5 Reasons Renting Still Beats Buying a House

You forgot to add that renting gives you more freedom to relocate -- to pursue better jobs and better locales should the opportunity arise.

Also, in many places, you can rent a much nicer house than you can buy.

Reason 1: Houses produce lousy returns, while stocks produce good ones
What is he smoking ... or which stock market is he buying in?!

Historically, I think real estate has a much higher return than stock market. Tax-wise it's also more beneficial to own than rent: 1) you can deduct the mortgage interest, but not rent and 2) the capital gains on selling your primary residence is tax-free up to $250K.

I don't know - one really insane landlord will ruin the whole renting experience. Also, I had lousy luck getting repairs and updates done to apartments and rentals I have lived in, which made it hard to have any say in how energy efficient my home was.

Maybe stocks are a better investment but you lose all the return by paying elses mortgage. Also you can be kicked out at any time. Renting is s**t.

The last apartment that I rented I had 3 neighbors with really nice sound systems. I never saw the sound systems but I sure heard them a lot!

I never thought of buying a house as an investment but a place to live, play, make memories, raise a family, make a home. You cannot put a value on those kinds of returns.

It's a good time to buy, prices are pretty cheap at the moment.

To buy into this thinking, you have to assume that you will be making mortgage payments forever. I paid my first house off in ten years, and I can assure you that it is REAL NICE to have no housing payment at all.

But as a landlady, I have to say that renting is wonderful, and I know a nice house in Kentucky that you can live in for a great price!

I tend to disagree with this. Not completely, obviously renting does have it's particular benefits over owning, but it really does depend on your ultimate goals.

If you're buying for investment purposes, property is a much more stable investment long term than stock market is. Yes we're finding ourselves in a slump, and yes housing is crashing, but property does not devalue at the same rate as stocks do. Stock market is great for higher returns in short- to medium-terms, but it's volatility makes it a riskier playing field for long-term investment.

Also, when is the best time to scoop up an investment? When there's a market crash of course. So in fact, this is the optimum time to purchase a house, especially if it's been repossessed. Ask Robert Kyosaki ;)

I admit there are some advantages in renting but it is very nice to know that you're paying (for a lot of years and in 3 or 4 times the amount the bank lent to you I know!) for a thing that one day will be yours. And when you die it will be for your kids to manage.
in the long run I believe that is a good reason to buy.
It's an opportunity for them to make some money with the same house they grew into or, if their lives are not going that sparkly, they can move in anytime they want.
A lent house, cheaper that it might be, will never be yours!
Except if the landlady is a sexy old rich woman that "happens" to die after she passed you the ownership...

A. Renters can not be kicked out any time. There exist Tenant Landlord laws that protect people in most states. This is why leases, monthly and yearly, are signed with notification periods for moving out.

B. I wouldn't actually call what we are in a "slump", but rather a doomsday scenario global financial disaster unlike anything we have ever seen. Keep an eye on the World Bank press.

Cheers.

There are many other reasons that owning beats renting. A few:

-- if you appreciate quality and discerning design, owning a home allows for improvements that would be wasted money in a rental. Thus, you can live better by owning (esp. if you have discretionary income).

-- tax implications were not considered in the article. Again, if you make good money you are certainly better off owning... the govt. ends up subsidizing a portion of your purchase, essentially.

-- Control.... you can decide exactly where to live and when to move. No, a landlord can't simply kick you out whenever they want, but they can make your life miserable or raise rents substantially at the end of a lease period to get you out.

I can think of many others... that said, I have owned 4 personal properties over the past 15 years and all have appreciated except my most recent which is down about 20%. Stocks during the same period are down further.... If you look over 200 years, stocks might be better -- but like everything in life it is about the timing of your buy-in and sell-out that matter.

My house payment with escrow is less than I can rent a decent apartment in my area of half the size.
I am my own landlord.
I get better discounts on insurance for being a homeowner rather than a renting.
The tax benefits are full of WIN.
I can play my home theater as loud as I want.
I can get things repaired on my schedule.
I can make any changes I want to my living space without having to get approvals from management.
I can have pets without paying extra.
No noisy neighbors. (Except for the divorced couple two doors up that scream and holler at each other each evening, but I consider that entertainment.)
Did I mention that I can play my home theater as loud as I want?
...just to name a few of the positives.

