Why I Am Never Going to Own a Home Again

why not to own a home

Many people have said to me in the past month, “I’m going to buy a home.” Or, “What do you think of the idea of me buying a home?” I like the second batch of people. They are my friends and it seems like they are sincerely asking for my advice. And I’m going to give it to them. Whether they meant it or not.

I have some stories about owning a home. One of them is here: “What It Feels Like to be Rich” where I describe my complete path into utter depravity and insanity. The other one is still too personal. Its filled with about as much pain as I can fit onto a page. Oh, I have a third one also from when I was growing up. But I don’t want to upset anyone in my family so I’ll leave it out. Oh, I have a fourth story that I just forgot about until this very second. But enough about me. Lets get right to it.

There are many reasons to not buy a home: [By the way, I also put this in the category of Advice I want to tell my daughters, including my other article: 10 reasons not to send your kids to college.]


A)     Cash Gone. You have to write a big fat check for a downpayment. “But its an investment,” you might say to me. Historically this isn’t true. Housing returned 0.4% per year from from 1890 to 2004. And that’s just housing prices. It forgets all the other stuff I’m going to mention below. Suffice to say, when you write that check, you’re never going to see that money again. Because even when you sell the house later you’re just going to take that money and put it into another downpayment. So if you buy a $400,000 home, just say goodbye to $100,000 that you worked hard for. You can put a little sign on the front lawn: “$100,000 R.I.P.”

B)      Closing costs. I forget what they were the last two times I bought a house. But it was about another 2-3% out the window.  Lawyers, title insurance, moving costs, antidepressant medicine. It adds up. 2-3%.

C)      Maintenance. No matter what, you’re going to fix things. Lots of things. In the lifespan of your house, everything is going to break. Thrice. Get down on your hands and knees and fix it! And then open up your checkbook again. Spend some more money. I rent. My dishwasher doesn’t work. I call the landlord and he fixes it. Or I buy a new one and deduct it from my rent. And some guy from Sears comes and installs it. I do nothing. The Sears repairman and my landlord work for me.

D)     Taxes. There’s this myth that you can deduct mortgage payment interest from your taxes. Whatever. That’s a microscopic dot on your tax returns. Whats worse is the taxes you pay. So your kids can get a great education. Whatever.

E)      You’re trapped. Lets spell out very clearly why the myth of homeownership became religion in the United States. Its because corporations didn’t want their employees to have many job choices. So they encouraged them to own homes. So they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs  is low. You can’t argue the reverse, since new adults are always competing with you.


F)      Ugly. Saying “my house is an investment” forgets the fact that a house has all the qualities of the ugliest type of investment:

  1. Illiquidity. You can’t cash out whenever you want.
  2. High leverage. You have to borrow a lot of money in most cases.
  3. No diversification. For most people, a house is by far the largest part of their portfolio and greatly exceeds the 10% of net worth that any other investment should be.

Personal reasons to not own a house.

A)     Trapped, part 2. Some people like to have roots. But I like things to change every once in awhile. Starting March, 2009 I was renting an apartment directly across the street from the New York Stock Exchange. It was fun. I’d look out the window and see Wall Street. How exciting! Before that I lived in The Chelsea Hotel with Chubb Rock. Last year we decided to relax and move a little north. Now I look out the window and see the Hudson River. And its quiet and I can walk along the river in the morning with no noise. It took us two weeks to pick a place and move. No hassles. I like to live a hassle-free life.

(click for my favorite Chubb Rock song)

B)      Walls. You can’t change the walls when you rent. A lot of people seem to want to tear down walls. Or paint them. Sometimes when you rent you can’t do these things. Well, make sure you have a landlord that lets you tear down walls. There must be some ancient evolutionary tic that makes us want to tear down walls or put nails in them or paint them. I don’t get it. I like the walls to stay right where they are.

C)      Rent. People will argue that the price of the mortgage, maintenance taxes, etc is all baked into the price of rent. Sometimes this is true. But usually not.

D)     Psychology. Look at your personal reasons for wanting to own. Do you feel like you can’t accomplish something in life until you own a house? Do you feel like its part of getting married and “Settling down”, i.e. creating a nest for your future children? For you, is it a part of becoming an adult. Is this what your parents taught you? Examine the real reasons you want to own and make sure they are coming from a good spot in your heart.

E)      Your time. Do you really want to spend all that time working on your house? Is this where your time is best spent towards creating a happy and fulfilled life for yourself?

F)      Choices. I feel when I rent I always have the choice to leave. To live wherever  in the world I want whenever I want.  Adventure becomes a possibility even if I never take advantage of it.

stress from owning a home

G)     Stress. For me (not for everyone) owning a home equals stress. I saw what my parents went through at their worst moments owning a home. I saw what I and others went through in the Internet bust when I first owned a home. I saw what people went through in 2008. People were killing themselves. I don’t like that sort of stress. This is how I deal with stress.

H)     Cash is king. I like cash in the bank. I like having access to it.  I don’t like it all tied up in one illiquid investment.  I want to fill a bathtub with all the dollar bills I would’ve used as a downpayment on a house. I want to bathe in that bathtub. I’m going to do that later today in fact.

By the way, this is going to sound like a contradiction: but I think housing is a great investment right now.  I think housing prices have gone down far enough and I can list the reasons why housing as an abstract investment concept is going to go higher from here. But I don’t like to write about investing on this blog. Suffice to say there are many stocks you can buy, with leverage if you want to take advantage of the rise in housing. But I’m never going to buy a home again. And sit there in the middle of the night thinking, “why the hell did I do this to myself again.”

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  • Reasonable choices. Me, I bought a house that, after the tax effect, costs me 3.1 percent in fixed interest over 20 years at a monthly dollar cost below current rent for the area where I live. I do not plan to move, since my kids are young and I want them to stay in one place at least through high school (thus, a 20-year mortgage).

    So, basically, it’s a bet that inflation will cause 1) rent to rise and 2) interest rates to rise or 3) both at a rate higher than 3.1 percent.

    We might lose the mortgage deduction, in which case it jumps to 4.65 percent presuming no prepayments. (Presume, presume!)

    We might also see the end of Freddie and Fannie, which would mean permanently higher mortgage rates and the end of the 30-year mortgage. See under: Gross, Bill.

    Yes, housing prices could fall more, but people with decades in the business are frankly scared of the opposite: under building and a bottleneck in at least some markets. Vegas is a disaster but you know what, I’m not moving to Vegas, so it’s not my disaster. Houses are not fungible.

    So lots of things “could” happen, but I know one thing is set in stone. If inflation exceeds about 4 percent per annum, we win.

    Yes, I have investments besides my house. Yes, I know houses cost money to maintain. But your friends are basically right. If they are EVER going to buy a home, right now is probably the best reasonable chance to do so at the lowest possible long-term cost, in my view.

    If they are NOT interested in owning a home, it doesn’t matter. Clearly, you fall in the second camp.

    • I agree that housing itself might be a good investment. but look at all the math thats gets added back in when you own a home: maintenance, taxes, stress (which takes a real toll), etc. You can just buy housing stocks if you believe a home is a good investment.

  • Patricksmayer

    I agree with you and have been renting since ’05. I love it but the wife and kids don’t. I have paid an emotional toll from my family for this decision. But nowhere the amount of pain we would have faced if I bought in Bend, OR when we moved here. Thanks for your perspective.

    • Trenton

      Bend? You would have been screwed. Your wife should be thanking you. Go buy one of those houses you had been looking at for 65% less.

  • bparrish2

    Excellant advice! I own my house, I enjoy not having to write a rent check, but that’s because I’ve paid the rent in advance. And possibly I’ve paid rent for months I won’t even live here.

    Here’s a few more subtle annoyances of owning a house:
    1. People turning around in your driveway.
    2. People from other neighborhoods riding ATVs through your backyard.
    3. People can always find you, come over and ring your door bell.
    4. Water problems! Not subtle.

  • Patricia Cori

    Well great, but your cash for the bath may soon be worth no more than toilet paper!!

  • SuperGuest

    You will only make money on a house if you get lucky enough to buy really low and sell really high. It’s not as simple as the difference between the price you get when you sell, and the sum of your mortgage payments over the years.

    People forget about property taxes, insurance, water & sewer bills, landscaping, broken appliances, repainting/carpeting/decorating every so often, renovations, occasional plumbing and electrical problems, and the fact that at any moment, something can break and you need thousands of dollars to fix.

  • Max

    I love owning a home, but in what I think must have been 2006, I was talking to a friend who wanted to buy a house. I had, at the time, been in my house for about a year. I advised her against it, and she said that she felt she was flushing money down the drain by renting. I showed her my year end credit card summary. I’d spent $16,000 at Home Depot. I had nothing to show for it. Perhaps some different tile in a bathroom or something, but believe me, there wasn’t a gleaming new stove in the kitchen or anything like that — it was all on systems updating and maintenance and paint. She paid, at the time, $1350 for her apartment.

  • Will you buy my house please!

    • Iconoblaster

      I admit up front that I have not had the time to read every single post. (Many were the same argument being re-phrased or simply re-used).
      I own the building my buisness is in. Yes, I paid a hell of a lot more than the $152,000 dollars the building last apprasied at. BUT by my owning a property out and out it catapults my credit ability tenfold. I just built a house way out in the country, (where I can shoot my guns right off the front patio or play my electric guitar with no repercussions as I have no neighbors within hearing distance.
      Of course I also like to sit on the patio and listen to the sounds that nature produces in rural areas that gets drowned out in the city or town.
      I make my own rules. If I want to knock out a wall for any reason I can do that. The quality of life living rurally versus living in a city in my opinion is a no brainer. I don’t have traffic. (the mailman and maybe one or two cars will drive by ALL day long)
      I pay 4.15% interests on a 30 year loan. But just as we did with our business we often make double payments, with all the money over the payment ging directly against the princeable (sp?). We saved over $30,000 on our business building. We are on tract to do the same or even better with our home.
      My home is 71/2 acres, with a tree lined creek adn about 5 acres in beautiful prarie grass. My property was declared a “Migratory bird sanctuary by “Pheasants Forever. No tax breaks, simply a designated term for the property I own.
      I’ve lived in big cities. For the most part I avoid them. But if I do want to do or get something from the city there are two within 30 minutes drive. I say I have the best of both worlds. My dogs run free (but on our property) and if I want to build a bon fire and have a party there is absolutely NOTHING to stop me from doing it. I choose my lifestyle. I feel that city dwellers have their lifestyles dictated to them by choosing to live in a place where you control almost nothing about what you can do with your property.
      There is the crime to consider. Over a murder a day in a nearby city. In 30 years there has not been one shooting anywhere near where I live.
      Renting a place like I have is very difficult. That is because the old farm houses are being razed and no new houses are built as they simply farm that spot. Finding homes in the country for rent is like looking for the proverbial needle in a haystack.
      Let me add that my wife and I don’t make much money. (gross around $52,000). But are vehicles are well maintained and have been paif off for 7 years. We live very much within our means. We rarely eat out, (bad for you anyway). We don’t party in the sense of clubbing, we party right here on our property.(cheap)
      What I am saying is there is a pride of ownership, the means to allow me to do what I want with my property. (I hold an annual “firearm competition”) I have a cannon I shoot a wad through three times a year. (July 4th/Veterans day/and memoriable day. To me, the lifestyle one can live (cheaply aside from paying for a house) is very worth any stocks, (I don’t play the stocks), instead I take Mark Twain’s advice, “Buy land because they are not making anymore of it!” While property values are down now they will rise to even higher than they were as I am in this for the long haul anyway.
      So owning a home in the country side is paramount to me and my wife because the lifestyle is so radically different than the frantic city pace I avoid. THAT is as important a factor in how one invests their money.
      I used to live in Colorado. I was a working hand and winters were slim pickings for work. However I prefered (and did) live in a tent, a cave and a car as I could not stand having room mates that argued about who drank the last beer or whp didn’t wash the dishes,etc;.
      I like serenity and you can’t even find that in the city. To me the standard of living rurally far out weighs renting in the city.
      To each their own I guess but I’ll stick to buying land.

  • While you make good points James, I am going to play Devil’s Advocate:

    1) “OWNING a house is GREAT”-
    you get ALL the freedom you want. This by itself IMO outweighs a lot of things you said. I dont have to worry about the “neighbors” across the hall/ on the other side of the wall or above or below me. I can yell,I can put the music up on high, I can walk around in my boxers outside in my backyard, I can do anything and I wont have to worry about others.

    2) The “Maintenance cost”
    is overblown imo. I have been ‘managing’ my house for a couple of years now and things do not break down as much as you suggested.

    3) “You’re trapped”
    -No im not trapped lol. I LOVE being at my house. Its the ONE place I know I can go to to relax. When Im at somebody else’s house, even if its my best friends or close family members, I can never relax even though I treat those places “just like home”

    4) “Rent” –
    Once you pay off your house, you dont have to worry about ‘rent’…Just property taxes and insurance,whcih even though is not trivial, is not at the same level of ‘rent’

    5) “Your time”
    -Like I said before, you dont (at least I dont) spend as much time “working” on my home as implied….

    6) “Choices”
    -Im fine with where I live…I love my city, my neighbors are solid/great, I have no problems with parking,….And if I ever want to go live in another city, I can always rent this house out and move. You can always sell it (albeit not a guarantee to sell, like you said illiquid)

    7) ‘Walls’
    -I can go break my wall right now without any consequence

    But this is all from my vantage point and obviously can very from person to person.
    And I talk about the home in the state of “home ownership” and NOT “home mortgage owing ownership”
    And like I said before, you still make some solid points

    • In my area, rent for a decent sized apartment is >= $900 a month, considering all the foreclosed homes, I could easily get a house for that or less a month. With more demand for rentals with the decreasing home ownership prices around here, rent is bound to go up. To me, if you can make a stable payment fixed for 30 years, that’s a fixed cost that no one can increase vs rent that fluctuates with the market. Long term, depending on your credit, the area etc… I would bet you could save money vs lose money. Plus if you can afford it, it provides a place that once paid for will not cost you beyond general taxes and crap. It’s a win if you can pay it off and if the price is right.

      • Jesse

        assuming you want to stay in the same house for 30 years! The average american moves every 5 years.

        • Uga62

          If you move every 5 years, you definitely should NOT buy.

        • Heather

          I find it hard to believe that the average american moves every five years.

          • MIKE


      • RE investor gone bust

        your also assuming that the taxes, and maintenance won’t go up- its a gamble

        • Mojohnglad

          if the economey continues to contract , and why wouldn’t? you can bet your butt properity taxes will go up up up. Be like me self employed, own a home and have it payed for and laugh every month when everybody pays rent and mails house payments

          • Claire

            Mojo-Good for you for having a paid for home. But your first sentence contradicts your second. YOUR property taxes will also go up. Pay your taxes, your you wont have the home anymore.

            That being said, your monthly nut is much smaller than anyone with a mortgage OR paying rent. I think that is the key to financial independence.

    • Ha! Jerry! You are a good devils advocate and just reminded me of the place my wife and I had before we bought our townhouse. The neighbor played his music so load pictures fell off the wall. I had to disconnect his power one night just so I could go to sleep. I feel better already. I still hate my mortgage.

    • Jesse Sahouses

      I can break and paint walls in a rental too. I may have to return them to the original state when I move out but so what? At least I dont have to pay a realtor 6% and title company 2% and wait for a buyer who then also requests me to do 1,000 dollars worth of repairs.

    • To comment on the less stress idea, I am a mortgage banker and own 10 rental properties. I have spoken to atleast 100 people in the past 6 months that have been evicted from their rentals because the landlord has been foreclosed upon. That would seem fairly stressful.


      I never believed that owning a house is an investment, even though I made money on the three I sold before buying my current house, for CASH. Yes, for Cash. Instead I make payments to my money market account just like I was paying a loan company. This was really handy when I was laid off for awhile, no bad credit rating when I didn’t make a couple of payments. I did pay myself back though. If you know what your doing, maintenance is easy, and with the internet, you can look up instructions on how to fix anything. Housing is a quality of life issue. If your happy paying rent, fine, If you want to paint, put in a patio, nice garden, flowers, own a home……

    • Dave

      1) If you rent a stand alone/apart ” house ” you can do all those things you say you can’t do in an apt.
      2) Stuff DOES break down and stuff does require maintenance … If you leave it go, it turns into a dump.
      3) I f you can’t relax in rented house vs. one you own then you have head problems
      4) Once you pay of your house in most cases means ” in 30 or more years ” Depending on where you live, a rent of $1000 – $1500 a month works out far less over 30 years of mortgage payments plus taxes and repairs etc.
      5) Time is not relevant …. it’s a personal choice how much time you spend working on a house
      6) It is NOT easy to sell or rent a house and go rent another one
      7) If you break your walls that’s just a another repair or maintenance cost ….. dumb !

      The whole concept of home ownerships not really about the cost…. it’s more about the fact that you are being ripped off by so many people …. banks/mortgage companies/insurance companies/taxing authorities/lawyers/title companies and the list goes on.
      I would sooner lose money honestly like maybe in Vegas vs. having it stolen by a bunch of crooks.

