rent a place smaller than his housing allowence and dump the rest into his retirement and investments. They were REALLY racking up the dough - but with only two of them, they didn't need a big place, so they lived small and padded their retirement. They did own the family home, though, and they just didn't want to deal with the "extras" that come with owning a home - buying, selling, fixing issues, blah blah blah. It worked for them, but it *was* fairly short term - only about 6 years, 2 tours (?) of duty in two different places.

[karne]

In this economy, if you choose to rent, I would really investigate the person or company you would be renting from. We have been hearing of situations where rental units are forclosed on, leaving the tenants searching for housing-not always so easy with kids. Perhaps there is a way to make sure that the rental is solid, financially? I don't know how you would go about this-sort of like a reverse screening of sorts. This is one of the reasons we chose to own. For me, stability is really important. But, I don't have to move every few years like you do.

[llamalluv]

I would be very wary of home ownership in your situation. Moving every 3-4 years eats up any equity gains, unless you are talking about an extremely up market (like the run up 3 or 4 years ago.) In a crashing market like we have now, it could be a disaster.

DH & I could technically afford to buy something now, but we are waiting until we are debt free and have a good emergency fund and down payment (30% - 20% down to avoid PMI, plus enough for closing costs, escrow, moving expenses, and make ready)

[Arduinna]

Originally Posted by karne

In this economy, if you choose to rent, I would really investigate the person or company you would be renting from. We have been hearing of situations where rental units are forclosed on, leaving the tenants searching for housing-not always so easy with kids. Perhaps there is a way to make sure that the rental is solid, financially? I don't know how you would go about this-sort of like a reverse screening of sorts. This is one of the reasons we chose to own. For me, stability is really important. But, I don't have to move every few years like you do.

It's easy. Just check the county recorders website for recordings of defaults. As for moving every few years. We lived in one place for 10 years. Longer than many people who own and we never had our rent raised.

[slsurface]

DH and I rented for 8 years before finally buying after we had DS. This was intentional because I was going through graduate school and we never planned to be in this area for so long. I imagine that once I finish grad school we will probably rent again for a few years until I get tenure somewhere. Life as an academic can be rather transient sometimes - post-docs, visiting positions and the like mean you never stay anywhere for more than a year or two.

The only reason we bought a house last year was because we saw the prices of house drop significantly and we could afford a house for the first time. We also figured that by the time we were ready to move the market would rebound. So we hope to sell the house for more than we paid for it in a couple years. Plus we've put a lot of work into the house. I see nothing wrong with renting, though. I would only add that you should rent from an individual, not a rental company. We rented from a company first. It was terrible and we were constantly having problems with them. Our second apartment was great. We had no problems with the landlord.

[oneKnight]

We were paying $425 rent, expected to increase, plus utilities, and NO the landlord didn't "just come over" when things broke. It was owned by a big property management company (not a person) and I had to call the on-site-manager's big bosses just to get a leaky toilet fixed and a porch light replaced in the breezeway. (I work overnights so the light over the outside stairs is very important to me.)

We own now, we pay $299 mortgage and if my toilet leaks tonight Home Depot is open at 6am.


As a PP mentioned, our neighbors' landlord got foreclosed on in June sometime and they had to move out by the end of July. Just heard the other night that the house across the street is also being foreclosed on (empty for a year, but possibly the same landlord).

[slsurface]

Originally Posted by oneKnight

We were paying $425 rent, expected to increase, plus utilities, and NO the landlord didn't "just come over" when things broke. It was owned by a big property management company (not a person) and I had to call the on-site-manager's big bosses just to get a leaky toilet fixed and a porch light replaced in the breezeway. (I work overnights so the light over the outside stairs is very important to me.)

We own now, we pay $299 mortgage and if my toilet leaks tonight Home Depot is open at 6am.


As a PP mentioned, our neighbors' landlord got foreclosed on in June sometime and they had to move out by the end of July. Just heard the other night that the house across the street is also being foreclosed on (empty for a year, but possibly the same landlord).

Wow! I can't believe that your rent and mortgage are so low! We paid $675 for our first 1-bedroom apartment. We pay close to $800 for our house (that cost only $90k).

[hollycat]

there are huge huge huge changes in teh economy afoot right now. i would say it is absolutely not a time to make any big financial decision.

[marimara]

Originally Posted by hollycat

there are huge huge huge changes in teh economy afoot right now. i would say it is absolutely not a time to make any big financial decision.

That's true too, in light of all that is going on in the news right now. It all just makes me nervous...I really wish we hadn't bought this house now....oh well, we are just going to keep saving money, and watching the news and hopefully next year we'll see some change (for the better) in the market!

[rebeccalynn]

I am all for renting in the right situation and I think that you have a sound argument. Most of the reason that it is the "American Dream" to own your home is that in my grandparent's day and before, people did not have a mortgage on a home (my grandparents moved twice in their lives so far and bought cash) they saved and paid cash. If you could not save or did not save then you rented. I think that is where some of the negative social thinking about renting might come from and is still around in some areas.

The one thing that I would caution is to get on a plan like the Total Money Makeover or something because you really should not have all of your savings in just your house. Also, if you sell your house and "life" might happen and before you know it there goes all of the retirement savings that you do have. It sounds like you are considering a smaller and less expensive place, maybe put the difference into an emergence savings (3-6months of expenses) and then into a roth ira or something.

Best wishes in your decisions!

[leerypolyp]

We rent for similar reasons, and it's worked out well for us. We have been moving every few years to different states (academia), and when we were first moving to where we live now, I had a sense that the market was about to crash -- so while everyone in our family pressured us to buy (American dream!), we rented, and now, three years later, we look smart, because there's no WAY we could sell for what we'd have paid. Houses are sitting on the market for a really long time, too, and our next move will be out of state, so...yeah.

I don't think the housing market/economy are going to be getting much better in the next year or two, frankly.

[marimara]

If we are able to sell this house early next year, we will most definitely be splitting our cash savings among several different investments and not put anymore into any house in the future unless we are going to stay there forever. We aren't going to spend that money for sure. Don't get me wrong, we have a smaller bunch of emergency funds in the bank, but the bulk of our savings is in the house. Soooo, we are gonna get out when we can, I think, and rent till dh retires from military probably.

[nichole]

We are also military and rent. Just the stress alone of selling a house every 2 years would be enough reason for me to rent. But yeah, it is such a gamble that we haven't been comfortable with it. When we get out (soon) we are going to buy after we find a town that we are sure we'll stay in long term. We will rent there for a year or so just to be sure before we start looking into buying.