Yeah, renting is oh so much better.

Sure there are downsides to home ownership, but I consider the upsides to make it all worthwhile.

I still want to buy a house rather than rent a house because I can make improvements to it that I could not otherwise make to a house. *OR* you make improvements only to have to rip them out again when you move. I want some place I can make in to my own instead of homes that always end up feeling like someone else's home.

I think that owning is way better than renting. Owning a home is also better than any stocks I have. If you think about it, as a home owner, what investment has earned the most return in the last year? Your house. At least in our (Canadaian) market. I recently optioned to purchase a house, and stand to make an 80% return on investment. I don't see many stocks paying out that kind of return. Perhaps the article is slanted to persuade people to return to stock buying?

I thank Neatorama for that gem of information in an article lately, "Show me the paper". The demand for your original Mortgage document in the face of foreclosure. Many U.S. Mortgages were bundled and sold as investments that the original document is long since lost. If you can't prove title, you can't evict. Could you imagine a law passing that removes this 'loophole' surrounding the sacred Mortgage document? I sure hope not.

Perhaps it really is time for the American Empire to collapse. The Ottoman Empire collapsed, the British Empire, the Indian Empire, and the Roman Empire. Empires don't work.

I think point number 5 is the most interesting.

IN the next year i am going to be buying in Australia, but in an area that is seen as undesirable.
The thing is when you have finite accommodation there is no such thing as undesirable, just undesired as yet.

A small inheritance, buying in a depressed market and in a potentially changing neighbourhood....all I need now is for the UK to AUS exchange rate to settle back down and I am good to go.

OH the other major point is that when you own you can improve. Solar cells water butts, grey water system, cavity wall and roof insulation...yeah!

No one has pointed out that rent is wated money. Say you rent a place for $1200.00 per month over 5 years, that's $72,000. Or you buy, and your mortgage payment is the same at $1200.00. At the end of 5 years, you can sell the house, and either break even, make a profit, or even if you have to sell for less than you owe, you will still be ahead of where you would be if you had rented.

I own a house for the sole reason of not having neighbors on the other side of the wall. I spent 25 years listening to other people's noises (in a variety of cities and apartments) and will do whatever it takes to never go back to that.

Economics aside, renting becomes problematic once you have a child -- that "freedom to move whenever you want" thing changes unless you don't mind uprooting your child from his/her school system, friends, etc. Speaking from experience after my divorce, my son's education was severely hampered by school changes. Most run on different curriculum and your child can really fall into the gaps involved in changes. (Not to mention (and this was some 15 years ago, his handwriting never quite recovered from when one school insisted on the "teardrop and hook" style printing, while the next went for the traditional "ball and stick" style.

I'm getting a kick out of the comments saying buying is better because you don't have neighbors one wall over or above/below you. You can rent houses, you know.

I've bought two houses and rented two and I have to say I'd rather rent. We've negotiated lowering our rent by making improvements on the home which I don't consider a waste of money. If you want to make something better and it makes your home a nice place to be, it's not a waste of money. It's only a waste if you say it is.

Also, the last house we bought we had to sell to avoid foreclosure because we both lost our jobs. Now our credit is bad and we don't have a choice. I'd love to eventually own and the pay off a property, just not happening now.

Rent is only wasted money if you spend more to rent than you would spend in taxes and mortgage interest in a given month.

Right now I rent with a room mate. If I were to purchase a condo across the street I would be paying *more* per month in just taxes and association fees than I am to rent now.

You throw away some money (taxes, interest, association fees) when you own a house too.

I plan on buying next year and paying cash. No need for a mortgage and I will have monthly expenses that are roughly the same.

seems to me that it is all in where and what you buy.. We bought the cheapest house in the nicest hood we could find.. it is in the city... close to everything.. we have put tons of sweat equity in the home.. our home has risen and risen in value.. our hood still went up 5 percent during last years slump.. We have gotten our mortgage down to where it is cheaper than most homes for rent in this area..

