My thoughts on renting versus buying

I've seen these critiques for years.

and while its not necessarily wrong, I believe it under weights a few points:

- Fixing your housing costs against inflation: You can't count on housing price increases, but you can count on inflation. If you buy a house and your mortgage payment is > rent. Overtime it will naturally flip. $1 no longer buys me a chocolate bar, and $800/month no longer gets me a 2 bed apartment.

- Leverage: I can't get a $700k loan to put into equities but I can for a home.

- Capital Battery: As I build equity in my home it can become an asset I take loans against to pursue other opportunities.

- Flexibility: Should I need to fiscally downsize I can still move out and rent out. Or rent a portion either via a suite or secondary unit

- Stability: No one can evict me into a hot rental market to suit their needs.

I wish more people talked about these points, selfishly so I didnt take so many of these articles at face value because in hindsight I wouldve bought earlier.

> the stability of buying

It depends.

Personally, after witnessing both sides of the coin second-hand, I am not leaning in the direction of either buying or renting in absolute. It is highly dependent on the context and circumstances of a specific situation/market.

I am aware that this is just an anecdote (i.e., it isn't going to say much about the overall state of things across all states in the US), but there is a specific example I'd witnessed myself, which led me to believe that this is a bit more complicated than just "renting is the move" and "buying is the move."

TLDR: one of my former coworkers bought a condo in Queen Anne neighborhood of Seattle (which is a highly desirable and expensive neighborhood in that metro area). Within the first year of his ownership, the pipes behind his laundry machine burst due to no fault of his own (while he was at work), and it ended up flooding the apartment of the neighbor below. It decimated the flooring of both his own unit and the unit of the neighbor below. He ended up was facing the costs of unfucking his own condo AND the unit below.

I don't remember the numbers off the top of my head at all (as the whole thing happened around 2018-2019, and I wasn't really involved in any direct way at all), but I remember that he did the math and (based upon the numbers, reasonably) ended up selling his condo as soon as he'd finished fixing his own unit + paying for the fixes to the unit below.

Meanwhile, I am currently renting, and if the pipes in my unit burst and end up flooding the neighbors below, it would be mostly the problem of the property management company running my building to deal with, not mine. This alone make me feel way more stable than if I'd owned the unit I live in atm.

The home buying process seems to have been thoroughly corrupted, at least in the US. The transaction costs are high, parasitic HOAs and paying over ask have been normalized, new homes are built as cheaply as possible, investors are driving up costs, etc. etc. The investment aspect is a bit overrated. You can't get that money 'back' because you still need a place to live. Most folks just flip their equity into the next place, so it never really comes back to them until they downsize or die.

I've been a homeowner for 30 years and am now renting a temporary apartment in a new location. There's a lot of upside of renting. I don't like apartment living at all, but I don't feel anchored to the location at all and have the freedom to live wherever without a bunch of overhead. I'm definitely spending more money per square foot renting, and obviously none of this is coming back to myself or my family, but that's ok for me right now.

I think my main takeaway is that there is no rule about what is best. It's what's right for you at that time of your life. A house is nice when you have kids and want some stability. Renting is nice when you want freedom and flexibility.

Reminds me of https://jlcollinsnh.com/2023/03/02/why-your-house-is-a-terri...

“Hey I’ve got an idea. We’re always talking about good investments. What if we came up with the worst possible investment we can construct? What might that look like?”

Well, let’s see now (pulling out our lined yellow pad), let’s make a list. To be really terrible:

- It should be not just an initial, but if we do it right, a relentlessly ongoing drain on the cash reserves of the owner.

- It should be illiquid. We’ll make it something that takes weeks, no – wait – even better, months of time and effort to buy or sell.

- It should be expensive to buy and sell. We’ll add very high transaction costs. Let’s say 5% commissions on the deal, coming and going.

- It should be complex to buy or sell. That way we can ladle on lots of extra fees and reports and documents we can charge for.

- It should generate low returns. Certainly no more than the inflation rate. Maybe a bit less.

- It should be leveraged! Oh, oh this one is great! This is how we’ll get people to swallow those low returns! If the price goes up a little bit, leverage will magnify this and people will convince themselves it’s actually a good investment! Nah, don’t worry about it. Most will never even consider that leverage is also very high risk and could just as easily wipe them out."

The TL;DR is that the value of renting vs. buying has a lot to do with being realistic and understanding real estate and investments in general.

Buying a house is often an emotionally motivated decision with many important risk factors... Were inspections comprehensive and thorough or did they overlook an issue with the foundation, wiring, plumbing, etc.? Did the buyer understand the required disclosures, and specifically understand what the seller is not obligated to disclose in their jurisdiction? (e.g., in many areas the seller is not obligated to disclose if a child sex offender lives next door). Is the neighborhood up and coming or struggling?

Getting these wrong can easily negate the potential upsides of ownership.

Renting can also be great, but as the article points out, if it mostly just results in more disposable cash, then you may be better off owning (forced savings). Rental properties often cannot be sublet and also cannot be used as collateral or passed on to family members with a step-up in basis. Rental leases also fluctuate with the market, so it's not uncommon in big cities for renters to be paying close or equal prices of their homeowners next door.

Anecdotally I know many folks who have rented their way through, invested wisely, and done well. I also know folks who have moved around the US and always purchased, did their homework, capitalized on tax incentives, and now have a stable of rental properties that helped them become FIRE.