Why My Next Home Will Likely Be a Rental

All my life I was told that I should buy a house. So in 2013, I did. Oh, the pride! What is it they say about pride? It cometh before the fall? Since owning a home for over five years, I’m not sure I ever want to buy again. My next home will probably be a rental.

First, let’s break down the biggest argument for home ownership: the old equity argument. You gain equity. This is true. However, you also pay interest. By the time most people pay off a $200,000 home on a standard 30-year mortgage, they have paid at least $343,739. Keep that in mind, but I’m just getting started.

5 More Reasons I’m Considering Renting

  1. Cost of repairs: Since I bought my home in 2013, I’ve spent over $35,000 in repairs. Granted, about $20,000 was covered by insurance after a storm, but it was still a pain in the butt. Out of my own pocket, I’ve replaced the heater, air conditioner, refrigerator, dishwasher, and the pipes under the kitchen sink. I’ve had the house painted and I’ve landscaped. And there’s so much more that could be done.
  2. Time for upkeep: If spending thousands of dollars beyond my house payment that’s mostly interest, tax, and insurance isn’t enough, I have to put countless hours into the upkeep. In the summer, there’s lawn mowing and weeds. In the fall, lots of leaves. The winter brings snow shoveling. And somehow, the entire house and garage constantly need cleaning, even the spaces that don’t get used.
  3. Better investments: If you spend a few minutes doing the research, you’ll discover that investing in your retirement is smarter than buying a home. After I sell my home and free up hundreds of dollars a month in cashflow, I’m going to add an additional 3-5% of my income into my retirement savings.
  4. Simplify life: After looking at my bills the other day, I realized I could eliminate most of them by renting an apartment. I can also eliminate countless hours of work and headaches. In the past month, I’ve had to deal with a broken pipe, a rat in the garage, and a problematic thermostat.
  5. Debt: If I rent, I’ll likely be able to pay off a personal loan, my car loan, and my daughter’s orthodontist bill. If I rent an apartment, I’ll likely get rid of my natural gas bill, my utility bill, and perhaps my Internet bill. That adds up to over $40,000 in debt wiped clean, and almost $1000 a month in new cashflow. More to invest.

Alternatives to Renting

There are a few alternatives to renting, but in my region they don’t make much sense unless one has a lot of cash.

  1. Condos: A condominium gets rid of a great portion of the repairs and upkeep of ownership, but at a cost. The average HOA fee for living in a condo is $250-$350 a month, and they can go much higher. In the town I live, most condos sell for upward of $225,000. That makes a $1400 payment, plus condo fees for a total of $1700 a month. I can rent an apartment for $1000 or less and save or invest the extra cash.
  2. Mobile homes: I’m not a fan of mobile homes. Sure, you can find an old $25,000 mobile home, but you’ll still be spending $500 a month in space rent. And your mobile home will depreciate. It can be a cheap way to live, but it’s not really much of an investment. And you may not have the best neighbors.
  3. Pay cash outright: There’s no way I could buy outright in my current financial situation. I don’t have $250,000 laying around. In fact, I’m still trying to kill off the last of my student loans and divorce expense, 10-20 years later. However, if I were to rent for 5-7 years while adding extra to my retirement savings, I could easily afford to buy a condo or small house in many parts of the country… outright.
  4. Relocate: I have a connection to the town of Joplin, Missouri. I also look at the cost of real estate there and see that I could easily afford to own a home in that part of the country. My $230,000 house would probably sell for about $90,000 in Joplin. One can find a decent small home for $50-75K in many regions of the country. If I were to take my West Coast money and put a $20,000 down payment on an $80,000 home, my monthly payment would be $352 a month. $352 a month! That’s cheap!

The Moment of Truth Is Coming Fast

I’m still prepping my home for listing. I’m not 100% opposed to buying another home. However, the current market in my town is crazy. Prices are inflated. Inventory is low. Homes get sold within 24-48 hours after being listed. Most smaller houses are in the ghetto.

Unless I find the perfect small home or condo with owners who are willing to work on a contingency basis, renting is more likely in the cards. And I’m okay with that.

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James Ewen
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