You don't own anything until you have equity. Falling prices are destroying that equity.

Depends on where you live.

Here in Indiana, we have 3-5% appreciation/depreciation on homes per year(yes, even in this market). Not much volatility.

It is cheaper, in most cases, to buy than rent in Indiana.

If you are an investor, there is GREAT returns, especially now when everyone is paniced. I buy houses at 60-70% of retail minus repairs, and then rehab and put them on the market at 90-95% and am still getting them sold. 100k house generally nets me 20-30k.

I work with investors who don't want the hassles with rehabbing real estate, and I pay them between 6-8% on their cash investment, plus they get all the tax deductions that go with it.

I also work with investors who want to buy and hold, but want me to handle the rehab/renters/etc. Tax deductions, depreciation, etc they get the benefits plus I give them guaranteed rent each month.

There is a lot of money to be made in owning real estate, but you have to be smart about it. You can't let emotion rule your world when buying a house.

Of course, my vote is for owning. I love doing my taxes since I bought. I only wish I would have bought this year, not 2007.

Is it better to buy the worst house in a good neighbourhood,or the best house in a worse neighbourhood?

I can't help but remember that where I am from in Glasgow was at one point seen as fit only to be demolished but now commands some seriously FAT prices.

Polx, worst house in a good neighborhood is my vote!

These things are what renters tell themselves to feel better about their situation.

Having been both a renter and an owner, I'd rather be an owner.

I was pro-rent for a very long time, and very recently bought my first house. I'm still not used to the idea of owning, and I can definitely see the pros and cons, but I think I'm leaning right now toward owning being a better proposition (who knows, the whole experience might change my mind).

What talked me into buying was when someone explained to me that if you buy a house and live in it a few years and then sell it for the exact same price you bought it for, it's basically like living rent-free. The only cost is the taxes, which depending where you are, is not that insurmountable. Where I bought, it's only about $3,000 a year. A total of $9,000 over three years. Combine that with about $10,000 of closing costs to buy and sell, and you're looking at $19,000.

Whereas if I were to rent something at, say, $1,000/month for three years (and that's cheap where I live), that's $36,000. I'd be paying $17k more to live in a crappy cheap apartment!

I could take that extra $17k and put it in the stock market and get the best of both worlds. Or invest it in the house and boost its value.

There are pros and cons in each scenario, I know. I have quite a bit more responsibility each month, but half my mortgage comes back to me at tax time.

Anyway, this was the argument that flipped my switch to buy (and depending on where you live, this is a good time to do it).

Each of these points is just wrong:

1. Houses produce lousy returns, while stocks produce good ones NOT A VERY TIMELY OBSERVATION
2. House prices have further to fall. STOCKS CAN AND DO FALL TO ZERO. THAT IS VERY RARE FOR REAL ESTATE.
3.Many houses for sale today seem designed to waste money. ugh--companies too--and as a shareholder you have almost no control ofer it
4. Big houses are targets for future taxes AND CORPORATE EARNINGS ARE TAX FREE?
5. Neighborhoods are changing in unpredictable ways SO DO MARKETS

Houses are pretty much horrible investments. Maybe... MAYBE! if you buy a house outright. But if you buy a house to live in for 30 years, you'll end up spending more money then you'll ever get back when you sell it.

That said, the #1 reason is bogus. If you're renting, you're still making a monthly payment. It would cost me my normal monthly mortgage payment to rent the same house I have right now. It's not like renting gives me an extra 1000$ a month to invest in the stock market. The good thing about owning is that after 30 years, I'll probably get at least the original cost of my home back if I sell it. If I rent for 30 years, I won't.

#2 - House prices falling further is great for future buyers, but your rent probably won't be dropping anytime soon. In fact, my in-laws are considering buying the house that they are currently renting. Doing so will decrease their monthly payment by 100$.

#3 - I don't know what this means.

#4 - What is big? Can rental properties fall in this category - thus passing the cost onto the renter?

