Owning or Renting a Home: Which is the Worst Financially?
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When Prudence of PrudenceDebtFree spoke to her neighbor about owning a home, he was emphatic that people shouldn’t own homes because in his opinion, owning a home opens the door to a “lifestyle.”
Prudence’s neighbor didn’t mean “lifestyle” in a positive way, either. He believes that homeowners are more tempted to take out loans on their house to do renovations. They’re more likely to spend money on “unnecessary services,” like landscaping. They’re even more likely to be in debt in old age.
On the other side of the coin, I recently had an elderly relative tell me that renting a home is a huge waste of money. He seemed very disappointed that I was “throwing away” my $1,875 every month on my rent when I should be using it to build equity in something all my own. It was strange to him that two people our age with two children were still renters.
owning vs. Renting a home -What’s the Worst Advice?
As some of you know, I’ve been documenting the worst financial advice around the blogosphere over the past few months here on Frugal Rules. When I think about home ownership and the advice that surrounds that decision, I find it really comes down to the individual, their own aspirations for their life, and their financial situation.
What may be terrible advice to give one person may be perfect for another. I’ve also learned that while it’s easy to make blanket statements about renting vs. owning a home, it’s hard to make everyone fit into those statements. So what advice can you trust to help you draw the conclusion that’s right for you? Here’s my two cents on how to decide whether you should rent or own.
Do Your Research
Ultimately, home ownership is a very serious decision, and each and every person should do their own research. They shouldn’t watch HGTV shows dreaming about the color of their granite. They shouldn’t drive through neighborhoods looking at houses they can’t afford. They shouldn’t go to open houses and fall in love with something before they have a grasp of their financial situation.
As J$ recently illustrated, sometimes renting is cheaper than owning a home on a year to year basis. Sometimes it’s also less of a headache, and emotional tolls are certainly worth considering.
My Home Ownership Goals
Home ownership is far away for me, so far it’s hardly worth thinking about. If I stay in New Jersey where I live now, it’s going to be a very, very long time before I can even afford a home. Just a small home in my city runs about $500,000.
However, there are lots of opportunities for real estate investment in this area and in Manhattan, which is about 30 minutes away from me. I can see myself purchasing a tiny studio to rent out to a tenant in Manhattan one day while still renting a larger house for myself out in the suburbs.
Only time will tell, but I know that for me personally, the advice to buy a home and stop wasting my money on rent is terrible advice. It would ruin us financially and we’re not nearly to a place professionally where we can handle it. For others, though, it might make sense, and to them I say go for it if you can afford it.
What is some bad advice you’ve heard when it comes to home ownership vs. renting? What’s your take? Are you renting or owning and why?