      • 1) Renting a house is pointless, you rather rent an apt. then a house. If you are going to rent a house, you rather buy one.
        2) Unless your a SLOB/careless, stuff does not break down as easily as you mention. Yes it does breakdown, of course, but its not like im fixing something everyday
        3) I never gave an argument that you cannot relax in a rented house
        4) DUH! Of course a house is more expensive then rent!!!! That is what James is arguing here. We are trying to figure out if that extra expense is worth it
        5) Time ~~> I have never spent hours upon hours fixing something. If something is broken that bad that I cant fix or takes hours, then you hire a professional to fix it.
        6) Ya I agree, but it is NOT IMPOSSIBLE either…Home prices in my area have actually stayed pretty stable over the years
        7) I never said imma break my walls! James did! I was proving my point that I dont have to listen to anybody if I wanted to do this…Im FREE to do it!

        AND READ THE ARTICLE’s TITLE….He said why i will never ‘OWN’ a house…Owning=you have no payments on it….Own= That which belongs to one—-If you have 1 payment left on a house, then it is not OWNED by you…..

        Ya you have to make payments to own a house, but obviously you do not go out buying a house if you CANT make the payments! duh!

        • Tyler

          I bought a house Feb. 2010 for a fair value at the time (appraisal value) as an investment, I don’t live there and never plan to because I bought it to invest my capital. My principal, interest, insurance, and taxes =$743 a month, i put 25% down on a 30 year fixed note. I found renters in 15 days for $1150 a month. Not only do i make 12% return on investment in liquid cash money but my mortgage is being paid off for me. I fixed it up the month I bought it and have had 0 maintenance so far in 13 months. Pretty painless and stress free for me, my money was only making .75% interest in the bank as oppose to the now whopping 12%.

          There are some great deals, I’m buying another in a couple months.

      • Jjj

        Paying rent for 30 years at 1000 a month is $300,000 and that assumes you don’t have a rent increase every 2 to 3 years plus the fact you don’t keep paying to move every 3 years when your rent gets to high. Paying $1000 a month on a mortgage for 30 years also is $300,000 excpet you own the property. Better yet pay it over 15 years to cut your interest cost down and you are way ahead of the game.

    • guest

      In America one can never truly “own” a house. The term “real estate” is derived from “royal estate”, which means owned by the royalty. You never own it, because if you stop paying taxes for your home, it will be taken from you. It is not like a car, which you can take off the street, stop paying insurance and registration, and you still own it. You stop paying taxes on “your” home, it is no longer yours.

      Secondly, a mortgage is derived from the latin word “morte”, or “until death”. When you buy a house, you are expected to pay until you die. I don’t have to pay for my bike until I die. Or my car, computer, or anything else for that matter.

      So to buy a house, you give a bank money to hold onto a title for 30 years, like renting, if you stop paying, you are kicked out, and then after the mortgage is paid off, if you stop paying taxes the government kicks you out.

      • Claire

        Guest. What you say is true. You must always pay your taxes, or you will loose your home to the County Government. However, if you are retired, the amount in taxes you pay will more than likely be much less than a rent payment, (depending where in the country you live, I suppose). So, on a fixed income, paying only taxes, insurance, and maintenance is a smaller amount of money than rent.

      • homeowner

        I pay $180/month in prop taxes- in California – for my house. I have no morgage (yes, I own my house). Throw in some insurance approx $100/month, total $280/month.

        What is your rent payment? $1000/month? $2000/month? And what will your rent payment be in 10 years? 20 years? 30 years?

        10 yrs from now, I estimate my bill (monthly) to be: $380/month (incl insurance). I estimate your rental rate to be at least $1600 (5% per yr increase, assuming $1000K a month today). At 10% per year (since this guy will make everyone rent)…your rent payment will be $2600/month given the explosion in rental properties demanded. If your rent is $1500 today, then in 10 yrs, your rent is $2400 or $3900 (5% or 10% annual cost increase)

        You have to live somewhere. Given that, I would much prefer owning to renting. $280 vs. is pretty cheap.


      i couldn’t have said it better! i own my home outright. no mortgage! lived here 40 years. love my neighbors as well as my neighborhood. my neighborhood has been the same quiet, lovely area i moved into 40 years ago. and most of my neighbors have stayed put for the same reasons. no crime, nor bad elements for 40 yrs. i’m retired and live within my means. maintenance is low as well as property taxes. cost of living in louisiana is relative low. i’m comfortable and happy. why move? i don’t pay rent. i know the kind of neighbors i have. dumb move to move. mike in metairie louisiana.

      • cherie

        Agreed….Renting you are basically throwing money away, you have nothing in the end….

  • With the current prices and loan rates, we’re in right at about what rent would be. I like having the home base and actually feel more like I am free to travel.

    We lost a ton on our previous house ($100K) but I now live in an area I absolutely love, doubled the square footage and lowered the monthly cost.

    I don’t think I would trust up and leaving for an extended period of time going overseas if I was renting… and I think the reason is our neighbors. They’re almost all original owners and have a vested interest in maintaining the neighborhood. They watch out for other houses and ensure everything is safe. We spend time out of the country and having good neighbors makes me feel free to do that.

    I’m not sure if you can get that renting and for me it’s worth quite a bit every month to pay for that environment.

  • The only thing Altucher meaningfully said was that he liked to move around a lot. Lists were just excuses for the primary factor: his hobby is changing his environment. I spend excess money on cars & try to justify it to my girlfriend. There’s nothing wrong with my hobby, and there’s nothing wrong with his. We both pay a premium for the service of enjoying our hobby to the maximum degree. But I don’t write articles about how everyone else is wrong for not enjoying my hobby.

    • Actually, the financial reasons are more important to me than the personal ones in the above article.

      • Whaleytrio

        Actually you missed the big picture here — A house is a home — a place for you and your children to have fond memories in and enjoy for a long time. Save your money — so you can afford the house you want to live in. Low or no mortgage. Have enough land around it to expand for older or younger generations that need help. Home is certainly where the heart is — and my heart never belonged in an apartment. We have scratches on the wall that my kids made when they were little, we are keeping them too. My house will be given to my kids when I go — no sale needed her, and every year here increases the value in my heart. Doesn’t matter how much it is worth to someone else, it is priceless to me.

        • Pete

          For me, a house is just a house.  The things my kids and I will take with us is the memories we share with EACH OTHER, not the memories we have of a place we lived!  Most people’s memories consist of people, not places.  The places are extemporaneous……

  • Love_that_tsc

    Good points, James, but any discussion of home ownership needs the old realtor’s cliche which I will gladly add here: Location, Location, LOCATION!!
    And James, you’re lookin, uh, pretty GOOD in that tub pic ;)

  • Yamini Sood

    James…in my won house, I an do my own walls, break them, paint them, it gives me hell lot of freedom…
    Beauties of owning a tangible asset are unmatchable, only gold apart from a house can give that sense of comfort…
    I have no one harassing me every 11 months or 2-3 yrs to change houses….no headaches of rentals rising…its sunk cost at the end of the day…
    It really doesn’t take too much time to work…its just fine most of the times.
    When I m suitably leveraged, the stress ain’t there..the stress comes out of increasing rentals thou….
    Cash gone is well spent…..

  • pjc

    The best reason for owning a house – tax free capital gains. I a pretty big check a few years ago, not a dime went to Uncle Sam.

    My retirement plan is to move into one of my rentals, live in it for five years, then sell under the capital gains exemption. I’m guessing 50 grand a year tax free. That’s enough to live off just fine, in this part of the country.

    I think the housing market around most big cities is slightly mad, and has been for some time. There are some great prices in the rest of the country. If you can telelcommute, and bring something close to a big city salary back to a small town housing market, then buying multiple houses with fixed 4.5% interest rate seems like a pretty good deal.

    There is always the risk that you are living in the next Flint MI, and your houses will be worth crap in 20 years. So you balance it out with some stocks. And you buy some real estate an hour or two away.

    Fact is – inflation is almost always associated with rising rental prices. Owning a house with a fixed mortgage is a nice hedge against inflation.

    • Hi pjc, probably owning housing-related stocks is an even better hedge (no mortgage, no taxes, no maintenance) and is also inflation hedge.

  • Dynanmoproductions

    i love owning a house. i enjoy even the crappy furnace that i will replace with my tax return that a landlord would probably not fix tho it runs at 70% on OIL and as a home renter i would be responsible for fuel.

  • James, I agree with you wholeheartedly.

    In fact, even when I was a kid and, as far as anyone was concerned, home ownership was the ultimate goal, there were two things that always struck me as simply wrong about the whole deal.

    First, being a woman of a certain age, I was supposed to expect my husband to provide the home of my dreams with no difficulties, expectations of work/upkeep or expense to me. Not realistic and not fair to him and very insulting and limiting for me!

    Second, it has always struck me as somehow wrong that anyone ‘own’ any part of the earth. The way I see it, she owns herself, while we’re just visiting. Owning a piece of land – whether free-standing or part of a skyscraper – strikes me as yet another example of our human arrogance.

    But that’s just me.

    Thanks, as always, for keeping my mind so engaged on ‘other things.’ You’re a joy and a fascination.

  • Welner

    Dude James, you’re are one of the most relevant bloggers(if you even call yourself that) out there. You write about stuff that matters(things that regular americans can relate, not some bullshit!) Anyhow, let me ask you for some advice. My wife and I bought a house about a year ago here in Las Vegas, I’m having issues with it because the builders did not compact the foundation well enough. So that means that the house is constantly making cracks noises and the concrete is cracking in all parts of the house that the tiles are starting to break. On top of that, the houses are right next to each other and I have a neighbor who decided to plant trees all along the wall (from the front of his house all the way to the back.) He has taken upon himself to water them SO MUCH! That is starting to create corrosion on that side of my house. And the house is starting to sink even more (STRESS FOR ME LIKE YOU DON’T EVEN KNOW.)
    So I’m thinking just letting this house go, and just like you say rent! What would be your suggestion?

    • Zeke Snipes

      dig under the foundation you might find tree roots as the culprit- i dont know the type of trees he’s planted but oaks will destroy concrete seeking out water as perhaps other trees.

      If so then severe the roots at your property lines this will stop the growth then wherever your foundation footing or slab has sunk just dig out another footer beneath and fill with ready mix concrete. if need be you can jack the slab up but I dont know how bad the gaps are or how out of level the floor is to do thsi extra work and you may need a concrete worker to do it it is a bit extensive- as i say i am not there to determine it and a licensed contractor will just run up a bill bidding it. you be surprised what you can accomplish by researching it.

      Now the trees. Sounds to me as if he has really abused the situation and in some way using them to encroach on your property because in makes no sense planting that many for aesthetic reasons it is just clutter.

      There are many ways to kill them. Start by cutting the roots. remove bark – although i know you can only do that on your side but just start each time you get pissed go to work on them. I suppose the distance between your homes are close so this is tough because I just realized they will eventually fall.

      So just get an auger bit and drill down into the bottom of the tree and pour sulfuric acid in there will kill the roots.

      Hopefully he will notice them dying prior to being felled. I have see trees actually grow much greener and healthy looking before this. I found out later it is because it is a last ditch effort to protect itself as it knows it is being choked off from the bottom so it draws whats left upward. Similar to a drowning victim in a freezing lake oxygen rushes to the brain.

      • Welner

        I had to comeback and thank you for taking your time and answering my question. I must I admit it really made me a laught. I thought about all those things I could do to the neighbors plants (because the aren’t even trees.) Like is said thank you. I’ll try to take pics to show you what’s going on. You can find me on twitter @welner

      • Iconoblaster

        I’m going to say that killing trees that are on another’s property line is illegal and could wind up costing you quite a bit of money should you be forced to have them felled and then replace them.
        In the town my business is in I have a big shot lawyer next to me who planted so many pine trees that they form a wall. he does nothing to take care of them. If left to him, the branches would now be over the roof of my buisness.
        One of my students cuts down trees for the city’s electrical needs. The ordinance in the town my business is in clearly states that a property owner MUST maintain their trees from growing well over the property line. Since he didn’t do anything after years of my requesting him to trim them back I was within the law to take care of the problem myself. I had every one of those trees flagged. “Flagged means a tree with branches only on one side of it. Now they are ugly but at least I can use my driveway there where before the branches hung so low I could not.
        There should be city codes about trees affecting another’s property. I would find out just what the ordinance was as he is probably in violation of it.

  • Those who own a house, most of them will disagree, those who doesn’t will stick with your point of view ;-) in the mean time another article here http://finance.yahoo.com/news/First-Person-Losing-Big-65-ac-2690070448.html?x=0 tells you another interesting point of view :)

  • You are sure to get plenty of feedback on this one! There are many reasons to own a home but any of the financial reasons are silly and history proves that out. Here is Massachusetts where the homes are mostly really old, maintenence is a huge load. Add in taxes and there is no way owning a home makes out better than renting.

    • GYSC, I agree. The financial justifications people have make no sense when you really add up the dollars and compare to the alternative (renting).

      People do have their personal reasons, though, which is why I separate it out. But for me, the benefits of having extra cash in the bank plus no hassles on maintenance, taxes, etc far outweigh the cons (of renting).

      • Mrdelurk

        The question is, once the major inflation hits, what will fall worse: cash, or houses, or stocks and similar investment vehicles. It’s something no one can predict; as Galbraith said, there are two types of experts, those who don’t know what the future holds, and those who don’t know that they don’t know.

      • justabrat3111

        Well….your partly right. But ya still have maintenance to worry about; even when renting. That…or a really great, on time landlord. Your rent is your mortgage, but ya don’t get any of it back. Ever. Your taxes get deducted when you own. So no contest there.
        The cash you lay out in the beginning also comes back in the form of the amount you sell your house for.
        Ya don’t only sell it for what your mortgage is. U figure out how much you shelled out for it, including all of your costs. See what the market will bear. Then choose a price listing.
        Hopefully….if the R.E. market hasn’t bottomed out, you’ll be making a nice profit, which is the usual; not like the current stream of things.
        Far as having extra cash in the bank goes….Are U enjoying your .5% interest ?
        At least tell me your not keeping your cash in a bank. Tell me your investing it wisely.
        I do understand your thoughts on renting tho. I just think owning is a better choice for me.

  • Zvi

    buy a REIT

  • Zuckerman Jarrett

    Great piece, James!

    I might add that renting is also a waste of money. I find that street-living is the only way to go!


    • Chrobertew

      The best post!

    • tyler

      I concur! Live off the land for free, let the gov’t pay you welfare/foodstamps, or go to soup kitchens, salvation armies, food banks, churches, for al your needs – what freedom!!

  • lee

    ..screw the investment advice. which housing stocks would you trade?

  • Tim


    I enjoy your posts and find them thought provoking, funny and never dull. Personally, I don’t agree with you here. The second house I bought, in 1978, for $58,000 appreciated a reasonable amount by the time I sold it in 1989. I sold it for $175,000, which was a nice gain considering, at that time, I made about $55K per year. I bought an investment property with half the proceeds and stocks with the other half. The investment property that I paid $180K for in 1989, I sold for $1.4M in 2009. The $55K I invested in stocks is worth $2.1M. Since my second house, I have traded up five times. the equity in my current house is about $600K. All of this is due to my first down payment of about $12K in my first house.

    I rented once in between houses. I didn’t like it. I can appreciate the freedom on not doing maintenance but I like having the house as I like it, without any permission.

    I know lots of people with home owning horror stories but for the most part, I know success stories. Personally, I think the average person would be better off buying a house and paying off the mortgage. Cash flow requirements for a middle class person would improve greatly if they have no rent or mortgage when they retire. In addition, if you own your home, pulling out cash is pretty easy.

    That’s my two cents!

    • That makes the most sense: cash flow. If you can balance cash flow while owning a home and investing for retirement, then it makes sense, because then you’ll have little in/out flows at retirement related to housing costs.

  • In 2005/2006 my work colleagues were buying houses and I was buying stocks.

    They still have the houses (slightly appreciated) and low interest rates. I have lost lots of money in the stocks (some companies went bankrupt) and I still live in the same apartment.

    “But I don’t like to write about investing on this blog” Why not ? It would be interesting.

  • all great points unless you want to have your own HOME. i agree on buying a house and most cant truly afford, but there are some that can afford and its the luxury of owning a HOME.

  • I love this post! I’ve never wanted to own a home. For all the reasons you list here but especially because I like to be able to leave a place whenever I want. I like to change the view from my front window and my neighbors.

    Right now I am in Australia. I am visiting a man I met (by pure chance) on the internet. I am contemplating whether or not I would ever want to live here if things continued to go extremely well. I could not possibly even be thinking about this if I owned a home. I don’t even have a lease right now though so if I choose to I can just pick up and go. Which is kind of fucking awesome.