#5 - This is pretty much best reason to rent. You are usually no more than a year away from being able to move to a new neighborhood, city, county, state.

It's all a matter of perspective and wants. In some cases it is better to rent, in others, it is better to buy.

Lew

I don't care whether house prices rise or fall. Our house is bought and paid for. It's OURS! All the things I've done to it to make it nicer and to keep myself amused would have really upset a landlord. Adding the conservatory, running a decent wired network through it, adding rainwater capture to run the downstairs loo, removing a wall to make the bathroom larger, then adding a shower unit etc. There's not a single house round here with a landlord who would have allowed all that.

5 reasons why he's wrong:

1. My stocks are down 25% since 2000, when I sold most of them to buy my house. My house is up 20%, even in today's economy. Seriously, what stocks are you buying?

2. If my house value goes to zero, I still have a place to live.

3. My house will be paid off 15 years before I retire and my cost for a place to live drops to $200/month for taxes and insurance. That comes to 30 years of rent-free living, a savings of $300k+ over the cost of a run-down rent-controlled apartment half the size of my house over those 30 years, assuming the run-down apartment is still going for today's rent.

4. Rent prices rise with inflation. Fixed rate payments do not. My payment (including escrow) has dropped from 23% of my income to 17% of my income over 8 years. Pretty good considering I refinanced from 30 years to 15, increasing the payment 25%. My last year of payments will be 14% of my income. After that, they go away.

5. In a typical non-big-city apartment, you start off in a bad neighborhood and stay there. I do not miss the neighbor's loud music & screaming girlfriends, walking across the parking lot in the rain, having drunks partying, then shouting, then fighting outside my door, etc, etc, etc. And that was the nicest complex in the city.

While I agree with the virtues of owning, I do feel that there are some virtues of being a renter:

1) It's easier to get rid of troublesome neighbors. All it takes is documented complaints to the landlord and a few calls to the police (also documented) to get rid of noisy or drug dealing neighbors.

2) It's much easier to pick up and move. You don't have to worry about who's going to move in next first (aka selling the house so you can move).

3) The monthly bill stays the same, regardless of any maintenance emergency that might come up.

4) Yardwork is somebody else's responsibility. As much as I love to putter with the flowerpots, I'm not always in the mood to mow the yard every other weekend.

We purchased our home for 20% less than the appraised value. After a lot of hard work in much needed cosmetic improvements, we now have plenty of equity. It helps that house values in our area haven't changed a whole lot with the current market. And, since we bought it in 2008, we are getting a huge tax credit, not to mention we get a deduction for the real estate taxes paid.

Hubby and I rented since 2004. Having lived in 3 different apartments, I much prefer owning. As for renting a house, I noticed our neighbors were renting out their house so I looked online to see what they were charging. For a house 500 square feet smaller than ours and with a smaller yard (ours is 2 story, theirs is 1 so it has a larger footprint/smaller yard), the rent they were charging was over $200 more than we are paying for our mortgage, taxes, and insurance combined.

As an owner, I have the freedom of doing whatever I want to my house as long as it's in code. Our neighborhood's HOA is voluntary and we aren't in it so we aren't bound by HOA rules. Owning rocks.

@Johnny Cat -

I'm trying to work out what these "tax benefit" comments are about. I guess laws must be different between the US and Australia but here in Aus, you can only deduct tax on interest payments if the property is an investment property - ie. a property that you don't live in but rent out to others. The house you bought to live in you can't claim any tax back on.

But I'd love to be able to! Is that really the case in the US? I'm assuming the US is where you are writing from...

I read somewhere once that studies show that renters have hap sex with their partners than home owners

I've been renting an apartment in a beautiful two flat for the last ten years. Our landlords are the nicest people, and are very responsible, and we now consider them friends as well as business partners. We have never had any problems other than living without a new stove for 2 days, and we have one other set of neighbors that we hardly see/hear.

We've been paying reasonable rent, and every morning in the winter that it snows, someone else shovels our walk for free. We even have a whole garden in the back that we never touched (not that into gardening), and plenty of space to barbecue.

