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I have noticed a rather new aggression in the media of late speaking to the wisdom of renting instead of buying. In our world of instant gratification, renting can make sense, and it certainly makes sense for those planning to stay in a home/city/town for only 1-3 years.
Almost every one of the home buying critics has a consistent message:
1. High rates make monthly payments much higher than monthly rental payments.
2. Rising insurance rates will make monthly costs even higher.
3. If you take your down payment money and your monthly 'rent savings' and invest that wisely, your returns will be far higher.
What do I have to say to this as a response? They are 100% correct on all three counts.....but.....here is my response:
1. While higher rates make monthly payments higher than renting, a fixed rate mortgage does not escalate 2-5% like most leases. If we need shelter for 30 years, that 2% is an escalation of over 80% by year 30. In reality if we leave home by 20, we need shelter for 60 years.....at 2% that would TRIPLE your rent by year 60....it triples by year 28 at 4%!
2. Rising insurance costs apply to homeowners AND landlords alike. Anyone who thinks landlords will not pass higher insurance costs on to tenants should think twice.... fast!
3. Yes, your returns on investment are more than likely to be better in the markets.....IF you are 100% disciplined about your investing. And conservative. The temptation to invest for quick gains is especially potent amongst those not educated in this field.
And to add to this list....
4. Establishing a longterm sense of community is best achieved in an owned home.
5. The 'forced savings' of ownership has been proven again and again. Mortgage payments build equity, rental payments do not. Consistent payments can fuel a higher credit score too.
6. "Enjoyment per square foot' matters as much as PPSF....you only live once and your home is indeed your castle and canvas of your life. Can you paint the exterior of your rental home a color of your choice?
7. Homes have tax benefits that should never be ignored....short term and long term. Capital gains tax savings are especially meaningful.
8. Not all landlords care for a property the way you might. For many, maintaining a home is their hobby. And enjoyable. Do-it-yourselfers can add value to a home.
If homeownership was such a horrid investment, why are so many institutional investors focused on buying up real estate to rent to others? Hmmmmm....
- Leonard Steinberg, published in the Compass Contemplations 3/17/25
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