The Clasp Blog

I plan to rent forever, am I throwing money away?
Buying a Home

I plan to rent forever, am I throwing money away?

In this series, we explore all the different facets of buying a home. The week, Megan discusses whether buying a home even makes sense for everybody.

I have an aunt and uncle who are both well over fifty and have never owned a home. It is not due to frequent moves or living in an apartment in a big city. They have lived in the same house, in the same quaint suburban neighborhood, for close to thirty years.

They have furnished their three-bedroom bungalow, changed the paint colors many times, and done a fair share of landscaping. Yet, they don’t own the home, they never have, and they never hope  to. They pay rent monthly and contact their landlord when any major repairs need to be done.

Buying a home can be risky. It's a risk that some, like my very cautious uncle, may not deem worth it.

In today’s society, homeownership is one of the ultimate symbols of adulthood. You haven’t truly joined the ranks until you own your own home. But what about individuals who don’t want to own a home, now or ever?

Are the Joys of Homeownership a Facade?

The owning of a home has long been touted as an important investment. The hope is that if you maintain your home and it is located in a desirable neighborhood or area, then you should see a good return. Sadly, this doesn’t always seem to be the case, especially with the fluctuating housing market.

Buying a home can be risky. It's a risk that some, like my very cautious uncle, may not deem worth it.

Furthermore, having a place to live is expensive, whether you own it or not. But, owning your own home means keeping up on the maintenance, paying property taxes, making mortgage payments, and funding repairs and replacements.

Sometimes it can feel like you are trading one monthly payment, rent, for another, a mortgage. And on top of that, you can’t just call the landlord or handyman when a problem arises.

On the topic of problems, fixing issues as a homeowner can often be more costly due to one thing, emotions. When you purchase a home you are not just financially invested but emotionally invested.

You are hoping to see a return on this purchase. Beyond that you live there, you have a sense of responsibility and pride towards your home. Nevermind not wanting to put up with the constant hassle of a malfunctioning dishwasher or a faulty toilet.

Therefore, instead of only having to wait on a landlord who is dragging their feet to fix the problem, you have to solve it yourself. You are a lot more likely to go out and buy a new dishwasher or a top of the line toilet for your own home than a landlord is for their renters. On top of that, you will probably do it much more expediently and frequently.

My aunt and uncle may have been on to something. It sure seems a lot easier to just hand over a check each month rather than manage a household.

But what about the return?

So you buy the flashy dishwasher saying to yourself, this will help me attract a buyer someday. But is that reality? In truth, many things have to line up for you to see a decent return on your investment.

First, your property can’t depreciate, be it from businesses, neighbors, crime, or even infrastructure. Then, you will have to live in your house long enough to see that return. Some statistics show that the average person moves every five years...this isn’t long enough to come out on top.

During those long years of having the same address, you also can’t borrow against your home. You are working towards paying it off, and you certainly won’t want to refinance. Finally, when it is time to sell you can only hope it will be a seller's market and that you can list it for a substantial amount more than what you bought it for.

So is it worth it to rent forever?

It depends on how and why. If you plan on purchasing a “forever home”, have good faith that your property won’t depreciate, that your home value will keep pace with inflation, and finally that you can make mortgage payments with the goal of paying off the house one day, then renting may not be worth it.

For you, it may make more sense to purchase a home, making your lower monthly mortgage payments and invest the difference elsewhere. Bearing in mind, this new residence will come with a host of repairs, projects, and maintenance over time.

But, if you live in a location where the rent payment is actually cheaper than a mortgage payment; then you should rent. If you prefer to rent and invest any money that would be going towards home upkeep/taxes/insurance elsewhere; then rent. If you love the flexible lifestyle of renting or have to travel frequently for work; then by all means rent.

Renting is not always “throwing away money” though this term certainly gets thrown around enough that it is almost always taken at face value. Renting does have its own drawbacks, but I don’t believe homeownership is for everyone. It certainly wasn’t for my aunt and uncle, both who have never regretted their choice to be lifelong renters.

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