in Home Ownership

Re: Buying Vs. Renting

suburb-hell

Photo thanks to SkyscraperPage

I recently read a fantastic article on the web called “Throwing Money Away – Buying vs. Renting.”

As a person who rents and has no intention to ever have a mortgage, I’ve been told many times by many people that I am “throwing my money away” by paying rent when I could be putting money into a home to “build equity.” It was great to read this article and have it explain exactly how I think and feel on this subject, so the next time this comes up, I’ll be sure to forward this post.

One thing this article doesn’t take into consideration is the advantage of being mobile when renting. Because I’m not heavily coupled with my apartment, I’m able to apply for many jobs around the world, without having to restrict them to my current area. Even if I was spending more than someone with a mortgage (which I do not believe), I would consider this an acceptable “cost of doing business” that allows me to move upward or sideways, in any industry or job I want to move towards. Sixty days notice and I wash my hands.

Which side are you on? Read the article then come back and comment.

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  1. Financially, it’s a simple question: Compare the cost of rent with the (non-equity-building) costs of home ownership, which themselves can be broken down into recurring and non-recurring costs.

    Recurring costs include mortgage interest, mortgage insurance, property tax, and maintenance. Except for maintenance, these costs typically apply on a monthly basis. Non-recurring costs typically apply at the time of purchase or sale and include 13% HST (on new or renovated homes), real estate commission (typically 5 to 6% of the selling price), any land-transfer taxes, and lawyers fees. These latter, one-time costs represent the the price of mobility for home purchasers that renters don’t incur.

    Having moved five times in the past fifteen years, including the purchase and sale of two homes, I have become much more aware of the transaction costs. I will not purchase until my working and personal life are much more predictable, if they ever do.

    • Hi Norm! Thanks for taking the time to read and reply.

      I think predictability (some might call it stability) is the key, here. If you feel comfortable knowing you’ve got a job for the next n years (where n is a high enough number to justify buying a home and includes the ability to sleep at night for lack of worry) and you’ve found a place that you love, then maybe buying a home is a great idea. As for myself, in the tech industry, things change on a weekly basis as new devices, languages, tools, and companies enter (and leave) the arena. For me, it’s much more important to remain agile by being able to pack up shop and head for brighter opportunities if the job market goes sour or a startup I’m a part of runs out of runway.

      I think there are pros and cons to everything and it really comes down to how you need to live versus how you want to live.

      For the cons of my kind of lifestyle, I don’t have a family near me and live alone (which can be lonely) and I’m frequently either with or without money (depending on contracts I have as a freelance worker or steady job). Predictability / stability is not in my vocabulary. But, for all of that, I’m able to focus on things I like to do like hackermaker code projects, push myself professionally, and move quickly when it comes to new opportunities. For me, it’s pretty close to perfect. But I can see that it wouldn’t fit for a lot of people. To each his/her own.