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Owning Vs. Renting – Not Just About the Numbers

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Any of y’all on  It’s a community forum just for your neighborhood and the ones around it.  I do Nextdoor like most people do Facebook.  Anyway, someone there brought up the rising monthly rental costs this past week, and I started to feel that tingle all personal finance geeks get when money starts getting discussed publicly.


I ran some numbers to help put things in some sort of perspective.  Here’s what I got for the average 3 bed, 2 bath homes around us (outskirts of Houston, Texas) that sell for $150,000-$180,000…

A $150,000 Mortgage Example

A $150k mortgage at 4% for 30 years is about $715 a month.  Then you have an approximate 3% rate for property taxes on $150k ($135k if you have the homestead exemption, but that goes away as a landlord), so that’s $4500 a year or about $375 a month.

Then there’s the $1200-$2400 a year home owner’s insurance policy, the $600 flood policy for non-homesteaded homes, HOA dues that range from $0-$3000 a year, and then the maintenance and repair costs for everything.

That boils down to:  $1300 a month + HOA dues + Upkeep and Repairs

Owning Vs Renting

All in all, if you are renting a $150,000+ home for $1300-$1500, you are pretty much covering the basic costs of owning a home – which means it is a good deal if you rather not deal with all the crap that pops up.  🙂

It’s a different deal if you have pretty good credit, a stable income, cash to put down to make sure the mortgage is where you need it to be, an additional stash for all the stuff that breaks, and you actually wanted to buy a house.  Then you just weigh the options and go with what seems right for you and yours.

One of my blogging buddies (you all may know J Money) owned his own house for 9 years, hated pretty much everything about home ownership, sold his home at a budgeted loss, and his family of 4 will now happily rent for the foreseeable future.

On the other hand, my hubby and I bought our first home at age 23, bought this one at age 29, and have been hooked even though we’ve had to deal with leaks, water damage, hot water heater problems, several issues with a/c’s, and then all the optional stuff we all splurge on, lol.

All in all, owning versus renting boils down to way more than numbers.

FYI:  I worked at a dead end cubicle job from 2005-2011 for about $30,000 per year.  I went self-employed in July 2011 and make between $70,000-$90,000 through blogging, professional pet sitting, hubby's reffing, and our rental home.  If you’d like to start your own site (link to my free step-by-step guide), I highly suggest checking out Bluehost (my referral link with a nice discount for you, PLUS a free custom header banner from me!).  Please contact me any time at budgetingfunstuff*at*gmail*dot*com with questions or just to brainstorm! I’d love to help!
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7 thoughts on “Owning Vs. Renting – Not Just About the Numbers

  1. I think there’s a lot of personal preference that has to get factored in. I really get annoyed at the articles along the lines of “Why You Should Never Own A Home” or “Why Everyone Should Want To Own A Home” because there is a lot of gray area that doesn’t take into considerations the factors that are important to some people but not to others.

  2. It’s been quite in vogue recently for various media outlets to poo-poo home ownership in favor of renting, and I just don’t get it. The cynic in me wants to say that they’re just pandering to the Mass Millennial demographic that won’t be in a position to purchase a home for a very long time.

    The rent-vs-own analysis really needs to be done on a locale-by-locale basis, not using national data. It’s not right for a media outlet to headline, “Renting is a smarter financial decision than owning!” based on data from all 50 states and then proclaim it as gospel. People make major life decisions based on that kind of stuff without realizing that what may be true in the average is not necessarily true in their backyard.

    Sure, home ownership over the long haul may not be such a slam dunk in less desirable parts of the country, but let’s face it. I’m in the Los Angeles area, which is an extremely desirable place to live, and apart from some unprecedented catastrophe, it will continue to be. This desirability will cause both rental rates and home prices to increase substantially over the long run. In such a climate, would one rather be a renter or an owner? The answer is simple.

    And if your family is small (like ours), you can turn your house into a money-making asset by renting out space. We rent out a room here in the L.A. suburbs to a young woman from church. She pays us $850/month, which comes out to over $10,000 a year. Over 10 years, that’s over $100,000 of easy money! You’d be hard-pressed to find a landlord/lady willing to let you rent out a room in the house you rent from him/her.

    Another beautiful thing about real estate is the ability to leverage. My first property was a 4-unit using FHA 3.5%-down financing here in the Santa Clarita Valley. I lived in one unit and rented out the other three. I was single at the time, so it was a no-brainer. Why? Because of leverage. I put a hair over $15,000 down for 4 units an hour away from Downtown Los Angeles.

    And because I only put 3.5% down, I had a decent chunk of money left over (+ cash flow from the tenants) to put into “real” real estate in the form of two private placements — a beachside development deal in Newport Beach + a buy, rehab, retenant, refi apartment syndication in Arizona — the returns on which have blown the stock market out of the matter.

