Two Views of the American Dream – To Rent or To Own A Home?

[Leo Kingston]

Two Views of the American Dream – To Rent or To Own A Home?

The stately brick home with white shutters and a matching white picket fence fantasy home is still with us, but some people are reconsidering the notion that owning a home is part of the American Dream.

Personally, owning MANY homes as a real estate investor has built my business and my lifestyle, so I wouldn’t walk away from home ownership myself.

But some people are doing exactly that. The upside of owning a home is not as great as the downside in their opinions. And these people span the age range from 19 to 90. It’s not specifically generational now, and that’s what interests me.

Since first time home buyers are notorious for overlooking many basic costs of home ownership, often focusing exclusively on accumulating a down payment and then making monthly payments that include property taxes and insurance, I was fascinated to read that buyers in their 20s and 30s are becoming quite savvy as they consider renting vs buying their home.

Millennials who have been renting for a while generally experience some sticker shock when they start doing the math on home ownership, because the square footage they can afford to buy is usually smaller than what they’ve been renting.

The New York Times recently published a post with the provocative title, “Is It Better To Rent Or Buy?” and the authors included a calculator to make the comparison easier. Built into the calculation are the following factors for buying:

*Home price

*How long do you plan to stay?

*What are your mortgage details?

*What does the future hold?

*Taxes

*Closing costs

*Maintenance and fees

While it sounds good on the screen (since we don’t use paper much anymore…) I can’t fathom any calculator having an algorithm for “What does the future hold?” I’m sorry, but nobody knows the answer to that, even if we think we know our own plans, we usually don’t. And we certainly don’t know the whims of the economy or the housing market.

If I had hesitated to purchase hundreds of homes as an investor because a calculator told me it would be better to rent than to buy, I might not be as well-off today. It was precisely the risk factor and the sixth-sense for a good deal I developed that allowed me to prosper. There’s just no way a calculator can factor in all the variables.

Yes, there are valid reasons for renting instead of buying a home. In fact, it can definitely be the best choice when maintaining a yard or bearing the expense of interior maintenance is not practical. Paying rent can be a sound financial decision under many circumstances.

I’m just saying that an online calculator is not the best way to decide whether to rent or to buy. It takes good, old-fashioned common sense and some wise advice from people who’ve lived through the ups and downs in any real estate market, along with your own financial considerations.