I definitely do NOT think it's weird.
Up until last year, I always thought renting was a "waste of money". I was trained to think this way by my friends and family. After college, I lived with my parents to save money because my job was literally 10 minutes away from my parents' home and moving out just didn't make sense. I couldn't be closer for a reasonable price. Anyway, I saved over 50% of my income for 2.5 years and had a lot of cash. I could have bought a house nicer than the one I grew up in, but balked at the opportunity. Instead, I used that money to quit my job and open a business.
Around that time, I also got married. My wife wasn't cool with living at my parent's place, understandably, so after a major mind-set shift, we started to rent. Since then, I've learned so much about real estate investing that I don't think I'll want to purchase a primary for a LONG time.
Here are a few reasons why:
- Opportunity cost: The down payment in any area that I'd actually want to live in long term would require a significant amount of cash. Roughly 75-125K. Locking up that kind of money for the rest of my life at such a young age seems silly. Let's say I want to trade up after 10 years and move into something bigger or nicer, I'm going to have to use the equity built in the current home as the down payment for the new home. So it's likely that the 75-125K invested today, never makes it back to my pocket.
- Is renting REALLY a waste of money? I have a friend who just bought a 350K condo with his wife. I love their place. I think it's great. It's definitely something I can see myself living in. ASIDE from the down payment of 70K, let's look at some numbers.
- Interest - 280K Mortgage (350-70) @4% over 30 years = 481,235 Total Payments. 481-280 = 200K of interest / 30 years / 12 months = $555/mo in interest.
- HOA - they are paying $350/month in HOA fees and that number is likely to go up each and every year. I'd probably go the condo route too because I definitely don't want to shovel snow or grow grass.
- Taxes - They pay 6K per year in taxes. 500/mo.
- Regular maintenance - it's a condo so not much really. Just the inside. Maybe 500 / year? so 50$ / month.
- Total so far - 555 + 350 + 500 + 50 = 1,455 per month of "wasted" money over the next 30 years for them assuming they stay there that long.
- The apartment that I currently live in is $1,400 per month. It's not quite as nice as their condo, but it gets the job done and it's in a similar type of area. Remember, that's NOT including the fact that they gave up 70K of their hard earned cash to live there.
There are arguments to be made for writing off interest as homeowners. My counterpunch is that I write off a portion of my rent as home office space.
Another benefit of renting is being able to move year after year for any reason. For example, my friends' initial neighbor recently sold their unit to someone who has their TV on 24 hours a day, at an annoyingly high volume... If I was in this situation, (which I am, except my neighbors preferred method of noise is music), I will just move - my friends are stuck...
Another benefit of renting is job flexibility. My buddy has had 3-4 different jobs in the past 5 years. His commute has been as long as one hour, and it's been as short as 5 minutes. What if he gets an AMAZING opportunity 61 minutes away from home? Is he not going to take it because the drive is too long? He says he wouldn't even apply to a job that far again. My wife got a new job last year and guess what we did? Moved closer to it so her commute time wasn't as bad. She's planning on sticking around with this company so we are actually looking to move even closer next year.
For my wife and I to be financially independent, we need about 4K/month. We make more than that combined now, but our expenses are 3-4K per month (a portion of which is just because we can afford to). At that point (4K/mo), we can do whatever we want, whenever we want. Based on the speed of my learning through BP, I don't think it'll take too long to get that #. And when we do, the last thing I'll want is to pay the mortgage on a house we barely use as we travel the world together.
I think conventional wisdom (buying a primary first) is a broken concept, especially in today's economy.
There are equal and opposite arguments for home ownership. I just don't think it's the hard and fast "best" option for most people like conventional wisdom says it is.