  • Steven L Goff

    where did you get that pic of that room full of cash from? lol

    • Jay Noyd

      To Steven L Goff
      The picture of the cash comes with many others. The picture was taken at a Mexican cartels stash house after a raid. Each bundle of $100s weighs over 32+ Lbs = one million. No more counting machines. All those $100 dollar bills mostly came from Americans who like to smoke pot. All that tax money going south. Shame on the politicians. JN

  • Steven L Goff

    Next to owning GOLD here today in the modern world. Owning a home is the second biggest suckers play today. Especially home ownership in the USA. You have to be a fool! I know people who’s folks died and left them a home free and clear (paid for) and they still cant keep up (make enough) money to own it. The town I live in just DOUBLED it’s water and sewer last year ($600 to 1200) That is total extortion IMO to start with, and should be inclusive in property taxes. Not to mention most municipalities during the housing boom did re-assessments while the market was up. And went it went to hell, them folks are paying taxes on a value that will never return. Just the utility bills alone will eat a single person alive who owns a home today. Unless in dual income relationship, than a home is not for you! Life is so much easier when you rent. It’s different strokes for different folks I guess. Not to mention having to pay taxes for schools in a town that you dont even have children in or have long since grown children. that is not fair to some. Now they wanna even charge you for an ambulance ride in the city. and to clean up a traffic accident. What the hell do these property taxes pay for? Thats why I dont pay em. I rent and will safely say NEVER OWN A HOME! I never have either. it is a losing investment to own a home in USA going forward. And James, housing prices have further to go. Even rental property (homes made to rentals) wont help prices. Even when the forclosure mortoriums end and MANY get booted and seek shelter. For there is not adequate jobs nor will there be w/ out govt job creation intervention…ie Hover Dam, Eisenhower highway project, etc.

  • Steven L Goff

    “Owning a home is no longer the American Dream, it has transpired to the serfdom nightmare”

    America also has the attitude that “good fences make good neighbors”…why the hell ya wanna own a home in and environment like that!?….thats an investment in misery if ya ask me.

  • Around here, rent=mortgage for the same house with a yard. Rent is way more than mortgage for a condo or similar. When husband and wife both have careers, moving is hard anyway, solving the two body problem is more difficult, the more senior you both get. Renting may make more sense in Manhattan, but in other places it’s throwing money away to rent.

  • Anonymous

    i think there are scant few reasons to own a home:

    1. to hedge against rent increases
    2. to have an asset that you can borrow against in retirement with a reverse mortgage
    3. the stability of not being evicted if the owner decides to sell or rent to someone else
    4. helping your kids gain financial wealth by leaving them an asset that they can sell, live in, or borrow against.

    here’s the thing: tax increases can wipe out the advantages of the first item. having your neighborhood decline – which is really common – can undo most of the benefits of the second. that leaves scenarios 3 and 4.

    reason 3 is only smart if you are one of the rare few who plans to stay in a place for the length of your 15, 20, 25, or 30 year mortgage. even if you move and rent the house, you run the risk of having to rent at a loss for a period of time or of tenants destroying your property. it isn’t always a profitable enterprise. and you still have the liability of maintenance and insurance.

    reason 4 applies if you choose to have children. otherwise why bother?

    i mean equity and assets really only matter if you need to get in more debt. those aren’t good enough reasons, in my opinion. they’re bad ones, actually.

    so my rule – especially after being severely burned by buying just before the housing market tanked – is that unless you can pay cash for your home (to eliminate the risks of borrowing) and plan to stay there, renting is smarter. renting an apartment is almost always cheaper than owning. renting a house is roughly even once you factor in the taxes, down payment, closing costs, and maintenance costs of ownership. in some cases, renting a house is A LOT cheaper than owning, even in states where real estate is cheap.

    i probably won’t own a home again unless it comes as an inheritance. and for my circumstances, that makes the most sense.

  • Anonymous

    I never bought a house because I have a calculator and realized the 30 year mortgage is a screw-job. Essentially for every dollar you borrow you have to pay them back that dollar plus 2 more.

    Say I want to buy a 250k house and have a rich “Uncle Ben” who will loan me the money over the same term with no interest. 250k/360 payments= $694. Get a loan for 250k at the bank and see what your payments are. The difference could be invested each month.

    Not to mention I live on the beach and rent is about 1/2 what it would cost to buy here. Some people here pay more in property taxes and insurance than my rent.

    Not to mention if/when a hurricane blows through, it’s my landlords problem. And you should see what the salt air does to a house over time.

    To sum it up, I enjoy being a renter because I can enjoy living on a sandbar without the inevitable problems that come with building sand castles 2 feet above sea level.

    2000 Sq. Ft. Ocean view 3br 2 bath a block from the beach $1250/mo. (mrs. cat also pays 1/2)

    Life is good.

    • Winnerscirclemovement

      well said!

    • Methjd

      If the person you’re renting from is paying twice as much on the mortgage then you are paying in rent how is he making any profit?

  • Huh

    Non sense. The comments actually make up for this poor article.

  • Marc L

    I’ve always said, there’s not enough Chubb Rock references in financial media.

  • shared this with both my adult children, so they could learn what I learned. I’ll only own again if I can pay cash and it’s easy to pay for all the nice workers to come in a fix everything.

  • Whatever

    Short-sighted. Can’t believe I actually read this whole article. Clearly this person doesn’t know about the leverage of compounding money. Yeah, housing may bendown now, but he will be regretting this descion when the market picks up. Sheesh.

    • Jesse

      if You read the article, NOT EVERYONE WANTS TO LIVE IN THE SAME OLD HOUSE FOR 10-30 YEARS! In fact the avg. American moves every 5 years. So with that in mind, yeah renting is way less and money tied up than buying.

      • Yeah, and everybody would *love* to drive a brand new car every year. So it makes financial sense to lease, right?

  • wow! I love all the articles on this site EXCEPT for this one — most of the content of this article is so full of fucking shit I think I need to go wipe my ass again

    some background:

    I own (was paid by the government w/a $7200 check on my birthday mind you ;) ) a home in Missouri.

    For a long time I did NOT pay rent — burning money every month — instead it went into my own private bank account. Further more, investing in real estate is not a short term investment — almost ALL the negative points in this post assume it is.

    I agree w/Jerry — I love the fact that I can do whatever the hell I want in my house w/out having to ask anyone! I got drunk one night and took fucking crowbar to my living room ripping out all the walls and ceilings because it pissed me off.

    I also agree on the fact that said home in Missouri would cost less than 2k a year after being paid off for taxes and insurance — it only cost $80k. That is a far cry from the +$6k/year it would cost otherwise.

    Why yes, I’ll re-roll my investment into others — why the fuck wouldn’t I? This argument is just weak.

    As for the time involved — maybe it’s different for different personalities but my home is now under property management and I just get mailed checks for it each month. No phone calls at 2 in the morning about a goddamn toilet bursting into flames, no cops calling me up about the drugs being made/consumed. Straight up checks every month — no questions asked. Really could not ask for a better situation.

    As for the ‘your stuck’ syndrome — fuck that shit. I moved halfway across the country 2 years after buying said home. Nothing was stopping me except for myself.

    Land is still a fucking awesome investment until we are all sea-steading or staking claims on Mars.

  • Georg

    Yeah much better to enrich someone else.

  • PatD

    James A…
    You always make the BEST arguements…..depending on peoples lifesstyles….
    for me….
    not only do I have children….
    I have 3 cats and 2 dogs….not optimal ‘renter’ material….
    I haven’t rented since I graduated from college…..
    plus …we make a living in real estate (him)…and I trade (me)….
    we are the quintesential entrepenuers….
    Lets give Kudo’s to the middle class self-employed….
    we are a necessary commoditity …to get this economy kick-started…

  • Anonymous

    especially true for Bombay. The yields v. interest cost are completely disparate. (4-5% v. 11%).

  • Ms. Single Mama

    Another one to add…

    As a parent it is very difficult to find a home for your child that you can rent that also sits in a good school district. In my city you can find some, but they are small duplexes, not the best or most suitable home for a child in the long run.

    Just my two cents and wanted to speak for the parents out there.

    • Dspauldingnj

      Yes, plus having good neighbors (which are less likely to move if they own). In our area (charlottesville, VA) the cost of buying a foreclosure was about 20% less per month than renting. Even if we move, we’ll rent it out as it will pay more than the mortgage! 

  • ” Housing returned 0.4% per year from from 1890 to 2004.”


    • I second this motion.

    • Robert Shiller of Yale University. Raw data http://www.econ.yale.edu/~shiller/data.htm

      Wikipedia summation: “Shiller shows that inflation-adjusted U.S. home prices increased 0.4% per year from 1890–2004 and 0.7% per year from 1940–2004” http://en.wikipedia.org/wiki/United_States_housing_bubble

      A Google of
      home prices history
      home prices history shiller

      will get you several articles with analysis of the data.

      Disclaimer: I’m in the buy a house camp as a hedge against rent rises and eventually no rent at all. In my area mortgage + taxes is still less than rent for similar houses.

      • And that’s the point. If I pay $1600 to rent a house in my neighborhood, I am putting that money into an investment on behalf of an absentee owner who will in time realize an enormous return — one free house. If I put that $1600 (which includes interest and taxes, but not maintenance, but let’s presume with the tax break it’s a wash) into my pocket, the eventual result is — one free house.

        (…Yes, you pay the interest on your landlord’s mortgage loan. Your rent doesn’t represent anything other than the break-even cost to some investor who expect to sell the property five or 10 years on at a profit, thus realizing a gain on his or her minimal down payment. Renters are oblivious pawns…)

        So what if the return is 0.04 or 0.0004? I can keep my money or give it away to someone else with the capital and foresight to have bought a home to rent out. If I am to be forced to pay someone for a safe, enjoyable place to avoid the elements and hang my hat, why not pay myself?

        I understand renters. I was one for years and was a renter even recently, in an upside condo where my rent money probably covered a fraction of the real current cost. If I were likely to move tomorrow (and for people in the military or corporate management, this is reality), I probably wouldn’t buy. But I expect to stay still in one town for lots of good reasons that have nothing to do with investing and time horizons. Considering that fact, and that the Fed is still holding down rates for whatever insane purpose they have cooked up, it was time to act.

        • Rad

          Well said. But why not do both? I purchased a home in 1995, lived in it for 8 years, then turned it into a rental. Since then, I have taken every dime of rent proceeds and payed down the mortgage. The house will be payed off this year, at greatly reduced interest liability. The cash flow will be enough to rent me a nice home, and, wherever I choose to live! Sure, this took some deferral of gratification, but what a payoff. You will pay, if you rent or own. The trick, and a simple one, is to use other people’s money.

      • Thanks. I’d like to observe that this 0.7% is the capital growth, not the actual returns. Actual returns would be rent less expenses.

  • Anonymous

    good article, but I’ve forgotten everything, and now all I can think of is how much I want everything on the very last picture ;P

  • John Wilbur

    Good article, but the point about the 0.4% return is a bit misleading since it doesn’t take into account the negative return of paying rent instead and not having anything. That said, compared to short term property owning where one never pays much into equity and pays interest only, renting is a better “investment”, or at least you bleed about the same money per month and get nothing back, but renting is more agile and you can walk away easier.

  • Exactly my thoughts. Applied to most other cities of the world. Few caveats: IMHO prices are still inflated – way to go down. Tax deductions are sometimes really meaningful (country-specific). Rent market has to be developed or incetivised (not the case in Moscow).

  • I guess it depends where you live, in big cities like New York / Paris / Tokyo / London you need to earn 10K/month to rent a decent flat (3K rent). Once you get old you will have to move away, so the only option is to buy in my opinion.

  • Anonymous

    Couldn’t disagree more. The house is an investment in stability for my family. I didn’t buy it as an investment but as a refuge for myself, my wife and my kids.

    After working in Manhattan all week, I wake up and I am surrounded by trees and grass and fresh air and neighbors with similar values and socioeconomic wherewithal. They care about the block and the appearance of their property. They care about their children being raised in a safe environment. I fit in here.

    Also, the tax write-off does help and as of this year, there is no more mortgage. This is the very best thing I’ve ever done with any money period.


    • Sooz

      I’m siding with Josh on this one, J.A.. I like the part about refuge. My home is the base of my families foundation. Growing up I lived in the same house until I went off to school. I couldn’t wait to go home for holiday’s or long weekends. That childhood home represented comfort and I knew my mom was there just waiting for us all to return for visits and special occasions. I want the same for my children and so far have accomplished that.
      My mother has been in the same home since my children were born. They have gone for many many visits/ weekend stays over the past 16 years. The thought of her leaving this home, the subject has been brought up in recent months, my children get very sad.
      Too many very wonderful memories attached to Grandmas home.

      • Sooz

        My home structure was built in 1945(although updated to 21century standards over the years). There are times I think it is too much work for me to maintain yet somehow, occasionally griping, I get it all done.
        I love my home and my yard .It is my families refuge..:))

  • Tom

    “My wife, on the other hand, just couldn’t fathom the idea of not purchasing a house once our son was born even though we had lived together happily in various apartments for almost 10 years. While I tried in vein to explain the many downsides to home ownership, I just couldn’t break through to her, and therefore gave in as any good husband should. Big mistake!” – http://finance.yahoo.com/news/First-Person-Losing-Big-65-ac-2690070448.html?x=0

    That pretty much sums up why most people end up in houses.

    • Anonymous

      That plusraising a family in an apartment sucks.

      • Tom

        But specifically how does it suck? Usually parents keep their child close to their bedroom in a house so they can quickly attend to any issues they may be having.

    • sarasep

      Yeah, I often hear horror stories like this from guys I know. What is up with marrying these financially illiterate, airhead women?? Men listening to their ignorant, nagging shrew wives is the reason so many families are in the financial nightmare they’re in.
      So guys – here’s what you do – you sit down with the woman you’re thinking of marrying, and you talk to her about her money views. If all she cares about is getting her nails done, what kind of hair extensions she has, what country club you belong to (or don’t belong to!), and/or that she wants 4 kids and to be a Stay-At-Home Mom, then RUN FOR THE HILLS! You will be broke and miserable in a few short years, and then she’ll want a divorce, and she’ll take whatever piddly amount you may have left!
      Just sayin’…….

      • Joanls

        First of all, I don’t know what state you live in, but in a few short years, it’s rare for the “wife” to get the house in a divorce case. With children she might, but it isn’t in stone.
        Plus…if you’ve only owned that house a few years, you haven’t paid much into it anyway, so you won’t lose much even she does get it.
        I’m sure you’ll lose much more by paying child support.
        I guess you better stay a nice guy, so she doesn’t leave you. Then you’ll have no worries.

        You shouldn’t be blaming the female of the couple for being so full of ill knowledge that she is the cause of losing your shirt. Buying a house, normally doesn’t fall the way it has in recent years. It has been a steady bet to earn gains on it.

        If your a person who doesn’t mind a lot of rules, then go ahead and rent all your life.
        I couldn’t stand them. I had owned for over 20 yrs.; then out of circumstances had to rent for a while. It was torture for me, so I went and bought another house.

        Yes….right now, I have lost my shirt. But only if I decide to resell in a short time. As long as I can wait it out, I’ll get my money back. At least I still have my income tax deductions for owning a home while I wait. I hated having to shell out over $3000. a year to the gov’t. every year, while renting.

        Normally, home buyers don’t take a hit like they have. I acted out of my dislike for rules and forgot my common senses. I couldn’t predict how far the Real Estate market would bottom out; nor could anyone. I thought it had reached bottom when I purchased, but I guessed wrong. Just as easy to lose a guess in the market with investments.

        Granted….when you rent, you miss a bunch of the expenses owners have. But you should keep in mind, that you get what you pay for too.

        If you buy a piece of junk with flooding problems and is in disrepair; of course your gonna have high costs. If you RENT a piece of junk, your gonna have a crummy landlord who never comes to fix anything in most cases.
        I’m speaking through experience, not guessing.

        After I rented a beautiful condo, it took me a mere 8 months to get myself out of there and go back to living in my own home.
        In my own home…I didn’t have to live with broken and dirty things, only to wait for somebody else to come repair them. Sure….I could have done it all myself while renting…But how many landlords will give you permission to spend their money ? Not just this…but God forbid, the landlord allow me to pick up a paintbrush to save him money. Oh no, a woman could never do a good job at that.
        Yeah, right. I didn’t tell my landlord I actually did do some re-painting. He didn’t even notice the change, it was done so well.

        You see….it was okay with my landlord if I made repairs; but he would not offer to let me take the cost of it out of my rent. He preferred I wait for him to come up to N.J. from Maryland, so he could do it.
        I know this…because he allowed me to remove an ugly chandelier & replace with a ceiling fan by myself. I paid for it. He never offered to even chip in for half.
        That’ because…as long as your landlord feels what’s there is good enough, your stuck with it.

        I couldn’t take waiting for the him to drive up from Maryland to repair things or paint his filthy walls, that he somehow got out of doing when he re-rented it. My sink leaked and ruined everything I stored under it. The doorbell didn’t work.
        I couldn’t have anyone keep their car at my place overnight. I had parking lot patrol who’d go around at 3 a.m. & leave threatening notes on cars who didn’t rent there. Then if they saw it again, a ticket would appear. If I ignored it or went to the office to explain whose car it was, next day, it got booted. That would cost $100. to get the boot off. You wanna live like that ? Go right ahead. You might save a little money. But will you have peace of mind ? Will you feel like you have any rights ?

        Renting better than buying ?
        Not in my opinion.
        It may cost a bit more to own, but I feel it’s worth it.