Every one of my friends and family members who owns a home has had to shell out huge amounts of money on HOME REPAIRS over the last 10 years. Home repairs can be a domino effect... My one friend has had to fix his drainage system, then the foundation started cracking, then the roof started coming undone. My sister bought her house not realizing there was a sewage issue that she ended up spending 10's of thousands of dollars on. Another friend's heat conked out in below zero weather, and it couldn't be fixed for several weeks because of a crooked contractor, then costly repairs, then a lawsuit.

And meanwhile there's my wife and I. Sitting on our back porch, watching the backyard grass grow, knowing that we won't have to cut it.

Here it is:

-- Homeowners are less social, on average, than renters -- spending less time with friends, neighbors, co-workers

-- Homeowners spend more time on household chores

-- Renters have more sex and less marital dischord and cope better with parenting than homeowners do

(Facts from the book "Home Buying for Dummies" by Eric Tyson and Ray Brown.)

Hands down Buying is ALWAYS a better bang for your buck.
owning:
The interest on a mortgage is a great tax write off.
It's a consistently better return then the stock market

If you want to move you can always rent it out. let someone else make the payments on your property
It gives you a permanent address.
you OWN property. positioning you favorably in society.
there is light at the end of the "Payments" tunnel..when it's paid for you are sitting on a gold mine.it's all yours!

rent:
you are making someone else's payment.
you will FOREVER pay! and it only goes up
you are throwing your money away.
ZERO monetary return.
ZERO stability.
Someone else dictates how you live with rental policies they draw up
Price increases without your control.

For "needy" people, buying may make sense; however, from my perspective, renting is ideal:

1. I don't have any kids or a spouse to "uproot" from school or friends. I never plan to have either. I don't need them. They are both liabilities that I can do without!

2. I market myself as someone "can relocate quickly" in job interviews and on my resume. And it has gotten me the job (or on the top few candidates list) in most cases. This is especially attractive to employers who don't want to pay relocation costs/moving expenses. One company I worked for paid for a guy to live in an apartment for 3 months until he could find a house and relocate his family nearby. If a company has a choice to hire me (who will relocate at no cost to them) or shell out thousands of dollars for the next guy, who do you think they're going to choose?

3. I don't like hassles or to be inconvenienced by a bunch of B.S. Have you gone through the rat race of buying a house before? My sister recently did. My God, it's easier to hitch a ride on the space shuttle. Renting only requires filling out an application, getting approved and paying the deposits. This normally takes less than 48 hours...if you have good credit and a solid history of being a good tenant.

4. I don't want to have to "sell" anything when I get ready to leave town. I knew a guy who moved from one state to another...but it took him 2 years to sell his house. And he was selling it well below market value. So there's no guarantee you'll sell or make any money off of your so-called "investment." By the way, this "market value" is based upon the inflated home values his neighbors bribed the appraisers they knew to put on paper.

5. In life, when it makes sense and is legal, put as much responsibility and liability on others as possible. I don't like shoveling snow, cutting grass, painting, etc. If I can pay low rent and leave all of that to someone else, you bet I'm going to let them do it. When a tornado comes through and blows the place away, I can simply walk away (with 30 days notice), but an "owner" is still stuck with dealing with the bank, the insurance company, and "rebuilding." I don't want to deal with that!!

6. I'm not a materialistic person or one who needs to attach himself to something or some concept. To me a house is no different than a car or a watch: it's something you use until it's gone or worn out and then you move on. I don't need a "home"...I need a roof over my head at a reasonable price. And I've found that quite easily.

7. Do you want somewhere to live or do you want somewhere to keep your junk? Don't spend your whole life accumulating a house and garage full of junk. 75% of the space in your home is consumed by junk that you rarely use. So what do some of you do? You go rent a storage space...so you can move out the old junk and bring in new junk. For someone like me who sticks to the basics, renting a one or two bedroom apartment makes more sense...otherwise, I'd have a house full of empty rooms.

