A prop owners: Why do your tenants rent instead of buy?

Question

Those with A properties, why do your tenants rent rather than buy?

I'm relatively new to the game and have a couple of A properties that rent for $2000+/month. My tenants all make a gross income of 3x rent and have great jobs. I can't figure out why they'd rather rent than buy. One tenant had a recent bankruptcy due to medical expenses, but aside from that, why do you're A prop tenants rent instead of buying? Also, how long have they been renting for?

I imagine the minute 7-years passes, they'll end up looking for a home...

Will Pritchett · Answer

@Jason Hartman I have really been enjoying your podcasts. I have learned a lot. Have you been a guest on the BP podcast yet?? If not, I think you should be. I found out about you from a Real Estate guys interview I believe. I appreciate your contribution to my education. I am listening to old podcasts and new ones now. You have made some pretty accurate predictions! Don't mean to hijack this thread but thank you for your reply.

Roy N. · Answer

I'll throw one more possibility onto the list: Some come from a societal background where renting is the norm.The cultural push toward home ownership we experience in North America is not universal. In many parts of the world, renting is more common than owning.

Marco Santarelli · Answer

@Petra M. @Will PritchettTenants rent for a wide variety of reasons:Some don't have the down payment.Some don't want the long term commitment.Some don't want to be tied down to one location.Some don't have the credit.Some don't know any better regardless of incomeSome simply don't want to own.Continued success!

Will Pritchett · Answer

Petra M. I heard a very interesting opinion on a podcast by Jason Hartman recently. He is no josh and Brandon but I needed more to listen to while mowing the yard etc. Anyway, he says he rents very expensive homes (to live in) for way less than the "1% rule". So a 1 million dollar home rents for 4000 a month, as an example, which is 0.4% of price (I hope). A 100 thousand dollar house rents for 1100; or 1.1% of cost. He sees the break over point in the 150K price range (market price). He says above that price you would be better off renting and investing the rest. The only caveat is if you want to stay in the same place forever or while you have kids at home. But that made some sense to me from a numbers perspective. Maybe these renters see that logic as well. Just a thought.

Raul Salmeron · Answer

Hello you guys . Great post you have here . I have ask myself the same question over and over . I believe they rent because they believe they won't be able to pay the house and scare of big debts and commitment . Regards

Patrick Donovan · Answer

A couple of my cousins make good money. Way better than I do but they still rent. I think they just don't want to have to deal with things when they go wrong at their houses or don't want to be tied to a place in case of an emergency and have to move asap. For some people it just makes more sense to rent. Never for me though paying rent was one of the hardest things I ever did ! Pay for someone else to own a house and make.money ? That's just crazy!

Michael Julian · Answer

I have had a property in the Nashville area since 1984 that is a condo on the higher end, (rents for $1800.00 right now)I have almost exclusively had it rented over the years to people new to the area. Some get a job here and need a place quickly and don't have time to search for a house, or want to get an idea of where to look first. The property sits right near an inner loop interstate, so it is convenient to just about anything, so it always rents quickly and I can be picky as to who I place there.The only downside is that people only stay 2-4 years or so, but like I said, it is easy to find new renters and people generally take great care of the place.

Jason Hartman · Answer

Thanks @Will PritchettGlad you're enjoying The Creating Wealth Podcast! I'd love to be on the Bigger Pockets podcast and I think one of our guest bookers is talking with @Joshua Dorkin or @Brandon Turner about that. It's a great show and I'd be honored to contribute to it.

Jason Hartman · Answer

@Will PritchettWe'll never really know what renters on the lower end are thinking but adding to the list of reasons people rent vs buy is a general concept I call 'financial immaturity' where people don't plan, save, delay gratification, etc. in order to invest for the future. If they're renting a property valued below $150,000 - $200,000 they would likely be much better off owning than renting.

Steve Babiak · Answer

Some don't have the "reserves" AKA savings to replace "big ticket" items like roof or heating system.