        My rent & other costs I got charged to live there was $1450. a month for a one bedroom apt..
        It costs me about the same for my house. Only difference is….I pay for repairs n’ shovel my own snow, instead of a landlord. But I get my own parking spot, no smells from other apt. dwellers, not barking dogs or smelly cats next to me, none of other people’s bugs, (this was a BIG plus for me )

        I don’t live in disrepair, my garbage goes out right in front of my door, not a block away to get to a dumpster, don’t have to worry someone’s gonna nick my car in the parking lot or steal it during the night. I can make all the noise I want to, and I have lots more space for me & my stuff.

        My children and grandchildren can come n’ stay with me as long as they want to. They can even all take showers everyday if they want. Have no landlord to complain I’m using too much water or have too many people in my home.

        And…….I get the tax deductions every year; which saves me $3000.
        So as long as the repairs etc. don’t go over that $3000 a year, I’m better off owning. Don’t ya think ?

        I don’t think I can ever stop owning, even when I’m unable to care for it myself. I’ll just have to hire someone to help me. That’s all.
        By then, hopefully my mortgage will be gone or soon gone, so I can afford it. And I’ll still keep all of my freedoms.

        Just be fair when you weigh the odds…n’ decide for yourself in a fair way. Don’t blame a woman for forcing you to buy a home if you don’t want to. That takes communication, not blame.

  • drummerboy

    hate to say it,but the song and dance about not owning sounds like a classic excuse from people who have pretty much convinced them selves of 3 things.1: your lazy.2: dont want to “learn” how to use tools properly,3: are afraid of tools. i rented apartments for years,but dude,there’s no place like your own home. i have managed and supered multi units,those owners pay through their teeth. not home owners. dude call me when you want to change a light bulb. honey do handyman……you make a business out of it, is all…………. reinvention, you can still be you,and be a schnider at the same time.

  • Interesting ideas. The folks saying why this is wrong are missing the point & wasting time by regurgitating the same arguments for owning that we’ve all heard a million times. Agree or disagree, it’s nice to read the unconventional view.

  • Rick

    There are actual many important advantages to home ownership you leave out (and I am not even a home owner):

    – The mortgage deduction is not exactly bridge under the water. It can be quite substantial for some people and came make home ownership come in line with renting at least.

    – You can always get up and leave and your home is a source of income. My sister own a place in the city. But she also loves to travel for extended periods of time. She rents out her place, it generates income while she is gone, and she is free as a bird

    – Owning an apartment is not the same as owning a home. Most people who have families with 2-3 kids aren’t going to raise them in an apt in the city. Most people still prefer the space a house affords, and the rental market for those types of homes isn’t the same as it is for apartments in the city.

    – Rents can go up over time, as mine does every year. With a fixed mortgage you have a fixed cost for many years – 20 years from now your rent will be pretty damn high, but your mortgage payments will be the same. That helps you budget costs

    Those are just a few of the reasons.

    • Winnerscirclemovement

      Rent goes up just like your property taxes and maintenance costs go up

  • Patrick Mayer

    After reading James’ blog (which is great), all the comments below and considering that Time magazine put a similar angle about housing/renting on it’s cover several months ago (Rethinking Homeownerhsip) ….I’m declaring a bottom in the housing market and will go out and buy a house in the next 3 months.

    I haven’t been to Home Depot in 5 years and I guess I miss the pain / reward of fixing my own stuff.

    • Well, I do mention that at the bottom of the article I think housing stocks are a good investment now.

    • justabrat3111

      Good for U !!

  • Tonx

    James you make reference to ‘sitting and thinking in the middle of the night’ quite a bit. How do you manage to get the required 8 hours of sleep you suggest?

  • Austrian economist

    Haha… James is absolutely right, even though he forgot (or didn’t know) to mention another significant reason. All you people who are saying ”hey… I made profit from selling my house after XX years” – ou did you now? Sure – you may have got lucky selling buying a house in 1997 and selling it in 2007, but did you REALLY make money? Unfortunately, 95% of you guys have very little (if any) knowledge on true inflation. Gold is money, not this worthless paper money (we call dollars). You should compare your purchasing power in Gold and see whether you really made money or not. I’m guessing that most of you didn’t.

    Another thing… what ever happened to all that ”profit” you guys made after selling your home? You bought another one, right? Sure – you made money from the housing boom, but you bought another house, which is currently building up an epic loss for you. Especially due to coming huge inflation… Huh.. too much to talk, but too little time. Just read and learn about true inflation, money (gold) and what happens to real estate once the true inflation arrives. Hint: Real estate will collapse even in 20-30% inflation per year. Dooh… winning? Not sure!

    • Himalayaneyes

      In the US, if you don’t reinvest your profit from the sale of a house into another house, Uncle Sam wants a piece of your profits.

  • Steven L Goff

    me as a tenant have more rights in a court of law than a homeowner does now. For my contract is more legally binding than yours right now. You can even be evicted and foreclosed on and tossed on your ass faster than I who rents (via different states landlord tenant laws) Eminent Domain can take your hard earned investment at the drop of a dime and you can do NOTHING! HOMEOWNWERS ARE SUCKERS to days! SLAVES TO THEM homes they own!

    • drummerboy

      pi,you are so full of shit the only eye color in you is brown,and you, austrian economist. pulease,your a fucking idiot to. i have gold ! i have silver ! physical, and paper, i should go out and buy a loaf of bread with it. wont happen ! what will happen right now though, is i walk into the bank that has held the note for the last 16 years and pay them off in silver because when i aquired mine the cost was nill, and it would be the bank that would lose on my dollars for payment of said house. what this article “FAILED” to take into consideration are the folks who have been in their present homes for more than the last 15 years, way before REAL ESTATE AGENTS, lead the lambs to the likes of country wide, bac, and jpm,C and wells fargo. someone had to lead these people around by the nose and begin the process, all the while being clueless, real estate agents should be lead to the hangmans noose,i have NEVER met a real estate agent that wasnt a greedy liar………any of you re agents out there…………go F$%# yourself,i hope your last commission check was 4 yrs ago

      • Steven L Goff

        I have the most gorgeous blue eyes they tell me BTW! And nice blonde hair. If I was a girl….ya would wanna do me. You are a bigger sucker if you hold GOLD here and going forward in the world. It is irrelevant and useless and will never return to the standard. it is not practical in this expensive currency needed world. You are DREAMING to think otherwise and a fool! have fun holding that modern day irrelevant BAG you claim to walk into JPM with and get a loaf of bread with one day……lol lol lol Good luck there!

        • Steven L Goff

          expansive currency world it should read…not expensive

      • bugjackblue

        As a former real estate broker (my last commission check was 6 years ago) in San Diego during the crazy days of ’00-05, working the buyer’s side of residential– the BUYER’S SIDE, driving prices DOWN– and rebating hefty chunks of my commission to my clients, I would take offense enough to shove someone’s teeth down their throat if they ever suggested I was ever, EVER less than 100% honest, truthful, and transparent in any business transaction. And it was a damned crusade on every single deal keeping those greedy bastards on the seller’s side in check, and usually a losing battle at that. But you know what? And this was really amazing to me at the time… as much as those La Jolla snake-oil-salesman may have wanted in their desperate weaselly shriveled little souls to lie and cheat and steal, probably just for the fun of it, they never really did because a) they never really had to in such a crazy seller’s market, and b) getting caught doing so– and believe me, I would have loved nothing better than to complain to the DRE and take down some pinky-ring’s license– would have been such incredible folly that even the skankiest creeps amongst them toed the legal line because stuffing a few dishonest $K in their pockets was not worth the risk of losing their precious ticket.

        Now that is not to say that MORTGAGE brokers of the era were not generally criminals. Half of my time working on deals was spent straightening out messes created by sloppy (always) or dishonest (usually) loan salesmen. And I’m sure that pond hasn’t gotten any cleaner in the years since.

        But again, you can’t assume every single real estate agent is a lying scumbag. Not every single one of them. (I suppose you can assume however that all agents who also happen to be republicans are indeed lying greedy scumbags, but that’s because they’re republicans and not necessarily because they’re real estate agents. Basic set theory, right?)

  • Steven L Goff

    Ya wanna know what else makes ya suckers? the FACT that some who bought homes who could not afford them are living in them FREE right now and not PAYING A DIME in mortgage payments and are safe from being tossed out. WHILE YOUUUUUUUUUUUUUUUUUUUUU are making them hard earned mortgage payments and getting up everyday to work 3 jobs to do so and hardly even see you children. MORAL HAZARD! Stop paying your mortgages you suckers! Nobody else is and is not in the future real soon.

  • Mike

    Easy for you to say. The thing is, most people aren’t as wealthy as you are. Owning their home is security plain and simple. If I new how to forecast future prices I could make a good living as a speculator. I can’t. So I don’t try to play that game. However, I do know that in the past 30 or 40 years those that own their own home out right when they retired had a place to stay that wouldn’t be taken away from them no matter what happened to house prices and rental rates. I’m sure in response you can say ‘well if the rents rise then move somewhere where they are lower’. Easy enough for you to say. However, most people are not making a choice between living across from the New York Stock Exchange or some other fancy place.

    • Mike, you make a lot of assumptions:
      A) what makes you think I’m “wealthy”. I think thats a very relative term. Also, both wealthy people and “poor” people own homes. And also rent.
      B) what makes you think owning a home is “secure”. Homes are leveraged 5-1 in many cases (stocks, at most, 2-1). When home prices collapsed in 2007-9, many people went bankrupt. I’ve seen many personal cases of people going bankrupt because of homes. Never because of stocks (unless they were short).
      C) when you own, your taxes still go up. often faster than rent. You are making a big assumption about tax rates for homeowners.
      D) what makes you think the place across from the NYSE was “fancy”? Because nobody wanted to live on Wall St in 2008-9 it actually turned out to be quite a bargain.

      My guess is this: you’re angry. I get that. A lot of bad things have happened. Maybe they’ve happened to you. Maybe even, you’re angry at the people who did these things to you. But no need to be angry at me.

    • If I ” KNEW” how to …….write.

      • Aly

        Come on, it was just a typographical error. Mike was more focused on his thoughts than his typing.

      • Redroxx


    • mikesmith

      You’re missing the point of the article. The point is that owning a home is not “security plain and simple”. The only thing plain and simple about it is the mortgage payment each month. The not-so-plain-and-simple are the maintenance (which btw everyone underestimates maintenance costs), the neighbors, the property taxes each year (which seem to go up even when property values go down), and the illiquidity of the house, etc. If one wants to tap the equity (assuming you even have equity) you’d have to pay interest in order to get access to it.

      There’s will always be a “place to stay” for retired folks. That’s why so many folks move to retirement-type communities once they retire. Owning a home is a very personal endeavor; however, people decide to own for the wrong and very emotional reasons. If you think you’re making an “investment”, think again. In most cases, you’re not (though there are some great opportunities right now). Buyers don’t really examine the long-run costs of owning, and buy just to avoid the “stigma” associated with renting. If you make a mistake by “renting” is doesn’t cost much to correct the mistake. If you make a mistake by “buying” then you’re really in a jam b/c you can’t just pick up and move (unless you want to destroy your credit in which you’ll have a hard time buying or renting after that). I know so many people who are now regretting their home purchase.

      Whatever the decision, it pays to do your homework.

    • Dwd817

      100 years ago house were built to last 100 years. No-a-days houses are disposable, made of cheap materials and labor. Now a house only lasts maybe 30-50yrs before being condemned. So by the time you can pay the house off it isn’t worth anything because they already ripped down your neighborhood and started building new ones. It’s like the government putting in 5yr hwy’s when they could put in 20yr hwy’s, but they don’t so that they will have to do it again in 5yrs. The only house that will last now-a-days is one that you build yourself or one that’s already been there for 100yrs.

  • pjc

    Not to over post, I just wanted to add some more comments. (In a respectful, thoughtful manner).

    1. Home ownership is currently heavily favored by the tax laws. If I buy AMZN, and it grows by 50% over the next 5 years, and I then sell it, I will have to pay 15% to the feds and 8% to the state in taxes. If the same thing happens to my primary residence, I pay nothing in taxes. The difference in tax burdens is not a “dot” – it could easily be enough money to buy a Volt. (This is without even considering that the house will allow me access to super low interest rates that can also be written off my taxes).

    2. Home ownership is a form of investment that avoids the “agency problem” that is fundamental to most forms of capitalism. The sad reality is that the CEOs of publicly traded companies, not always but far too often, will prioritize short term compensation and returns over long term growth. Not a problem with my house. When I replace the roof, I’m going to spend 20% more to buy a roof that lasts twice as long. I’ll enjoy the benefits of that investment, since the house will probably be lived in or rented out under my ownership for the bulk of the timespan involved. CEOs’ don’t always think like that, since they are often on to something else in a few years.

    3. The maintenance issues you describe can often be an opportunity to economize. The classic example here in Oregon is “ductless heat pumps”. DHPs are perfect for older housing stock in a mild climate with cheap electricity. (I.e. the Pacific Northwest). Landlords almost never install DHPs. Why should they – the landlord pays the upfront cost, and the tenant enjoys lower heating bills. Only homeowners are installing DHPs. Since a DHP often pays for itself through lower heating bills in 5 years, this means that OR homeowners are essentially buying an investment that yields close to 14% . How many renters are getting 14% yields off their stock investments?

    Just a few points. Perhaps I’m kidding myself, since I own multiple properties. Over the long haul, you surely have a better investment track record than I do, but I do think you are glossing over some of the advantages of being your own landlord.

    • R.

      I find it interesting how everyone emphasizes how they don’t have to pay taxes when they sell real estate (if their home value went up…. ask the millions who are underwater on their mortgages about that). What these people fail to mention is that they have to pay property taxes as long as they “own” their homes. Try not paying and you will find out who really owns your house!

      Another show of economic illiteracy is the claim that the owner of real estate can forward the cost of owning to the renter. The truth is – he can’t. If he could, the renting would always be more expensive that owning. Rents are determined by supply & demand, not by cost of owning.

  • pjc

    Just one more post. There is usually an “apples to oranges” fallacy that occurs with this sort of debate. People muddle the debate of “renting versus owning” with the debate of “multi-dwelling apartment versus house”.

    There are all sorts of fantastic economies of scale involved in multiple dwelling units under the same roof. These are almost too numerous to describe in detail, but essentially bigger buildings (like 10 story apartment buildings) are much more cost effective on a per-person basis than small buildings (like a 2000 square feet house).

    Buying a condo is sort of a mess, so if you’re going the 10 story apartment building route then renting is a very valid choice. But renting a house is often financial madness, especially if you end up staying there for 5 years or more.

    • Anonymous

      And renting an apartment in close proximity to 10 stories worth of douchebags is actual madness.

  • Suzy Orman is saying this too. She also is touting the don’t get into debt by having a student loan. I sit in my house clutching the amortization chart and I look at my student loan and I cry. Good post!

  • Dr. Martin

    Would be nice to see some facts and mathematical proofs for all this blather but you won’t since this is all option……and pretty much useless. I hope no one will follow this advice till you do your due diligence…..

  • One must have item for any house I will buy is that it has no neighbors.

  • kurtNYC

    OK, I’ll bite. I am actually trying to decide this right now, so here goes.

    We live in nyc, have just sold our co-op. have about 430k from that, no mortgage. This is a huge amount of money for us, we are artists so our long term cash flow is volatile, we can only qualify for 150k mortgage for a house purchase (brooklyn) even with a 400k down payment.

    Now I love the idea of owning a home, for all the psychological reasons listed. with income that has big swings I don’t like the idea of leveraging a big mortgage. and I’d rather be on the landlord side of the nyc renter’s market over the next 10+ years. Maybe we can get a small 2 family for 600k with a 1400k rental, and be break even monthly. That’s plan A.

    Plan B. However it’s an unusual situation to have so much cash compared to our annual income, and it’s not hard to imagine that a return on that cash could pay for a nice apartment, and leave the principal intact. the idea of being smart with it, and potentially being able to grow it far beyond what a little house can do, certainly has appeal. I like that idea a lot, and we can always use that for a home later if we choose to.

    The rub is the risk of growing it. I find articles about ‘rent don’t buy’ almost always written by people who invest professionally. I invest for our retirement, I do more than funds and etf’s, I’m not a fool but I also know that making money consistently with out relational risk is something even professionals don’t always manage. So I have 430k in capital, it will take 32k a year at current market to rent the equivalent of what we would buy. So in my simple math I need to make 32k + short term cap gains tax + at least a few % appreciation of principal, maybe that’s 12% as a minimum? you tell me.

    I definitely grew up with the own a home idea. Since this is an investment not real estate site I am curious to get the contrarian thought. For us this is a real decision, not a hypothetical.

    thanks – kurt

    • FrancoB411

      Rent in NY, where purchase prices and maintenance costs are ridiculous.

      Then, with some of your 430K, buy and rent out some houses somewhere where prices are lower and the rent is higher than the mortgage and management costs. Say, a college town upstate within driving distance, that always has students coming in and out.

      With the amount of capital you’re sitting on, you might be able to buy several homes cash. Students pay per room. Parents often underwrite for decreased risk.

