No. of Recommendations: 4

I came across your thought provoking post a bit late ( ). I read through all the responses and found myself compelled to add one more. I am starting this as a new thread since the original seems to have died.

You might be interested in a similar thread I started on the Retire Early Home Page. Two links to the heart of the thread are: and

It is helpful in complex buy vs. rent analysis like this to make a distinction between 1) the purchase price of a home and 2) financing the purchase. I must first decide whether it makes financial sense to buy some “thing” vs. renting it, and then as a separate decision I look at how to best pay for it (cash vs. finance).

I think it is important for a clean analysis to look at each of these areas separately. In the link I posted above, we start out by comparing the cost of buying a "shelter" outright, vs. leaving the entire purchase price invested (with VERY conservative assumptions) and paying rent. I assume rent goes up at the same rate as inflation, and a VERY conservative investment return (4% real rate of return). I look at the Net Present Value cost for each of the two scenarios. I provide a generic methodology that can be used by anyone to make the Buy/Rent decision. The thread later trends off this main topic into a discussion of buying outright vs. carrying a mortgage.

I arrive at the same conclusion as you. For me, it makes very little financial sense to buy. You are not alone! Determining which choice is financially better depends upon many factors. What I think a whole lot of folks fail to understand is the upside down markets in many growing cities and states.

They also fail to understand that apartment renting CAN result in both the landlord making money AND the tenant saving money. It is not a zero sum situation. Consider that much of the cost associated with "shelter" is in the LAND, not the building. If an apartment building can have 10 units on two or three lots, doesn't it make sense that each unit can rent for less than buying a "shelter" that takes an entire lot, even after the landlord tacks on his/her profit? Maintenance costs are also spread more efficiently. For example, putting a new roof on a 10 unit complex is certainly more expensive than putting a roof on a single family dwelling, but it is nowhere near the cost of putting a new roof on 10 single family dwellings. Seems straightforward to me.

On a tangential note, lots of mention has been made of the lifestyle advantages of home ownership. I am here to say that there are tremendous lifestyle advantages to renting. Off the top of my head (this list is by no means comprehensive):

1) FREEDOM (from mortgage, hassle of making sale, to move on a whim, etc.). People talk about the freedom they feel from being a homeowner (I can pound a nail in the wall, turn up the stereo, etc.). These freedoms pale (in my opinion) to the freedom I feel knowing a) I can pick up and move at any time I like, b) have no mortgage hanging around my neck and c) having one less BIG “thing” to care for and worry about.

2) Don't like your neighbors? Move (try this when owning a home! I suffered through some terrible neighbors and disputes when I owned a home!). I have experienced a few bad neighbors while renting, but they moved away much more rapidly than when I owned.

3) Live in a MUCH BETTER area than you could afford to buy. Many here have said just the opposite, that buying a home allowed them to live in neighborhoods that they felt were superior than where they would otherwise have rented. Not my family. We live 2 blocks from the ocean. Every night after work I take my 1-year-old son for a walk on the beach. How much is that worth? Many renters also have access to in-ground pools, saunas, exercise rooms, clubhouses, etc. that the average homeowner does not.

4) Schools? While it may be true in many cases that the better homeowner subdivisions have better schools, consider this. How many 2-parent families need both parents working to support the mortgage for the home in the good school district? Instead, those that choose to rent (especially apartments with their lower relative rent compared to renting houses) may find they can afford for one parent to stay home. The fact that one parent stays home, plus the fact that there is no home maintenance (yard work, painting, etc.) means that FAR more time can be devoted to helping the children with schoolwork, and in general just spending quality time with them. IMHO, after the basic needs are met, parent's time is more valuable to children than anything money can buy.

5) Renting (especially apartments) is just a much simpler lifestyle. You have (generally) a smaller amount of space, and thus fewer "things". I find many of my homeowner friends and family have come to the point where their “things” own them. Many of their decisions are made by how they will take care of "stuff" they now own (including the biggest “thing” of all, their house). They will not “downsize” to smaller “shelters” because they would have to get rid of some of their “stuff”. Sad.

6) Renting in a multi-unit apartment complex is easier on the environment. Fewer natural resources are required to build and sustain the structure (per person). Less land is used and therefor more can be left free of development.

7) Some folks will admit that buying may not make financial sense compared to renting. They admit it is not a financial thing. They indicate that the increase in “lifestyle” or personal joy offsets the financial penalty. “How can you put a price on the sense of pride of home ownership?” is often heard. Well, if you can quantify the financial cost, you CAN see what you are trading. You can convert the dollar cost into LIFE ENERGY cost, and see just how much of your LIFE you are trading for the “lifestyle” of being a homeowner. Maybe you will find that you get a better value for your life energy by spending it elsewhere (with your family, retire early, etc.). We all are given a very limited amount of life energy. It is important to spend it wisely.

I could go on and on, but you get the picture.

I might be amazed, like you, that so many in this country blindly believe "you are a financial moron if you can't see how buying a home is better than renting" rhetoric without critical review. I am not. Unfortunately, that is just the way of the masses. I do not even blame those that follow this path. We have entire industries and even our own government spending BILLIONS to convince us of the validity of this viewpoint.

I will stop here for now. Just wanted to let you know that you are not alone.


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