Unless you need the security blanket of owning your home, it is nearly always a better financial move from an investing standpoint to rent rather than buy. — David Kaufman
It’s a question often on the top of mind for many, especially in this uncertain economy: Is it better to buy than rent? Hundreds of readers had their say on our comment pages and via email after columnist David Kaufman came out last weekend firmly on the renting side.
Here is an edited sampling of what readers had to say:
I have invested my money in both stocks and realestate over the years and have been very disappointed with my investments. My home has doubled in price unlike my investments. In my 20s I rented in the 80s as my ex husband followed your principal. When we separated, I put all my savings into buying a home. His investments tanked and I made $100,000 on the purchase of an $86,000 home.
So, not only as a realtor, but as a consumer, I advise enyone to own a home.
I pay my rent each month (and a couple of utilities) that’s it: No mortgage, no property tax, no school tax, no capital expenses such as foundation and roof repairs, no heating, no condo fees, no depreciation, no appliance repairs no plumbing repairs…whoever told us owning your own home was an investment forgot to carry the zeros.
We we’re recently renters by choice as we we’re witnessing our local market deflate. We recently purchased a home for approx 14% below assessed and current appraised value. Our monthly financial burden is less than it was as renters and as a bonus, I punished the vendors on the purchase price. The home needs some tune ups and I work in the construction industry (over 30 years). We don’t care if the market dips further as our monthly financial burden is less than that as a renter and every month our liability shrinks and our equity grows.
We also own a home in California and in 08 we saw over $250k of equity wiped out on a paper loss. No worries as we’re still net investment and cash flow positive via rental income approximately 50% amortized PA over our initial purchase price. As real estate is cyclical we’re not sweating.
My mom has a grade 4 education and bought a house back in 1980 in the middle of downtown Toronto for 50,000 dollars. It’s worth close to 700,000 dollars now. She had no clue houses could appreciate, in fact, she has no idea what appreciation was. Heck, she has no idea what a stock is and how to buy it. We rented out all 7 rooms to pay off the mortgage in 5 years time. What do you know, we still live here and my mom, who made only minimum wage all her life is a millionaire!
What’s the difference between the guy that rents for 30 years and the guy that owns a home? The renter is still paying X amount in rent, and the home owner is paying nothing, and owns a 800k home…that is, assuming the ‘renter’ was able to pay his rent and SAVE more than double what his rent payment is to amass the same amount of capital. Doubtful.
The debate of rent vs buy will never end. Just do what’s best for you and your family to create and live a rich, full life. If you and your kids feel safe, loved and healthy than you’re doing something right.
I am a single mom with 4 kids and have rented for the past 15 years. My rent hasn’t gone up in that time and this rental home is our home for now. My children have that sense of security and belonging. I want to move – they don’t so much. And they are in their late teens/early 20’s. Owning a home doesn’t necessarily give security. And the money I would have spent on a mortgage is now socked away in the bank in investments. If I would have bought in 1999, prices were high and interest rates were high.
I look around and I see immigrant families who came to Canada with nothing 50 years ago and today they are very well off because they followed a credo many immigrants did – buy land. Now they are older and own several homes that pay for their retirement.
But as long as there is inflation, people can feel like house prices go up over time. If consumer prices rise by 300% over the next 30 years and house prices rise by 310% everyone feels like they got a good deal because the price of their house quadrupled. With a little careful management, this can even be used to cover up a decline in real values.
I didn’t purchase my home as an investment. I purchased it to provide myself with shelter. Must be nice to have enough money to consider real estate as an investment.
If you want investment buy rental property. If you want a home, buy a home. The only real benefit of rental and for some reason no one mentions it, it’s easy in and easy out. Depending on your area 60 days notice and off you go.
While the risks, costs and liability are high, there is an element of forced savings built into the already assumed cost of living inherent in shelter. To have no mortgage and a million dollar asset when you retire is better than jumping around house to house at the mercy of a landlord at the age of 70 and paying rent in perpetuity.
I would hate to be 70, being a renter… if hyper inflation hit. There will many living in cardboard boxes under bridges.
I have seen over and over people who cannot seem to save any money who, once they bought their own home, go on to pay down their mortgage over time while the house increases in equity. The forced saving is one of many reasons to own your own home.
If you buy smart, it works out OK. I bought my first small bungalow in 1972 and sold it 9 years later for 2..5x what I paid for it. I put that money into the next house – a large century home – and sold it 14 years later again for 2.5 times what I paid. I then bought a small 50 acre farm with another century home and have lived here for 17 years. It’s been a great retirement home and is currently worth 3 to 3.5x what I paid. Perhaps I could have made more money by investing and renting, but I am not convinced. Financially I may be ahead or behind – but lifestyle-wise I am far ahead.