      Liquidity? Check.
      Hedge against inflation? Check.
      Cashflow? Check.
      Freedom? Check
      Live where you want? Check

      Rent where you want to live. Buy where it’s profitable.

      • kurtNYC

        FrancoB411 ok so you come down on the invest and don’t buy side, but your thinking ‘invest’ in income real estate? ok, low risk maybe but then don’t I have all the ‘headaches’ of a house – upkeep etc – except I don’t live in it? It’s an interesting idea, though managing capital in that fashion is – I’m guessing – no less time intensive than an investment account. The upstate town your thinking of is more than a few hours away.

        Have to chew on it but I’m not sure that its accurate to say buying in nyc can’t be “profitable”. Expensive? yes.

  • mr. pink

    mr. pink is back with a new house–catch me on the streets on manhattan homie.

  • This is a great article, but I think it has to be put in context.

    I’m with you on the trapped feeling of owning a home, especially if you live outside of New York City. Countless people I’ve worked with have 2+ hour commutes each way everyday, I would kill myself if I had to do that. Right out of college I drove 1.5 hours each way since I landed a job with a big hedge fund and I thought it was worth it. It wasn’t and I left after a year and a half. Like most college kids I was happy to just get a (hopefully good) job, so I was willing to commute to wherever I had to.

    My commute is now 8 mins and 3 subway stops (WIN).

    I also agree that it’s great to have a larger stash of cash. My main gig is working as a consultant in finance and we all know how safe those jobs can be when the sh*t hits the fan! Needless to say I’d like to be safe.

    It definitely pays to rent in NYC.
    To buy the apartment I’m renting right now in Chinatown (I locked in a great deal in June of 09) the market shows that I would pay about 75-100% more than my rent to own the same apartment. You can also add taxes, maintenance fees (usually another 500-750 for someone to take out my trash, awesome), etc. etc.

    In short, if you are in a more burb-like area I think it could definitely make sense if the price is right. My 24 year old cousin just bought a lake front house in Orlando for 138k for example and his mortgage is something ridiculous like $450 a month for two people.

    If you are confident the community is in line with keeping up your block, respectfulness, etc. etc. then that works. I however am not ready to risk buying a Manhattan or Brooklyn apartment to end up with some crackhead blasting me out of the place with their 3am salsa music and subwoofers (happened to me).

    Also, I really don’t want to go up against one of those Manhattan co-op housing boards to determine my “worthy-ness” like a bad episode of American Idol. It could get ugly lol

    -Eric Von MarketShot III

  • Jerry

    A better deal then he offers is this! My house cost me $1100. Per month (year avg) I lease it out for enough to pay all expense Plus, then buy a Rv, live in a nice R V park for half the price & move when & where needed.
    No neighbor problems, no heavy maintaince problems, moving is no problem. Also no one but wife & I. Great life style.

  • It doesn’t have to be all or nothing. I would assert that there is such a thing as a modest, affordable home. We currently have 150% of our mortgage in the bank and liquid investments. The key is to avoid the temptation to trade up. We have three young children, so having acreage and a sense of place provides as sense of security. However, we spend 2-4 weeks in the fall and 2-4 weeks in the spring exploring other parts of the country (and Europe / Mexico) with the family. Is our house an investment? With outlook of the economy in northern Michigan, I’d have to say “No”. But I wouldn’t trade our “affordable” house for anything.

  • Fan-o-James

    Well – I tried to read through the replies, so not to rehash comments already published. I’m glad there are people like James. I bought my first investment property in 1981 – I think – by taking over a mortgage of $500/Month and rented at $450 a month with no money down, except for closing cost of about $1,500 if I remember correctly. Since then we have had a couple other rentals and only rented when we spent 1 year in DC and when living in Germany. I think owning is great despite the maintenance and property tax issues. Couple things I have not seen much in the comments. 1) I think we are due for inflation in the mid to long term. We can’t payoff the debt we owe unless we devalue the dollar. Home values will follow inflation, even if not lock step. With an increase in inflation home prices will increase. 2) Despite the future increases in property taxes and perhaps even insurance, my house note will have the same payment for principal and interest for the next 30 years. Will rent? 3) I like the idea of removing risk. Yea there are other risks with owning a home but I know what my payment will be for as long as I live here. and 4) I get to borrow at 5% (3.5% after taxes) and I am convinced that over the next 10-20 years I’ll get somewhere above 3% increase in my home value.

    So lets say I put down 20% on a 250k house, or 50K. I pay rent or pay mortgage, so monthly costs are a wash. Yes, I have to pay for maintenance, but I take care of my stuff and keep those expenses down. I can paint by myself and I can do minor repair, however there are maintenance costs. In normaly times my monthly mortgage goes from how am I gonna come up with the payment each month to that payment isn’t too bad in about 8-10 years. So, for $50K today, I can pay say 3/4 or 2/3 of rent in 8-10 years. What will an anunity give me in 8-10 years if I put in $50K today?

    I guess after rambling somewhat my take is don’t forget what we just went through but don’t obsess about it either. Warren Buffett just made something like $3.5B on a $5B investment in banks over 2 years because he didn’t run and hide when the crap hit the fan. Don’t expect that realestate is going to return 15-20% a year, but don’t buy the 0.04% either. Step back and make an informed choice. Make sure you compare after inflation with after inflation numbers.

    BTY James – if you decide to move to Culpepper VA or Reno Nv let me know – I’d love to rent to you. :)

    • Jesse

      You are making the Huge assumption that you are going to still want to live in that house in 10+ years.

      • Or in that same neighborhood.

        • Mrdelurk

          Or in the same country.

      • Annonymous

        Read his post again. If he isn’t living in it, he rents it.

    • GD

      Real estate isn’t for everyone. Too many people are confusing this last housing bubble as something that will happen again and again. Ok ,sure, there are housing cycles, but the housing bubble this past decade is not a typical occurrence. It reminds me of the dot.com bubble. It seemed like every man, woman child and dog could make money on the stock market. The housing market was much the same.

      The reality is — there is no free lunch. There is no such thing as a free lunch, you pay for it in other ways. Please, always be financially responsible and only do what you are able to do within your means. Buy a home only if you can really afford it and moreover if you are comfortable with it. But don’t let the recent memory of the housing bubble scare you from ever buying real estate.

      Much to the contrary of this author, for some there is value in settling. I’m 35, married, with 3 kids, and I sure as heck don’t want to be moving every 2-3 years. Moving is a pain in the a**. Moreover, moving costs money too. Plus the landlord with deduct a cleaning fee and who knows what from your security deposit. Uh, hello. On the other hand, there are those that know nothing about home repair and freak out when water is leaking or something breaks. So to each, his own.

      Pay no attention to this article. It is food for thought, and I think it is a good warning for speculators, but for many, a home is more than an investment. When I buy a home for my wife and kids, I don’t think about how much money I’m going to make on it in 30 years. I just want a place to call home, a familiar surrounding. Something that fits me just perfectly. And if it doesn’t, I can always tweak it to make it perfect. Again, as long as you can afford it. Live within your means people!!!

    • jean

      The problem with your reasoning is that you get tax advantages through depreciation that a homeowner does not. Second, you will pay three times the value of the house with your mortgage over 30 years. There are only a few years when this is deductible, and the benefit is nil if you are stuck paying AMT. Also, if you put 50k in the bank (dividend bearing stock) for 10 years, it should be at least double that amount at the end. Finally, there is simply the matter of time. I will pay you $20 an hour or whatever to do my painting and repairs. I want to be at work or out having fun any way. Don’t forget, while you are out there repairing properties, your family is getting older, your health is slipping, and inflation is eating away at the real value of your investment.

    • Chovek

      Renting and paying a mortgage are not a wash. That’s the whole point. You always pay substantially more if you buy a house than if you rent one. Also, you have to consider time value of money when you talk about your down payment. So, it’s not like 50K you paid 30 years ago it’s like having 500K now…. etc. The basic concept you have to consiuder that whether you pay to own (mortgage) or pay to use (rent) these are two financing options and chosing one over the other depends on cash flow, and opportunity cost as usual. If you can afford to pay a mortgage of 4000 but opt to rent for 2500 and put the other 1500 into a business you are starting or a great stock you see coming up big in the future etc. then you make the decision that it is worth to allocate part of your cash to the business/stock and pick the cheaper financing option for your living situation. Conversely if you really just like to keep your money into a .05% interest CD in your bank at the moment and can afford the bigger payment of the mortgage then you probably should. I mean that is a 3-4% return (saving on the interest you would otherwise pay) and beats the hell out of .05%.

  • Mcconn746

    I bought a small farm for $35K in 1985 and sold it last week for $300K. I then bought a 50% bigger farm that has more potential to develop for $350K. Hopefully my next move will be in a small ceramic jar. The kids can figure out what to do with the new farm. Buying has suited me fine.

  • Reiyoku

    What are some examples of ‘housing stocks’ mentioned?

  • Lpro65

    Honestly this guy is a bit of a doofus. OK so what are you going to do, go mobile like The Who? Rent from someone else? If you rent you are totally dependent on the landlord to do the right things, ie fix things, pay his own mortgage, etc. And unless you are renting a house you have to share walls with other people. And even if you rent a house it could be a matter of time before the landlord decides they are tired of renting and they want to sell the place instead.

    This is a huge overreaction to what is going on in the housing market right now. People who really had no business getting mortgages, or no business getting approved for the size mortgage they got has caused a lot of this mess. Or rather, not the people themselves, but those who gave them the mortgages. At some point most people do downsize (as they retire) , so you do see return on your investment most of the time.

  • MStockie

    I love renting! It is so much easier than owning a home. When something goes wrong, I call my landlord. Saves me time, energy, and MONEY!

    James, I love your blog! I think so many people still believe the American Dream is supposed to be, go to college, start a career, move up in that career, get married, buy a house, have kids, and somehow become wealthy… I am sure you “catch my drift.” It could be so much more, if people would do what they want instead of what they think they should be doing!

    I have started doing just that. When there is something I want to do I GO FOR IT… within reason… of course!

    Keep up the great blogging…

    Also, I came across your blog while researching for CigX, it was under the recent stories header. It took me your article about Alz.cure on seekingalpha.com, which led me to your blog. I know you don’t want this blog to be about stocks, but you seem interested in how people find your blog.

  • Captain Jack

    Good points James.

    As an architect I am always amazed at how little people realize they are slowly eroding their’
    “returns” through constant maintenance.

    The one thing you don’t mention is quality of life. The only reason to own a home.
    Unfortunately, in this country, rentals tend to be either semi-squalid or pleasant and exorbitantly overpricied.

  • The “American Dream” was concocted by capitalists to sell shit. Imagine all the stuff they have sold you over the years under the auspices of this brilliant fabrication. A house, a car, a gold card, appliances, college for the kids, siding , double-paned windows, tank-less water heater, refrigerator with ice dispenser, garbage compactor, wallpaper, carpet, hard-wood flooring, paneling, chair rails, kitchen cabinets, pool tables, bar stools, jacuzzi bathtub, sectional sofa with matching recliners, automatic garage door, closet organizers, dining room set with matching buffet and hutch, bunk beds, sleep number bed, executive desk with left hand return, patio furniture, bar-b-cue,…. ETC., ETC…. It’s as if, somehow, we are less American if we don’t buy into the lie. I remember after 911, President Bush urged us all to go out and shop to spur on the economy. And President Obama issued a nice little stimulus check when he came into office. God forbid we should be a society of prudent, responsible citizens that live within our means and make do. God forbid we should save as opposed to spend and use our money for something meaningful, like helping others, or traveling to distant lands, or beautiful art, or a concert. The machine would grind to a halt. And God forbid the companies that got these men elected didn’t get their money’s worth. God forbid indeed.

    • Betsy

      I agree! completely with you ….I was brain washed by my American ex- to buy into a home … well not even one bu 2 ….see, I owned 2 business, used to rent and move my home around where I felt it was nicer for me to live, before too, I traveled the world or wherever and whenever I pleased THAT WAS LIFE ! …back then, I was hostage to none! ..then came the kids and I was sold on to this idea of “staying put in a box” ..I could had done the same in any other “box” that was not mine for a fee! ..but NO! we had to be like all the other Jonase’s … until one day I said what or why am I in this rat race? to go where ??? and no lie …he left because I refused to get a pool and buy him the BMW ,…seriously No joke ! …now he has the BMW..another box another wife ..and he got the box with what he took from me ….I did kept mine because it was a big hassle to get rid off and kids needed to get educated ..but I wish I hadn’t done all that …I am still here TRAPPED in this box!

    • 05kmurdock

      Awesome Natalie. Your rant is very inspiring at this time in my life :)

    • Robrt Eddy

      You must be some kind of hippie… Im not going to claim to be some kind of geniuos or stand up on a soap box and tell anyone how to think, live or spend their time and money. The “American Dream” Im pretty sure was created by all of the immigrants that fantasized about moving to this counrty.
      The land if opportunity, as it was so commonly referred to, so yeah opportunities came to be. Companies were created and the ones that were run by intelligaent people succeeded, not to say that some werent run by greed and/or unetical action. When George Bush said go out and spend your money to spur the ecomomy he meant dont let this lead us into a recession or depression, dont be afraid to live your life as you had in other words.
      Keep in mind that your life and mine are better because of what this country has always had to offer, people are getting angry and looking for anywhere to place blame now that a world ecomony has changed it. Take a look at Libia or Egypt, do you think the people that were and still are fighting in the streets in those places can just decide to go buy, because they want to, anything that you have listed above?

      • Literary

        “When George Bush said go out and spend your money to spur the ecomomy he meant dont let this lead us into a recession or depression, dont be afraid to live your life as you had in other words.”

        I thought what he meant was “You’re not spending enough to keep us out of a recession. Find more money to spend so we won’t slip into a recession! Huh, maybe I’ll increase the deficit so I can give every one fake money (money they think is theirs, but they’ll have to pay it back in taxes later when Obama is President) to spend. Oops, we’re falling into a recession anyway! How many months do I have left in office? Maybe once Obama is in office, everyone will forget about me and blame everything on him!”

    • homeowner

      The American Dream is based on one thing – Freedom. No one is putting a gun to anyone’s head to buy things. No one. That has happened in the communist world, that unfortunately, you seem to yearn for? The communist world tried that…and look where it got them.

      One of the fundamental bedrock principles of the Constitution is individual property rights. The right to own property. Based on freedom. Thank goodness we have a the right to risk capital, and to make a profit. If you want to still live in a tent, and walk in the snow to an outhouse, and live with a loin cloth of deer skin around you, I wish you well.

      You have the right to be prudent, you have the right to be unwise, and you have the blessing of receiving the consequences of your choices.

      Now I will grant you that there is no incentive to save, based on the FED’s artificial low interest rates. They have artificially driven the debt society. But that isn’t capitalism – that is a government entity actually robbing us of our freedom. If the market were allowed to work on its own, rates were allowed to be truly market driven, we would be more prudent, less debt heavy. The illegal alien would have been able to borrow $500K to buy a house in LA. No way. The market is the answer, not the problem.

      So, when you take shots at capitalists, that misses the mark. The problem is governmental greed and their desire for power. Free markets, if allowed to work, has proven the most effective way to allocate resources, and to create wealth, and secure to ourselves the blessings of life, liberty, and the pursuit of happiness.

      • Ssohara

         I agree with you 100% about capitalism. Capitalism is a great force for good, and for freedom. was it Ben Franklin who said if you trade your freedom for security you will get neither?

        Anyway, I am NOT a home-owner. My husband and I owned a house until 2002, we sold it because we moved, and then we were not sure we were going to stay in our new location for more than 3 years, so we didn’t buy… and that was the right decision FOR US. Now, we’ve found a place where we want to put down some roots, and so we are thinking of buying a house.

        I think it’s great fun to talk about housing as an investment – it probably isn’t as good a long term investment as stocks. HOWEVER, what people fail to realize – for many people, a house is not JUST an investment. For many people, it’s also a way to be part of a community, to leave a heritage for the kids, a place of emotional value, etc. Not everyone feels this way, however.

        The easy mortgages of the last few years ARE a scam, but 30 years ago when people put down 20%  for a house, etc., they were doing it because home ownership meant something to them, not because they were scammed.

        I personally think that in terms of rate of return, real estate is not as good as stocks. However, in terms of security, it’s great. If you own your own home and it’s paid off, then even if you lose your job and the value of the house falls dramatically, you still have a place to live for pretty much free. Whereas if you experience a wipe-out in the stock market, you’re left with zip. Now, the key here is – is your home paid for and can you stay in it? Obviously if you are paying an outrageous mortgage and you lose your job, you can lose your house and if you need to move every 2 years, the house can be a millstone around your neck.

        My personal thought – don’t buy a house until you find an area where you want to be part of that community for a while and buy a modest enough house that you can pay the mortgage on one salary (so if one of you loses a job, you can still pay the mortgage, and if you are both working you can be buying stocks). Think of the house as diversifying your portfolio as well as something that gives you pleasure.