Kev notes: STOCKS CAN AND DO FALL TO ZERO. THAT IS VERY RARE FOR REAL ESTATE.

Not true at all and millions of homeowners around the country are falling into negative equity which makes their stake in their home LESS THAN ZERO!

The good thing is that unless you're buying on margin, stocks can ONLY fall to zero. Houses on the other hand, as people are finally coming to discover, can fall well below zero. Combine the recent plummets in values with the fact that many people were putting down only 5% on their homes (or even less) and many people have gone underwater in their mortgages meaning they owe more than what their house is worth.

For instance, you buy a $200,000 home and only put down 5% ($10K). Say, property values in the area decline 13% over the next 10 months. You now have a $190,000 mortgage on a home that is only worth $174,000. This is happening to people all around the country with people having NEGATIVE equity.

Unless you buy on margin or borrow, it is not possible to have negative equity in stocks.

In our expensive area of California, I rent a 10-year-old granny unit for $950 a month. My fiance pays $2650 a month on an interest-only mortgage for a 30-year-old ranch house that is only slightly larger. My commute is three miles, his is 16. My neighborhood is much nicer and has better access to stores and cultural amenities. I have no maintenance responsibilities, and my utility bills are much lower. Of course renting is better!

I rent a beautiful 5500sf house in one of the nicest neighborhoods in Salt Lake City for $2700/month.

I prefer to rent for the following reasons:

- zero maintenance. Instead of spending my weekends at Home Depot I can go do what I like. I place a huge premium on my free time. When something breaks I just call the property management company and the problem gets solved. No cost, no hassle.

- Easy to bail. If crappy neighbors move in next door or if a career opportunity comes up somewhere else I can relocate without having to sell anything.

- No debt. A mortgage is debt. My debt load is zero - I like it this way.

- The only thing I really like owning is cash. With the money I save on renting I can bank far more cash than I would if I had to pay for home ownership.

- Its a myth that owning a home is the American Dream. George Bush and his cronies pushed the whole mortgage crisis based on the fallacy that owning a home is the American Dream (remember the "Ownership Society"). Again, I'd rather own cash.

- I view housing as a living expense, not an investment. My investments pay me interest - my investments don't suck money out of my wallet.

- Housing values are likely going to be flat for 5-10 years anyways. The price run up between 2001-2006 was totally unsustainable. The market needs to stay flat to catch up with itself.

- I get much more bang for my buck renting. My current house would cost $5-6k in monthly mortgage payment. Instead of paying that amount I can bank an additional $3k/month.

- You never really own a house. Even when you're done paying the mortgage you still need to pay the government 'rent' (i.e. property taxes).

I understand the arguments for owning. And in some cases I can see good upside to owning. But I for one would rather rent until I can buy a house outright and avoid hanging a 30 year albatross around my neck (i.e. mortgage payments). Big debt in the worst economic climate of a generation is bad news.

BTW, to determine a 'good' rental price I multiply the monthly rent by 200. If that is less than the value of the house then its a good rental value. In my case 200x $2700 is $540k. Even in this market, the house I rent would sell for over $750k - so its a good bargain for me.

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When people tell others to BUY A HOME, they really need to explain that this also means you have to pay the following:

1. Homeowner's insurance
2. Property taxes
3. Landscaping and lawn service
4. All home repairs (roof, plumbing, leaks, structural, etc)

When something breaks, I pick up the phone and call my landlord. I love that! But I love being able to pickup and leave if needed as well.

I rent a nice 3 bedroom/2 bath single family home in a nice neighborhood for $800 all INCLUSIVE except for cable/internet. No HOA, PMI! etc. My total monthly bill expense (cable/internet/cell phones) is $1050 a month! That's it!

I don't understand why some homeowners feel the need to "belittle" renters (see mjgolli post). To each its own and I enjoy my take home pay vs monthly bills and my bank accounts are also! LOL

It really depends - for families with kids and two incomes it makes more sense to own but the price should be right. Single folks and couple without kids should rather rent and save (invest) as much as they can, that's the key. The rent is a lot less than the mortgage interest + taxes + utilities + improvements.