    The FHA fourplex strategy really is a no-brainer for single Millennials. If one does nothing else in real estate, they will have succeeded by getting into a fourplex as a young man or woman with only 3.5% down.

    Assuming the rents cover their expenses, in 30 years when they’re in their 50s and the mortgage is paid off, and they’ve done the smart thing by raising the rents over the years, they will be sitting on a million-dollar asset that cash flows thousands of dollars per month at the cost of a measly $15k or so out-of-pocket when they were 20-something.

    I can’t think of any better way for young people with limited resources to prepare for their future so early on in life with so little cash out-of-pocket.

    If I had listened to all the noise and rented all those years rather than owned, my net worth significantly less than it is today, and that’s not even including the appreciation on the property.

  3. If I had $15,000 extra in my 20’s I would be significantly more wealthy now too. No one was hiring single moms with a kid and pure science degrees back then. And paying off a student loan earning only $6-10/hour while paying for daycare and stuff could get tricky. One of my friends sold his paid off house at the beginning of a run on real estate in Houston back in the 1990’s. He invested the money in the stock market and never had to work again, although he did, as an engineer. He rented, as he hated house chores and payments. Worked anywhere in the world he wanted. Retired before he was 50 and enjoys life, with no need to raise anyone’s rent or pay others ungodly amounts to maintain anything. He bought some real estate (and sold profitably) and owns his house he is thinking of selling now. We raised 3 kids and own two homes. We could have managed stuff better, but we are doing fine. Most of our investments have been in the stock market also, although we did rent our 2nd home for 10 years. I have walked in a lot of different shoes and managing a real estate empire is not what would make me happy. Loads of choices in this world, loads of ways to meet your goals. While interest rates are low, real estate does make more sense than ever, but I have seen renters make millions too. Adapt to what is happening and gauge how much you can handle. If you are able to make decisions based on the amount of risks and work you can handle day in and day out, you will be happier in the long term.

  4. Crystal this is an awesome post and topic. We live in a low cost of living area just outside St. Louis. It has been very helpful and a deciding factor in our owning vs renting battle. I think if I owned many homes I’d have someone else manage them. I could see how that could get overwhelming.

    In our area, we rented a 2bd apartment for $600. Got a great deal renting a 6bd home for $500 per month. Mortgaged that house for $370 a month. Extra principal payments and our mortgage is now in great shape. I always disliked renting. Couldn’t plant anything. Too many silly rules. Terrible landlords and maintenance staff.

    To some renting may be better. Some people cannot stand to do yard work. It can make life much more simple to not have to worry about maintenance. However, for our family, we’d rather build and pay off a large asset. Seems smarter in our position.

    Our front yard is beautifully landscaped now. 5 fruit trees, 9 rose bushes, many other flowers, and a garden. Could have never done that in an apartment. Instead of having 50-100 neighbors now we have one immediate neighbor and one at a distance. Our house is set in the woods on a dead end with more privacy.

    Owning vs Renting for us is hands down owning. But we like to get our hands dirty. Homeownership is a massive responsibility. I wouldn’t down anyone for wanting an apartment. Heck, when I get older I’ll probably want an apartment instead. For the elderly and young apartments are likely a better move. They won’t want or be able to mow the grass or take care of a home properly.

    With today’s modern society travel is becoming more frequent. Also, for a person or family that works remotely renting may be ideal. Some may not want to be tied down to one building or one area. It’s all a matter of personal preference and what is the most ideal for your unique situation.

    Generally, I’d say that owning is the more financially intelligent move. However, I have seen rent sometimes go cheaper than owning. Especially with less than ideal credit. Or in highly populated areas. Paying off a moderate home, upgrading and renting it out seems the most ideal. Owning vs renting? Owning all the way here!

  5. @Money Beagle, yeah, gray area doesn’t seem to be “in” anymore.

    @Logan, but if someone doesn’t want to take care of home repairs and other home ownership headaches, why not invest in stocks or something else and skip the headache? For my husband and me, home ownership and the rental income from those homes (renting out rooms in our homes while we are there and using our first home as a rental property after we moved) have more than made up for any headaches. But like the commenter, “me”, below and J Money, it might be more headache than it’s worth to others.

    @K.P, here, here *raises my imaginary wine goblet*!!!

    @me, yeah, I can see where stock investing or anything along those lines can also be a route to success. There definitely isn’t just one good path.

    @Joshua, yep, we all have our priorities! Home ownership works well for us too.

  6. We’re probably gonna immigrate to the US next year and we’ll most likely rent. Which I dislike as an idea, since it means paying for a place to stay and getting nothing in return, except for the fact we are under a roof. But we do have properties back here, so we’re gonna roll with it. Unless we get into some huge money and are able to buy something in the US as well.

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