        Right now the housing market is nice and soft and rents are cheap, so my husband and I are glad we’ve been renting but we’re thinking of buying a house next year. In another 10 years, we’ll see fast rising housing prices again, probably, and at that point we’ll be glad not to be paying rapidly inflating rents. Of course, if Obama gets elected again, we’ll probably forgo buying a house in the US and move abroad instead.

  • Epizia

    I love my neighborhood. I rent in it right now and I hate the apartments. I hate the apartment because they’re all a bit small and ramshackle and most of them don’t have central air, which is hideous in the summertime. HIDEOUS. And with a recent spinal cord injury I have difficulty getting up and down the stairs (it’s a walkup) so I’m hoping one of the downstairs neighbors wants to move so I can sweet talk my landlord into letting me move downstairs. Trying to find a whole different apartment right now is more than my back will allow.

    All that said, I wish I owned a home in this neighborhood. I’d give it central air, and a laundry room that would work with my injuries. I could spend $2500/month renting the exact house I want. Let’s say I did that. $2500/month, and I lived there the rest of my life. And let’s say the rest of my life is another 40 years. That’s plausible since my health isn’t the greatest.

    That’s 1.2M dollars. And at the end of my life I’d still be paying that on a fixed income. Maybe on disability. And that’s assuming the landlord never sells the property, and the rent never goes up. Actually I saw the house I’m talking about. It was cute, but the fixtures weren’t awesome, and I’d probably want to change the landscaping a bit.

    Or I could buy that house. It would cost me about $600K. In LA’s inflated real estate market it’s a lot of money for not a ton of house. But I’d be done paying it off after 30 years, and would never have to worry about housing payments until my theoretical death. And I’d have saved DOUBLE the cost of renting. Hell let’s assume I spend 100K on renovating. Even 200K renovating and retrofitting against my eventual need for a wheelchair and ramps. I’ve still saved at least 400K against renting. And I wouldn’t have to worry about a payment while in my declining years. I could even sell it and move into a retirement home where people would take care of me. Or rent it out and use that money to pay for an assisted living facility until I’m dead.

    Yeah. The down payment is a big fat check that I’ll never have in my bank account again. But my rent is no different, except at the end of the day when I leave the place I rent I don’t get to take the value of the money I paid for it over the the time I lived there with me elsewhere.

    • Goner

      Not so sure you’d save double the cost of renting — if you pay off a $600K house in 30 years, the total of your payments over time would be about 2.5x600K or 1.5m considering the interest.

  • Yesac13

    Very interesting comments!

    I would say it depends. As a whole, its probably best to just rent. However, if you likely will stay in one place for a long time, owning a house may be cheaper in the long run. Inflation may occur massively and that makes owning a home cheaper than constantly paying higher and higher rents which could have paid down a mortgage.

    The key thing is probably percentage of income (and partly net worth). If it is a high percentage of your income or net worth, buying a house is not worth it. If you earn lots of $$$ and buy a proportionally cheap house, you may be better off. Also, location is important. I have strong suspicions that many houses outside of urban areas will plummet in value (inflation-wise) because of higher energy costs of long commutes.

    I hope I am wrong about massive inflation coming but if I am right then owning a home in the right place and if it doesn’t take a big proportion of your income… its the best way to go. People who move often need not to apply, though.

  • malcolmkettering

    all of you who wrote about tax benefits and such, with our local, state and federal finances in the shape they are in, do you really think that in 5, 10, 20 years those tax deductions, loopholes, etc, are going to survive?? no way in hell. property taxes have to go up dramatically, we can no longer afford the mortgage interest tax deduction, etc., I think it is foolish to plan around these types of items anymore because something has to give with regard to all the local, state and federal deficits.

  • Sooz

    a POS little bungalow around this joint will cost you 1,900/mth rent. No Sh!tskies!!
    I have a friend that battles with this month after month after month(she is renting at this time) and every month that goes by (((POOF))) 19hundred bucks thrown practically out the window of a speeding train wreck!
    Trapped by ‘Richville’ prices and determined to stay in the community for the sake of her children(schools..etc).

    She tells me she feels like she has been thrown into the middle of the ocean and sharks are circling as she chokes on the water that is drowning her..:((((

  • Anonymous

    Wow, people still live in NYC? I mean, I know there’s several millions of people there, so somebody must be, but the place is a deathtrap! Look what happened on 9-11, you all had to walk home for miles in your idiotic ‘stylish’ shoes! Any, and I mean ANY displacement happens in the economy, or a natural disaster, and there’s not one day’s worth of food in the stores. Stop thinking in terms of getting rich on Wall Street and start thinking about living lives that mean something real. Stop worshiping money. Those of us out here in reality land think all you Wall Streeters are evil incarnate.

    • Who is a wall-streeter here?

      • I live on wall street. Apparently that makes me “evil” and an “idiot”. I must be an idiot bc I cant seem to find a logical point in signalfire1’s comment.

        • Anonymous

          Forgive me. I figured with a name like ‘StockTwits’ you were investors, and stupid ones at that.

  • aras55

    I have to say that 2 of the typical arguments against renting just don’t hold much water with me.

    The first is that when you own, you can somehow magically control your neighbors – like just because you own, it automatically makes everyone in your neighborhood wonderful, courteous, and trust-worthy. I know plenty of subdivisions (and let’s be honest, most families with kids who need to be in a ‘good’ school district live in crowded, cookie-cutter subdivisions) where the HOA is a bunch of control-freak, nit-picking psychos who tell you what kind of mailbox you can have, and what colors of exterior paint you can use. Plus, the houses are so close together that you can hear everything the neighbors are doing at any time – they don’t always have to be having a party with loud music to be totally obnoxious. Not to mention the barking dogs, kids who ride their bikes through your yards, and mowing the lawn at 7am on a Saturday morning!
    When I rent, I can pick up and move if I have psycho neighbors. And in the apartment where I live,I can also report them to the management, who then are responsible for taking care of the problem, or the problem tenants will have to move out! I don’t have to worry about seeing a psycho neighbor every day for the next 30 years, or worry about any retaliation from them!
    Another thing is amenities, and what you can do with the property when you rent. I have so many awesome amenities that I could NEVER afford to have if I was an owner (and I owned for many years). My complex is gated, w/ a 24-hour security guard, on-site maintenace crew, tennis courts, pool, covered deck/garage parking, laundry service, dry-cleaning, business center, free Wi-Fi, and a clubhouse/grills, etc. Also, I can paint, hang pictures, install my own lights, ceiling fans, shower heads, and anything else I want as long as I change it all back out when I move. My rent has increased only a small amount over the time I have been renting, and it is more than worth it to me.
    If I wanted to buy, about the only thing I could reasonably afford would be some shitbox that needed a ton of work, somewhere out in the middle of nowhere where there’s no jobs or things to do (except take care of the house!) I have other, much better things I’d rather be doing with my life and time at this point, and renting is perfect for that!

  • JC

    You left out that you never know who the person that owns the house next to you will sell to! You buy your house. The neighbors are so nice and you all have a lot in common. The neighbor next to you then sells to a large family that has loud outside parties late at night, they keep a lot of unsightly junk in their open back yard, they walk their dogs on your property and don’t pick up after them, they are doing illegal things in heir house, and so forth. What can you do? You can’t just pick up and move. You own a house! Good luck!!

  • jhina2

    This is a great discussion and a tough puzzle to sort out. I think from a financial standpoint owning a home is not a great use of cash but if you’re raising a family it can be a great investment in happiness. I like that no one can tell me that I have to move and I like the ability to decide how and when I make repairs. I also like that, aside from property tax changes (mine have actually gone down for 3 straight years), I know what I’ll have to pay each month. The other issue that may not have already been raised is that location is a critical piece of this puzzle. If I lived in NYC or SF or DC or any other expensive and high density location, I would probably never buy. But, I live in a mid-sized college town. I wanted a nice neighborhood and a place with a large yard for my 3 kids. I wanted 4 bedrooms, a 2-car garage and a good school district. It’s not easy to find a property to rent with these parameters. If you can find a 4br, 3ba in a nice hood to rent, it’s probably a property that someone doesn’t want to sell and they plan to return; or they have had difficulty selling but still want to unload within a few years. Either way, the forced to move on someone’s schedule rather than my own thing becomes a major issue (plus, it would probably cost about $10K just to relocate my kids’ lego collection, let alone the other crap we’ve accumulated). I guess it’s a lifestyle choice. We bought in 2005 at the height of the bubble and we’ve probably lost $60K+ in equity but I don’t regret the decision because the financial side of it is only one piece of the puzzle.

    I think the best advice I ever received in regards to home ownership is to forget the buy/rent decision and simply focus on finding a place where you *want* to live. After you’ve found the place that works for you, do the following. If it’s for rent, rent it. If it’s for sale, buy it.

    • I would add one caveat. If its for sale, but the buying it would make you stay up at night, then rent,

  • First things first. I LOVE the way you hit a nerve with people. You know that you have a loyal readership when people write things like, “I love every article you write EXCEPT this one…” or “You’re full of shit because you are rich…”

    For me, it boiled down to 2 things.

    1. My financial well being and 2. My life well being.

    My financial well being told me to never, ever buy. If you are buying a home as a way to make money, don’t. Traders don’t own stock, they rent it. Know why? Because cash is king, the more you have available (liquid) the more options you have. An options make you money.

    My life well being (aka my wife) told me that I wanted to own a home. I wanted the comfort of waking up in the same house for the next x amount of years. To not worry about having anyone other than me throw me out. As long as that payment is made, I get to live there – this is peace of mind.

    The solution (thanks to some solid advice from James in an email) was to appeal to the comfort side of my life. To remind my comfort side how nice it was to have cash. The result – I still bought a house (this weekend actually). However, I bought a house that was much less than we could afford, saving roughly 30% of my cash and much lower mortgage payments. I now have the comfort of owning a home and the flexibility of cash…a great combo!

    Michael G.

  • cpowers

    I rent & like the freedom – however I dont have a bathtub full of cash when I bath though

    • Its not that expensive to fill the bathtub with $2 bills. Ask your bank for all of their $2 bills. Its fun.

  • I keep telling everybody the same thing for years. – I’m 25

    • Hopefully you keep your wisdom. I spent whatever common sense i had in my 30s. I’m hoping now i’ve regained it.

  • Franz

    We sold our house 5 years ago and having been renting a house ever since. I agree with every point in this article. I did not realize how much I hated owning a house until I no longer owned one. I am renting a house similiar to anything I would have bought and it costs much less.

    • Manxmomma

      Me too – and it’s such a freeing experience! As our kids grow up and move out we can downsize without hassle. Owning a house made me feel like i was doing what I was supposed to do a la American Dream, but selling that house helped me realize what I really felt was trapped under that mortgage. Free at last and we’ll never go back!

  • I’ve watched my parents pay a mortgage for 40 years, they are now upside down on both houses that they have a mortgage on. They are so stressed out, they cannot even talk about what they need to do. The taxes are huge, they spend $10,000 a year in property taxes for the two houses. Their land sucks, they cannot grow a garden without buying a ton of soil because they bought commercial properties that stripped off all the top soil leaving only one inch to grow grass. They spend thousands of dollars each year on maintenance and not even preventative maintenance but blow up in your face maintenance that cannot be put off. They now worry about money much more than they used to. Neither house would sell in a few months, in fact their second house has been on the market since April 2006.

    Would I ever own a home? You bet! I’ll buy two acres of land for $5000 and put in a well, then I’ll buy a nice used RV. A house on wheels doesn’t raise your property taxes. The land will be used to raise chickens, a couple of goats and a large garden with a hoop house so that I can grow year round.

    • pr2011

      I completely agree with you. I been thinking a lot about how the corporations and banks have really taken over America and I am convinced that while is true that buying a house is not a good idea, the people shouldn’t renounced to property ownership. Right now the best strategy to make some leverage is for more individuals to own land, foster renewable energy and live as independently as possible from petroleum.

      • Joe

        You don’t think it is wise to own a house, but think it is wise to own land…contradictory are we? what would you do with the land (and that makes it a good investment) that you couldn’t do with the house?

        Owning a home is a GREAT investment…for $20k, you can control an asset ten times that value. And the growth opportunities now are wonderful.

        • Just Sayin

          Joe–land does not require the up keep that a home requires. If the land sits vacant for 10 yrs. it’s ok-you won’t need to paint or add a room to sell it! Then it can be sold to one who wants to BUILD a HOME for 2-3 times what was originally paid for it!

          • Dewmoss

            Joe you can also plant trees “walnut,hickory,christmass, or a lake and your land will iscrease even more over time from not doing anything . let mother nature do it for you…

    • sherry

      Nice idea but in most areas of the USA this is against the law for zoning etc. You might enjoy the website tinyhousedesign for some great info. I think this world would be a better place if we all volunteered to scale back and put into prespective what is important in life. good luck

    • Rebelroy11

      WHy have two houses? That seems to be the problem.

    • Alfredo

      The well and septic will cost you $30,000-50,000 Still a good idea if you can find the right spot.

    • LR

      “I’ll buy two acres of land for $5000”
      whee is that? want to share?
      Land is a good investment as well.

      I own an apartment, I paid in cash when I found a great opportunity. lived there for 2 yrs while I made improvements myslef or hire a couple of workers to help me out.
      Now is being rented. I estimated that renting it 5 yrs and with the prices in the area going up, in that time I’ll have 30% return. Liquidity is the best, but tell me now if there’s any bank that will give you some similar return. No way.
      Stock market..yes, maybe if you’re really into it or have a good advisor, but is personal taste and I don’t like to spend my time playing in the stock market.

      If you know how to, real state can be a good investment, but do your research or you may end up with some crappy story to tell.

    • very clever — and then if you put another one in the back and rent it out for cash only it will pay for the whole damn thing — for one thing please move to the deep south — real estate is cheaper and better — and fewer criminals

    • Emb53z

      I have looked into buying land and putting an RV on it. You have to move to some pretty rural areas to do that. Most cities, towns, etc. simply don’t allow it. emb

    • Jimzfifty7

      “I’ve watched my parents pay a mortgage for 40 years, they are now upside down on both houses that they have a mortgage on.”

      Pay a mortgage for 40 years? How can you pay on a house for 40 years and still be upside down?? Sounds to me like your parents refinanced to the hilt and are now overextended like alot of other people. Your parents should have had their property well paid off by now or at least close. It’s funny how many people talk about how owning a house is a bad deal now. The majority of these people should have never bought in the first place because they 1) couldn’t afford it in the first place 2) used there house like an ATM and are now up a creek. I am a homeowner in my early 30’s and despite the huge decline in the market, I still bought within my price range and did not over extend myself.

      • Srdaction

        Pretty easy when they most likely refinanced it to pay for your college so you couldn’t figure that answer out yourself.
        Statistically I have made a 30% profit on all real estate investments when bought and flipped. I also currently own 27 rentals and average 300 per door in my pocket profit every month after all expenses. Do the math. I have a mortgage on my own home of 93K and my payment is 720.00 a month which a 3br 2 bath.
        I have a 3 bed 2 bath mobile home property that I get 1100.00 per month for. You tell me how it doesn’t pay to to invest in real estate. My tenants not only pay for my investments they pay for my housing also. I hope to have at least 100 properties by 2015. Remember the 300 per door when purchased properly.
        I am just turning 42 and was basically retired at 35 using real estate. I’ll keep my home instead of trading for the whimsical lifestyle that you renters choose to believe that you have total freedom.
        Bill gates, Donald Trump, and many other investors have made their fortune using real estate and will never rent.

        • Ssohara

          Part of this is that you have self-discipline and you also have both skill and luck when it comes to buying real estate. I love playing the stock market and I am quite good at it, so that works for me. However, I’m not knocking real estate as an investment – obviously some people (such as yourself) have done very well with it. 

  • Greenteapot

    I’ve been saying the same things for years, but you (Altucher) are making money off these ideas. You could also apply the same framework to marriage, as in not. One thing you did leave out, real estate is French for royal estate, back in the day they figured out how to tax the land and not have to manage or worry about it. Think about it. If you pay off you mortgage and stop paying your property tax, then who will own your land? The government will evict you and take your so called paid of house. Renting is the way to go, but you need to pay low rent. A house may make sense as a real investment in certain areas, such as resort, and beach front, lake shore. Other than that, a house is a life style. One more thing your hose is an asset on the bank’s sheet and a liability on yours.

  • lao bie

    The woman in the bathtub, is she Asian?

  • PatD

    I will be the contrarian here…
    I love my home…my yard..( I live in so-cal).and I spend alot of time here daily… I spend my time stock trading..indoors and out…
    I have 5 critters…(generally a negative in a rental)….
    and I am not wealthy enough to not care about the mortgage tax deduction…(wish I were)….

    If we were all the same in this world…
    what a boring place it would be….
    and who would we learn from????
    Thankx Again for your sharing….

    (PS James…lets make a wager….a few years from now…you will feel differently….)

  • Brittbrat

    RV? freeeeeedom!!!

  • Paul

    I’m a male and will be 59 next month. Still have a good job. Went through a divorce a few years ago. Cost me a fortune but still have enough to buy a condo/townhouse if I want. Have enough in retirement accounts to live modestly if I work until I’m 65-66. I’d have to put down about 60K as a down payment to buy the condo/townhouse I’m interested in. Its just me. The kids are pretty much on there own now. Is it crazy for me to think about buying at my age? I know condo’s/townhouses don’t appreciate as well as regular homes and lets face it, most likely I only have 20-25 more years in this wonderful life. What do you think?

