Lifelong renter

[shaggy]

Is anyone else here a renter? I'm 50 and I have rented my entire adult life. I don't like the stress and hassle of maintaining a home and I don't like the thought of having a huge chunk of money invested in one highly illiquid asset. I also have fantasies of moving to the E.U. someday and wouldn't want a house to circumvent that option.

But I know my cost of housing will increase in the future unless I move to a much cheaper area and/or buy a house. Where I live now it's crazy expensive. My rent is $3,000 a month (for a 1 bedroom apartment -- outrageous!) but a house would cost $2 million but I love my city and don't want to move somewhere cheap right now.

I'm trying to save like crazy so that I can cover more expensive housing later in life. I own my own business and don't intend to have a traditional retirement (I'd like to work until someone tells me I'm too senile to do the job). Currently I'm saving 30% of my net income.

Conventional wisdom says I should be buying a house and paying down a mortgage, but I'm resistant. Any thoughts, advice, criticism?

[MonkeyMama]

If you don't want to buy a house, I wouldn't buy a house. Especially a $2 million house.

I think for the long run you probably want to think more about middle ground. I am personally not a real huge fan of the *hassle* of home ownership, but I am far less of a fan of the hassle of moving a lot and of renter issues. So, we have signed up for "extremely low maintenance" home ownership. We highly value stability, so am probably always going to lean that way. But there are several options to keep things simpler. We bought new construction - not only does that mean low maintenance early on (since you start with everything brand new) BUT the quality of most the materials is longer lasting. Just more modern materials. We should *never* have to replace our roof - stuff like that. We've never been "spend lots of time at Home Depot" or "Hire a lot of people for repairs" homeowners (in 13 years).

Before this home we lived in an expensive region and owned a condo. Which is a significantly more low-maintenance form of home ownership. As soon as our kids are grown we are moving back to condo living. We don't want a yard to deal with and all that jazz. Surely you could own a 1-bedroom apartment for far less than $2 million. I think the comparison is apples to oranges.

I think you need to do what makes you happy and works best for you. But I also think it is helpful to run financial scenarios so you know the actual dollar value you are gaining or losing by renting. Then you can decide if your choices are worth the cost or if there is a better option. For example, what would it cost to *own* a one-bedroom apartment? Will you get a huge tax write-off? (Likely - so factor that too). What are the hassles and the pros and cons? The difference may be begligible, and you may be far more content as a renter, but it may be a fair option in the future.

The thing about high-cost areas is that home ownership doesn't really tie you down too much (as long as you don't buy too high and end up under water). I've always considered our homes to be fairly liquid assets because they would sell in 5 minutes. It's a totally different beast than real estate in most places. (& this was true for us during more than one bust. When real estate is in that high of demand, the demand doesn't *go away* when prices fall, that is for sure).

[shaggy]

Thanks for the reply. I really appreciate it.

In my city it would cost $1 million to buy a small condo. I'm in a strange place when it comes to real estate. There is zero new construction of single family homes. It's an historic city and the only new construction is a few small condo complexes and those units sell for well over $1 million. the $1 million units are in old buildings that are either 1) old and subject to repairs, or 2) not in a condo association, but in a TIC or Co-Op situation (which I don't like for liability reasons).

Good point about the stability of renting. I'd hate to move when I'm in my 70s, but that's something any of us could face as we age, even if we own a home.

I will have to run a calculation of how much I'll save on mortgage interest.

Buying a house would be a no-brainer in any other area, but I'm no willing to uproot myself yet, and if I did I'd be moving to the EU.

[scfr]

Given your age (no offense at all ... we're almost the same age), if moving to the EU or to a lower-cost part of the country in retirement is a strong possibility, then there's nothing wrong with continuing to rent. The decision whether or not to buy a condo or house post-move can be made later. You'll have the nice advantage of probably buying only once (no need to downsize when you hit retirement).

Are you saving enough for retirement? If so, great. If not, you may need to rethink your willingness to move to a less expensive part of town.

[MonkeyMama]

@shaggy - where on earth do you live? {You don't have to answer that, of course. Just a rheotrical question}.

I think even if renting is "more expensive" in the long run, that $1 mil is a heck of a lot to tie up in a home. The primary reason we moved to lower cost area was we could never really foresee putting $600k+ just to own a single family home. Just to say that I think it's fair to say, "I will just rent because buying here is completely ridiculous." Of course, we felt this way in our 20s. It doesn't seem quite as ridiculous with age as we build wealth and assets. But I do think it is more than just math (as you clarified the cost to own a similar apartment). That is a lot of assets to tie up in *one* home. I'd probably be very reluctant to buy a home in that situation.

[shaggy]

@shaggy - where on earth do you live? {You don't have to answer that, of course. Just a rheotrical question}.

I think even if renting is "more expensive" in the long run, that $1 mil is a heck of a lot to tie up in a home. The primary reason we moved to lower cost area was we could never really foresee putting $600k+ just to own a single family home. Just to say that I think it's fair to say, "I will just rent because buying here is completely ridiculous." Of course, we felt this way in our 20s. It doesn't seem quite as ridiculous with age as we build wealth and assets. But I do think it is more than just math (as you clarified the cost to own a similar apartment). That is a lot of assets to tie up in *one* home. I'd probably be very reluctant to buy a home in that situation.

Let's just say the city I live in is a law unto itself when it comes to real estate.

Thanks for sharing your perspective. Like you, I can't wrap my head around spending so much on a home. The older I get, the more I like having cash in the bank.

Given your age (no offense at all ... we're almost the same age), if moving to the EU or to a lower-cost part of the country in retirement is a strong possibility, then there's nothing wrong with continuing to rent. The decision whether or not to buy a condo or house post-move can be made later. You'll have the nice advantage of probably buying only once (no need to downsize when you hit retirement).

Are you saving enough for retirement? If so, great. If not, you may need to rethink your willingness to move to a less expensive part of town.

I'm currently saving > 30% of my net income toward retirement. I had to give a big chunk of my savings to my ex-husband in our divorce, so I'm starting over almost from scratch. I feel that I can't save enough right now, especially since I'll be facing increasing cost of housing in retirement.

On the plus side, I own my own business, it's doing well, and I plan to keep working until my brain gives out, which I hope won't be until my 70s.

You hit the nail on the head with the "buying only once" comment. At this point I do think I'd prefer to go straight from renting into a retirement community. But I'm always second guessing myself because all the traditional advice is that renting is throwing money away.

[LivingAlmostLarge]

We are currently considering renting. Depending on a job opportunity if we move it'll be to a more expensive place than where we are now, which is still very expensive. I don't know if we can honestly afford to buy in the new city and that's with a very good income. Lots to consider. Maybe it's throwing away money but not if to buy a SFH will cost us $1M minimally.