  • Betsy

    I have a beautiful 4thousand sq ft house in sunny So Ca for sale ….who wants to buy it? you must be a wealthy guy and good looking ( also my type) ..single no baggage …in your mid 40 to 50’s …and available to date and be in committed relationship … all these would benefit your tax bracket …it comes with a great cook, maid service and much more …only really serious investors can apply …really ! this is the only way to sell a home now and stop the draining of my retirement ..a catch 22 …if one sells while single, one pay up the cahoots … if I don’t , why then do I need to support and pay so much taxes for the schools etc ..when my kids are already grown … I was sold on the idea of the american dream …now I have my other retirement pad but still trapped here …

  • Linda

    A man after my own heart. I never understood why “owning a house” was The American Dream. It was never my dream. I always wanted to save enough money so I didn’t have to work at a job I hated. And I hate fixing things and I hate gardening, which seems to be one of the main reasons people buy a house. That said, I own a house. I like this house and this area very much. But my husband is great at fixing things, which is why home ownership works for us. We all have to live somewhere, but like you, I like the idea of leaving whenever I want to. Roots are overrated.


  • tom lemon

    Everyone jumps on the writer because they know people, or are people, that own property and rent. No one here is writing about losing their life savings trying to maintain a house payment, to “protect” their credit. No one is writing about losing a job, and not being able to make a house payment, or having to move for a new job, and letting the house go to forclosure.

    Some people can never see the future. Owning a home is a financial disaster.

    • Guest

      “No one is writing about losing a job, and not being able to make a house payment”

      Interesting, but neither is anyone writing about losing a job and not making rent. The way I see it, you get kicked out in both situations. At least if you own, eventually you don’t have a house payment.

  • Anonymous

    The cool thing is to study human behavior. As a guy who has been through a few booms & busts, I’ve seen people react accordingly.
    House prices have taken a major slapping over the last three years and the prevailing thought is that buying a home sucks.
    Sure enough, there will be a boom again (fueled by non-pessimists) and the chats will be full of people stating how much equity they have in their homes. Why, you’ll even hear that they’re thinking of buying multiple homes because of the massive appreciation potential.
    I’ve see this behavior in housing, I’ve seen it in the stock market. All I can say is that, personally, I have stayed the course in both owning a house and owning stocks and, despite the volatility, continue to grow my wealth. The key to all is living within your means.
    Sure, its no fun when your home value or brokerage accounts dip in value, but it is a buying opportunity. We’ve been through tough times before and the American spirit has always prevailed.
    Gen X, Y, Z, etc., buy a comb, get to work, read Nick Murray and don’t put your faith in rock stars like Obama. Demand liberty over tyranny, and demand that you be allowed to invest in your own Social Security Account.

  • Anonymous

    A cool thing to do is to study human behavior. As a guy who has been through a few booms & busts, I’ve seen people react to each.

    House prices have taken a major slapping over the last three years and the prevailing thought is that buying a home sucks.

    Sure enough, there will be a boom again (fueled by non-pessimists) and the chats will be full of people bragging about how much equity they have in their homes. Why, you’ll even hear that they’re thinking of buying multiple homes because of the massive appreciation potential.

    I’ve see this behavior in housing, I’ve seen it in the stock market. All I can say is that, personally, I have stayed the course in both owning a house and owning stocks and, despite the volatility, continue to grow wealth. The key to all is living within your means.

    Sure, its no fun when your home value or brokerage accounts dip in value, but hindsight certainly has proven these times to be a buying opportunities.

    We’ve been through crisis and tough times before, and the American spirit has always prevailed. This, because like no other place on earth, people are free.

    So, I leave you, especially you youngin’s, with some of my insight and hindsight:
    Gen X, Y, Z, etc…buy a comb and use it. Question the media, financial, political and otherwise (hint: they don’t have your interest at heart). Read people like Nick Murray, Milton Friedman, Benjamin Graham and Mark Levin. Learn that your behavior as an investor will be more responsible for your wealth than the particular stocks you buy and sell. Don’t worship false Gods and empty suit rock stars like Obama and Gaga. Give Paul Ryan’s Roadmap for America a look and form your own thoughts. Don’t buy the false argument that government is compassionate and wants to help people (e.g. welfare is not helping most recipients, it is enslaving them by removing their incentive). Always demand liberty over tyranny. Hold your government representatives accountable, but first, give them guidance by calling and emailing them. Research and learn that Social Security is a governemnt Ponzi scheme and it has already broken its promise to many Americans (in its current form, it will break more promises to more people). Demand that you be allowed to invest in your own, private, Social Security account (ps: if you say fight for this and the government votes “yes” to this, I’ll give up the Social Security benefits due to me when I retire). Enjoy today, there will be never be another.

    • Zaccave

      Social security has a 2 trillion dollar surplus, it has never missed a single payment, has kept millions out of poverty and is solvent until 2027. After that, it will pay nearly 80 cents on the dollar if nothing changes. All we need to do is increase the cap on social security and it will be solvent forever. Feel free to check these facts at the Congressional Budget Office – http://www.cbo.gov. Also, Friedman is dead. The Lexus and the Olive Tree is complete bogus. Japan greatly subsidized Toyota in its first few decades and had huge tariffs on foreign imports, protecting Toyota from competition. Toyota would have never made it in a “free market”, funny how Friedman conveniently left out this tidbit of information.
      Nobel Prize winner for economics, Paul Krugman, would be a much better source on economic issues in the US.

      “A necessitous man is not a free man”. FDR

      • Anonymous

        Wow, this is an exciting day for me. I actually got Paul Krugman to respond to my post.
        Paul, I must say, I’ve always found your articles amazing! Never have I seen someone get it wrong so consistently. I assume this continued failure is the reason for your hostility.

        We all know Milton Friedman is dead. You don’t have to take a classless cheapshot. Still Paul, you couldn’t walk Friedman’s dog.

        The 2 trillion dollar Social Security surplus actually does not exist in cash, or investments, but in IOUs. They are stored in a filing cabinet and are occasionally pulled out when they run low on lunch napkins. Also, check with the CBO, the surplus will soon become a defict. Further, each SS beneficiary must continue to hope that the government doesn’t need to the funds to pay the interest on our debt, thereby reducing their ability to pay back these IOUs.

        They govt. actually already reduces Social Security benefits. They do this, by the way Paul, using various techniques. First, they raise the retirement age, next they raise the amount of tax one must pay into SS, then they raise the taxable portion of your benefit, next, they tell you that there will be no inflation adjustment, even as food, fuel and energy prices are climbing through the roof. Finally, the govt. raises taxes, so that you and I are paying more, to pay ourselves Social Security Benefits, for which we already contributed. All of these reductions and additional taxes are broken promises by the federal government. More to the point, they are promises made by FDR, that could never be kept.

        So, you can have your entitlement, dependence and 80 cents on the dollar. I choose liberty, private property rights and self reliance.

        Oh yeah, one more thing, the $2 trillion accounting entry surplus doesn’t look to good when you match it up against the $15 trillion unfunded liability. (That’s negative $13 trillion, Paul) http://www.usdebtclock.org/#

        Regarding Toyota, if the Japanese taxpayer had to subsidize it for decades, that was their choice and it came with its own consequences (higher taxes and and opportunity cost). Of course, had they not subsidized Toyota, and other companies who did not eventually succeed, they may have been able to avoid their own crushing national debt and stock market collapse.

        See Paul, each dollar (or yen) comes with its own little opportunity. When I trade my time and skill for dollars, I own those dollars and I want to decide how to use them. Unfortunately, you and your buddy Barack think you know how to spend my dough better than I do! Amazingly wrong again!

        (Get ready everyone, when someone from the left loses an argument, they resort to race baiting, class warfare, name calling and/or misrepresentation.) Lay it on us, Paul.

        • Enlightened Reader

          Wow, i must say that this discussion is intellectually stimulating to say the least. I haven’t committed to either side but would love to experience the Krugman response. Unlike many, when i pick up a coin, especially one somewhat unfamiliar, i tend to enjoy examining the details at both sides.

          • Trissfriss


        • BobH

          ?? You lost me. If that was a flippant comment (regarding Krugman responding to you), it didn’t work. In any event it’s ironic that you would chastise the writer for a “classless comment” for simply noting that Friedman is dead (a statement of fact) while suggesting that with your insight, you realize that Krugman, a Nobel Prize winner, somehow “gets it wrong so consistently” that “this continued failure is the reason for his hostility.” You then go further to state that Krugman “couldn’t walk Friedman’s dog.” You probably should restrain from criticizing others for classless comments, at least until you achieve some tiny fraction of Krugman’s success (and insights about the world).

          • ODS

            Krugman won the Nobel Prize in economics like Obama won the Nobel Peace Prize. As long as your ideas resonate with the Nobel Prize committee members, who are left-wing intellectuals when it comes to social sciences, you get the stamp of approval. So if you like the Obama administration’s economic policies of wealth redistribution, monstrous government size and spending, raging debt, high unemployment, etc., you can blindly read Paul Krugman and believe. Otherwise, read a range of economists and draw your own conclusions as to who knows what’s going on and how to fix it. Don’t let the Nobel Prize committee pull the wool over your eyes.

        • Breezyhillfarm214

          The republicans robbed the money who are you kidding

        • Csubroncs

          Check and mate.

      • LR

        Funny quote to finish your commnt after your idea of supporting Social security (an institution)
        don’t get it.

      • Papa Bear

        Where is the $2T? It is not in a bank account. It is just a bunch of IOU’s from congress, there is no money. Republican and Democrats have spent it all.

        Soon they will HAVE to cut benefits and increase taxed to pay for it.

    • I agree — but if you don’t pay full price for a home you really can’t lose — I buy at 25% to 50% on the dollar — how much would the market have to drop for my 27k house that is worth 50k to be worthless .. how bad would the economy have to be — I owner finance for long term — without touching the house repairs — for the most parts the payments are interest only for the first 5 years where there is a balloon payment at the end — I may even get the house back — even better 0– it is in better condition — I took 5k down and now i am in it less than 27k and I got to claim depreciation — is that really a bad investment — you will never really make money on the house you live in — but for damn sure you will never make any money off the property you rent — your savings every month are paying for your landlord’s house — if it were really a better investment to rent — all the financial wizards would be in an apartment complex

      • Trissfriss

        How much POT do you smoke a day???? You dumb sxxx….we are in a RECESSION…..5 million people have NO JOBS……the unemployment rate is close to 10% and climbing…and you are stupid enough to BOAST about this sxxt????? Get off it……………….I rent….now, one of US is STUCK for however long to PAY $x,xxx annual taxes on where we choose to hang our hat….the other, i.e., ME, is not STUCK with anything, i.e., a new roof repair, new furnace, new a/c, plumbing, etc etc….however, YOU my friend will be paying taxes on your PAID FOR PALACE for as long as you own the damned worthless investment………….d.u.h. to you!

        Final thought dude….None of thIs really matters anyway…WAKE UP….The End of Days is Near.
        Get down on your knees instead of on your proverbial man-made throne!!

        • Lilleybunny

          there is no god that you would understand and your hate shows how good a servant you will be in Hell

        • Mneas

          what ever floats yer boat dood!

        • Melinda

          14 million people have no jobs

      • Ssohara

        Bottom line, it’s buy low, sell high, investing 101… buying a house near the top of the market is a loser’s game, but if you can buy a house at a 30% discount… the first house I bought was a HUD house back in 1991. I paid $60K for it in a neighborhood where houses sold for $80-$90K. I had to sell the house a year later due to moving for a job, but I still made $10K on the house even after paying all the fees… and I’d only put $3K down because it was a HUD. So, I effectively quadrupled my money in a year (I put down $3K and got back $13K including my original down payment).  However, if I had bought a house 3 years ago at market prices and I had to sell today, I’d be singing a different tune.

        I think NOW is probably a great time to buy a house if you can…

    • Crushlymbug

      bla bla bla.

    • Chuckie

      Social Security has allowed a great many of low age earners to retire in some degree of dignity rather thsn working until they drop dead. Do you think they would have invested thatn money if they had the choice. Do you think they would have invested it wisely. I think they would have spent it on things both needed and unneeded. The free Market is mostly a myth. IF not for the Anti-trust Law there would be no choices. In fact if the governmnet gets soft on Antitrust, you see more consolidation, fewer airlines, fewer Phone companies. If they all become one company do we still have a free market?

      • Pdfmixer

        Most anti-trust laws in the USA were designed to allow Establishment people to artificially have more control over the market and competition from others. Only government can create the existence of monopolies.

      • Anonymous

        Frankly Chuckie, I do expect all earners (low and high) to be better off by placing a portion of their earnings in their own Social Security account.

        The only difference is that the account is owned by the individual and the funds do no get into government hands. Why anyone would prefer the latter is extremely perplexing to me.

        As a conservative, I expect people to educate themselves on the matter of personal finance and become self reliant.
        As a conservative, I expect the best out of the individual and I will be there to help those who truly can’t help themselves.
        As a conservative, I understand the need for government and the rule of law. However, we are now witnessing the dire consequences when government gets involved in things beyond its purpose, such as retirment savings and health care.

        • Stocks0223

          So 1ConservativeUSA based on your argument I expect you and those that agree with you to practice what you preach any not accept any social security benefits or medicare/medicade benefits and live only on your personal investments in your retirement. To do anything other than that would mean you and your cronies are complete and utter hypocrites. I hope you saved enough to pay for your cancer treaments out of pocket, if not too bad. Medicare would have come in handy but that would be un-American wouldn’t it.
          I don’t expect you have the guts to do that though, your kind never does.

          • Crazyweasel

            So, you think he should be forced into paying social security and medicare, but then should not accept it? I’d opt out of social security and medicare in a second, as long as I don’t have to pay into it and I get back the money that I (and my employer) put into it.

        • LouieAP

          I agree that individuals should take responsibility for their lives. However, you expect people to become educated, but those that need the most help are the ones that don’t have access to that education. If I have to work 2-3 minimum wage jobs just to survive and as a result don’t have time to take the bus to get to the library since I can’t afford a computer, much less Internet access, nor a car, how will I be able to get the advice I need on finding ways to make my financial situation better? You say you will be there to help, but how far are you willing to go to reach out to them? Are you planning to start some sort of non-profit group to help low-income individuals get themselves out of their current situation? Are you willing to go into the neighborhoods where these people live to give them this advice? How about helping their children out by providing them with a quality teacher and individualized tutoring, or even just after-school daycare?

          If you have all those things in mind and are willing to implement them at little to no cost, then by all means get to it; I applaud you and will sing your praises all day and will provide some financial backing as soon as I am done with graduate school.

          However, I have a feeling that you believe everyone has the same access to the same resources, and this simply isn’t true. Conservatives like you want education, no matter at what level, to come with a price tag that gets charged to everyone no matter what their ability is to pay for it. If the next Einstein happens to be born in the inner city, tough luck if he can’t afford to pay his way through elementary school and high school. If a black child living in the middle of Chicago’s south side needs a bone marrow transplant to cure is sickle cell disease, which has forced him to stay at home from school for a total of 1-2 months out of the year because of the excruciating attacks, and there is a compatible donor ready, willing, and able to help, too bad if he can’t afford to pay the surgeon(s), nursing staff, and pharmaceutical companies on his own to make this happen. This kind of thinking is ludicrous, but unfortunately is all too common among conservatives. You and others like you need to get out of your bubble surrounded by a white picket fence and see that there are so, so many people that need our help. If you and your corporate puppet masters are unwilling to do it on your own, then the only entity large enough to tackle the problem is the government. Any better ideas are always welcome.

        • DickCheney

          You forgot to add the part about government getting involved in matters they should not, such as Iraq and Afghanistan, and I believe one of the Conservative movement’s idols, George W. Bush is the reason we are mired in this nonsense. Healthcare and social security are necessary, war is not.

    • Breezyhillfarm214

      yourfull of sh—

    • Mneas

      I practiced what this guy preaches and I now own a small farm house on acreage in the midwest with a modest income, my health and feel like God has blessed me with a modest life of simplicity. Always be a pragmatist. Feed your spirit and practice good health.

      • Ssohara

        good for you and God bless you.

    • RonOshier

      People are free here in Canada too.

    • Ssohara

      good for you. I am also a conservative, younger than you though. :) People who knock capitalism are idiots. Capitalism has been a great force for good, lifting masses out of horrible poverty. I am also a Christian, and I believe greed is bad, but working hard and keeping the fruits of your labor (and giving some to charity) is a good thing.

      But, anyway, my husband and I live below our means. So, even though we’ve had some hard times financially, we are doing OK. When bad things happen, we have a cushion. We are debt free. We have been renting since 2002, but now that the housing market is soft and we’ve found a community we want to be a permanent part of – we are probably going to buy a house next year. We’ll get a modest house, not a McMansion and we’ll probably put at least 30% down on it. We may get a rental in the same neighborhood.

      However, if Obama is re-elected, all this will change – we’ll probably leave the country. :)

  • Martin

    I disagree overall with you. If you have a family, it is so nice to have stability for kids until they graduate from college and leave you to live on their own. I like going back to the town and area where I grew up from time to time. I have done that with some rental apartments where I once lived also, but it is not the same feeling. In a rental building, you commonly do not get to know hardly anyone else in the neighborhood. You really do not feel the same part of a neighborhood or town. For most people, you become a transient when you rent. Also, if you buy a house in a nice neighborhood, you commonly have the best schools reasonably close to where you live and do not have to spend any money to send your kids to a private school. Many renters live in a area that would have lousy schools and possibly crime ridden since the rent is cheap and rental cost is usually the most important variable to think about. I remember also how unfriendly other renters were in the same building. Most of time, no one would even talk to you inside an elevator, if you were lucky enough to have one at all.

  • Beachpauls

    My father was a full time mailman and a part time real estate salesman. He told me to fall in love with a woman not a house. He said in real estate only three things mattered; location, location, and location. He also said, when able, to buy low and sell high. When the bubble came, at first, I thought everyone was crazy. I missed buying opportunities. Eventually, I realized it was an opportunity to sell. We sold one of our houses for three times what we had bought it for. We were lucky because money was easy for buyers to obtain. The people that bought it had sold theirs for a nice profit. How do I know? They were our neighbors. Why? Because our house was closer to the ocean, hence a better “view”. We kept our other house and guessed right. It is in the only neighborhood in town where the taxes went up instead of down, where the valuations of the homes and sales comps did the same. It is a small house with a bigger lot in a better location for retirement. You can walk to places. In a recent sales ad for a neighbors home the realtor used the phrase “where everyone wants to be”. Unfortunately, one of us had to go back to the city to get a real job, the other stay until our child graduates high school( one more year).. The job market and small businesses with it, have crumbled “at the beach” due to the terrible economy. The rental market has been terrible here. In the fall of ’08, there was a brief panic in the city. We scored a decent co-op with a garage spot for an underwater price. I didn’t feel bad for the seller because he was a lawyer whom also had another suburban home. In life, you will find, the opportunities are few to screw a lawyer out of money. It seems in real estate, their hubris sometimes gets the better of them. I can’t wait to get back to the city, get a real job, and spend five years paying off the rest of our debts and putting our daughter through college. We own our house. It’s the equivalent of a luxury car payment and some elbow grease to maintain it. In a few years we could rent it for a month and cover almost if not all of our expenses to own it. We don’t need anymore “stuff”. The thing with real estate is this: you can touch it. You can roll around in its dirt, climb its trees, smell its grass. Its value is real. The market? It is numbers on a screen. You go to bed, wake up, and the numbers can change, for better or worse. You don’t even get a certificate to hide under the mattress anymore that you can actually touch. In this brief sojourn on earth, real estate provides an illusion of certainty, a repository for memory, a warm place to call home in the cool breeze of uncertainty that blows all around us.

    • Rudyp911

      Poetic and nice.

    • LFE49


      • Amit

        AMEN AGAIN

        I would suggest everyone to slow down before signing those mortgage papers! When all cash flows are considered, renting costs less, which means you’ll have more money to save & invest. Over the long run, the stock market averages +10%/yr.

        So the 20% downpayment, 3-5% closing costs, 5-6% selling costs every time you move (average US home borrower moves every 7 years), property taxes, maintenance, insurance, is all money that could have been invested.

        If you look at everything (all cash flows considered), you spend less money when you rent! Between property tax, insurance, maintenance, mowing the lawn, fixing the roof, etc. etc. plus the extra utility costs you’re spending a lot of money that could be invested instead. What’s wrong with renting??

        Learn from the past people! (Of course they look at me like I’m crazy when I suggest they cut a $100+ a month cable bill. Or drive a car that is 3 years old. Or only fill up their tank from the cheapest place according to GasBuddy. Or get $25/month budget car insurance from Insurance Panda. Or cook their own food instead of spending a hundred a week on restaurant food (or far more if they like the bar).)

        Nobel Prize winning economist Robert Shiller was one of the few people who accurately called both the stock market crash of 2000, AND the real estate crash of the late 2000s.

        And he says that owning a home is a terrible investment.

    • ExpectNONE

      There are tools out there that will help answering this question. I’ve found valid reasons (in mathematical numbers) why we should or should not. The result will varied but should give one a rough idea.


      • Mrdelurk

        I just entered the values for my state in your online chart. So for me renting for 15 years costs $84,085 less than owning. Well, for a $500 monthly savings, I can put up with the occasional noisy neighbor party.

        I know, the main argument of the “buy” camp is that after 15 years, should I sell my property (without losing money) I’ll have the $157K back that would have gone for rent. At first this is an impressive argument. But what will $157K buy 15 years from now? Probably a sofa.

        • Xasdlkj

          except that you’re also going to get the increased equity in addition to the $157,000, so that should buy more than a sofa.

          • Supapackers

            ya they could prbably throw in an armchair or flatscreen tv

          • Supapackers

            ya they could prbably throw in an armchair or flatscreen tv

          • Supapackers

            ya they could prbably throw in an armchair or flatscreen tv

          • Mpollery

            Don’t forget about your rent rising. Landlords are there to make money and what rent was 10 yrs ago is a lot less than it is now. So the 500 savings a month could end up a lot less or even become a . Im not saying owning is for everyone, it is just like anything what is good for the goose isnt always good for the gander……

          • Ole Oleson

            I’ve rented for the past 15 years, my rent hasn’t gone up more than 2% in that time. In fact quite a few years it has gone down. Renting is a competitive market. You can’t keep raising the rent and expect people to pay because they’ll just move somewhere else. That is the beauty of being a renter. You are free.

          • Trogdor

            Rents fall or stay stable when housing prices rise, because rising prices (usually) mean more homeowners and fewer renters.

            It was an incredible shock when my $115K rental soared to $200K in value… and the rent I could charge plummeted from $1,100 to $950 per month.  

            Such is the way of the market.  If you think that rents will continue to increase 2% over a 15 year period, I’ve got some swampland in Florida I want to sell to you.

          • Henry32771

            From a former Floridian, there isn’t any left. It’s been overrun will fast food franchises, discount shopping, used car lots and billboards.

          • Mas

            $500 a month in rent will rent you something like a swamp in FL. Where on God’s green earth will you find a decent place to rent that isn’t the size of a shoebox? Your dreaming if you think you can rent a decent place anywhere for $500 a month.

          • mindismoving

            …not that i’m especially interested in this argument, but you should check around more closely. i live in memphis, TN, less than one block from the university of memphis where i go to school. im renting a 2 bedroom 2 bathroom apartment with a full size kitchen, a bit less than 600 sq ft for $525/month. that’s not unusual either.. the place i had before this was literally half a block from this; i paid $430 for a one bedroom that was quite spacious. just sayin.. look into it, you might find a great place for way less than you thought :)

          • Xavier

            I have lived and raised a family in the same rental house for the past 27 years in a small northern Colorado farming community. $550 per month on 4.25 acres, 1900 sq. ft.. In an hour or less, we can drive to the mountains, go boating, hunt, hike, ride bikes, hit Denver for major sports and other activities. No better deal anywhere!

          • Bob

            And you should have bought the place. If you had, you’d be paying less each year than what you’re renting for right now (because you’re getting money back in taxes), and by this point, you’d be 3 years away from owning the home outright and never having to pay another dime other than property taxes. Also, your net worth would be about $125,000 higher (assuming that’s roughly what the property’s worth, based on the rent amount) than it is right now, and when you inevitably pass away, you’d be able to pass your historic family home down through the generations of your family.

            As it stands now, your landlord may rent this property out to someone else the minute you pass, and your grandkids and great-grandkids will never get to see the beautiful home that produced their parents. A whole heaping hunk of your family history down the drain.

          • mike in texas

            Sentimental slavery. Better to invest in your childrens’ character, spirit and intellect, giving them an inheritence that they can carry with them anywhere and from which they can draw dividends any time. With maintenance, taxes, insurance and other liabilities, “a whole heaping hunk” of illiquid ball and chain is what property is.

          • Eric ‘Rich’ Richardson

            Holy cow… you really are that stupid aren’t you? When you return from your fairytale world of giving your kids spiritual gumdrops and unicorn tears, I’m sure your kids will really appreciate your worthless wisdom.

          • RJ M

            You’re the stupid one. Unbelievable. In your world only material inheritance is worthwhile. If it’s not material then it’s “spiritual gumdrops and unicorn tears,.”
            I inherited material stuff, money from my estranged father when he passed. I would gladly have traded it for an actual father who was present, who I got to know and had a meaningful relationship with.
            mike in texas is wise, you are a fool.

          • I always see people like yourself as stunted human beings who are clearly here on their first journey. Pity any trophy woman who gets together with you and then loses her “value” (perhaps due to ill health or some unforeseen circumstances.)

            Still types like you are just what the modern capitalist world and corporates wants: blunted individuals who think materialism prevents them from being dull individuals.

          • Natashafx

            So true. Landscapes and neighborhoods change over time and often not for the best. Better to not establish family history based on material structures.

          • brad

            In my view point i like both concepts house buying and apartment renting I my self I am a renter. I choose this. by the way the private sector has plenty of affordable apartments for rent and even some house houses for rent,
            real estate companies own the apartment complexes they rent them out. yes their is laws in place that govern the price of rental apartments. many landlords and property managers have told me this. Capitalism always creates both high and low markets.
            Lower markets does not always mean low or bad quality check into it in person. ask questions. their is no nation wide rent cost for all that is the same price. Capitalism forms every thing for all types of full time workers. my rent each month is only 650 dollars with some utilities included and their is big parking lot for the residents to park their cars. the other utilities I pay for every month. my total monthly bills and expenses come to 2000 dollars every month and that is because i have car payments and full coverage insurance. My car was semi new 2012. 14,000 miles for only 15 grand on a 6 year payment plan. MY point in this capitalism does help people. if you cannot afford to live in the city you live in travel to another place. live and work in the same city. Also most people are not rich. 75% of the stuff you here on TV and the radio is false data. Also 50% the stuff college teach you is not true. their will always living areas for the poor, fair class , middle class and the rich. most people will be fair class. their is already socialist features in america’s economy. Some people are just lazy and to stuck up on them self’s. education and working full time is the only way to transition your self into a higher level over time. renting apartments is not hard keeping my monthly income over 2,000 dollars a month is also not hard. i make 2,500 a month after tax. I work all 30 days a month I make 100 dollars every day. I have 5 grand in savings. I am 27 years old.
            IF you cannot move up to the middle class status then do this focus on making the your current level better. get some better cloths i nice jacket a Cell phone. get your car repaired. every body is not getting a house. Apartment renting is for fair class american’s. just form a friendly relationship with your land lord I did. fuck paying a dame bank for 15-30 years on a mortgage plan plus i have to pay for any repairs and all utilities. I will be a renter my whole life. real estate companies rent apartments. 40% of apartments and houses for rent are affordable on this market.

          • Henry H

            Assuming that you have a $125,000 mortgage and you put 20% down, you would have had to have $31,250 as a deposit to get that mortgage. That $31,250 compounded at 7% (a reasonable long term rate) over 30 years is $237,883. I’ll take that over the $125,000.

            If you don’t want to use the completely reasonable rate of 7%, you can use 5% and still get $135,061, which is more than you would get by selling the property.

          • The O

            Well, this is 8 months to late for you to see, but perhaps for someone else — You assume a compound return rate for your downpayment, but assume the house has remained static in value. Even worst case scenarios the cost of that home probably went up 2% per year.

            You would still end up ahead, but the calculation was faulty.

          • Henry H

            Assuming the house went up 2% compounded then you’re still ahead by $10,000 by investing it. The difference is that you can’t just compare the portfolio value and sale price that you’re getting. You need to pay 3-6% of that sale price for broker fees ($7,000-$14,000), need to pay insurance, maintenance, etc on the house (assume 1% of home cost per year – about $47,000 lifetime) and you’ll quickly see that they aren’t even close. Appreciation doesn’t come close to the amount you make by investing it.

            Edit: You’ll also pay about $96,000 in interest payments that you should probably also factor in (tax adjusted if you want).

          • Gas Bucket

            I wouldn’t call your worst case an actual worse case. My worst case was a house that lost $13k per year in value (and of course the tax assessed value didn’t keep up with the rate of depreciation either) despite remodels, additions, and other desperate attempts to retain value. THAT is a worst case.

          • zxoiesru

            $31K will pay your rent for 3 to 5 years. However, if you put it on a down payment you will never see that money again and in 3 to 5 years you could be homeless when you get foreclosed.

          • zxoiesru

            Note: $31k will pay for just 1-2 years in Southern California (or Norcal as well), or just a few months in Manhattan, NY. But then the houses in socal or norcal cost $750k and up for a small one-story 2 bedroom house, and in Manhattan, a small condo goes for millions. Both of which $31k won’t even begin to cover your downpayment.

          • zxoiesru

            p.s. You logic works better if you are SAVING that $31K to buy the $125K house CASH sale paid in full. In which case BUYING is a much better option.

          • RealityGirl

            Bob first of all not everyone gets to deduct mortgage interest it all depends on your tax situation and i would say Many homeowners dont get that deduction.
            Second… you are assuming that he would pay LESS in mortgage without considering maintenance and repairs costs which on a property that is at least 15+ years old can be significant and thereby offsetting any equity they would have on it.
            Third, “never have to pay another dime other than property taxes” you say? what about when the ac needs replacing, when the roof needs replacing? when the foundation begins to crumble and needs work? washer/dryer breaking, dishwasher falling apart. You’ve never seen an old person struggling to maintain a house that’s been paid off and has become a money pit due to old age? I have…plenty of times.
            What about insurance? you still have to pay that on top of the property taxes. When all is said and done you may have just about broke even or taken a loss on that property if it sells at all. And your assuming that his children will want to live in it once the parents pass away. In majority of cases kids almost always SELL the property. Most don’t want to live in the “old” and possibly “dilapidated” homes of their parents. And what happens if one adult kid moves in but the other’s want their “cut”.?

            Fourth, did you know that 99% of Americans have never seen or will see the house their parents/grandparents were born into or lived in as children? I haven’t and neither has my husband and frankly in the grand scheme of things living or knowing the home our parents were born and grew up in doesn’t affect us in the slightest that is THEIR history and THEIR path in life. We have our own.
            There are so many variables that you did not consider.
            Spoken by someone who has owned 5 homes and has rented as well as been a landlord.
            In all but one home we “broke even” or took a loss.

          • Natashafx

            Right on Reality Girl. Everyone keeps telling me,,,with the money you make you should buy a home. You are wasting your money on rent. Blah blah blah But what about all those who foreclosed…didn’t they waste a whole bunch more money and got a bad credit rating? I sometimes think friends and family try to pressure you into buying a home or guilt you into buying a home so that you can be just as miserable as they are in a mound of debt. Or they are just doing what we are “supposed” to do when we have a good job. Why can’t we make new American dreams that don’t involve being a homeowner as a status symbol? I don’t own a home not because I can’t afford one, I just don’t want to. I have friends from high school barely earning more than minimum wage and bought a home! I did look into it before the housing bubble burst and then afterwards when houses valued at $500K were now closer to $300K. Million dollar homes were now half the price almost (I live in California)…totally ridiculous prices here. I have a friend who admitted that they would never be able to payoff their home..then why waste all that money! To be a member of the country club? They could definitely rent for less than half the price they are paying for that mortgage. It’s a very nice house but is it worth it? Not in my opinion. I have another friend who got a great job offer in another state but he couldn’t sell his home and didn’t want to rent it..tried once and had bad experience so the house is sitting vacant and he is paying mortgage for an empty house while renting a room in the new state with the great job! That’s ridiculous as well. I was tempted to buy. Everyone said I could deduct the mortgage interest. I don’t think I would qualify for that just like I found out that I don’t qualify for first time homebuyers’ deductions and credits either. Besides I’m not from here and probably won’t remain so why buy…I’m free to go where opportunities take me. My boyfriend inherited a home but it needs a ton of work. If we got married I would be rent and mortgage free…but then I would have to help him fix the place up…which since my name isn’t on it so I am not eager to do that either. Unfortunately he doesn’t earn as much as I do so we have a catch 22 here. Renting is so much easier. Suze Orman is also now saying that buying a house is not a good idea in this day and age.

          • Natashafx

            That sounds nice and all but isn’t necessarily the realty fur most. My mother owns the home she was born in but 60 years later this home is a whole heap of a mess and in shambles and needs to be torn down because she couldn’t afford to properly maintain it. And she can’t afford to fix the things that are wrong with it. It needs to be torn down like some of the others on the block AND the neighborhood has really gone bad. And you can’t tear it down and build a nice one because the neighborhood is too bad now. People wloukd be breaking in for sure if you put a nice home in the middle of the modern day equivalent of shacks. No one wants to live there and her grandkids and everyone else in the family could care less about that raggedy house. Family history is based on experiences not brick and wood!

          • Gas Bucket

            “Never having to a pay a dime other than property taxes.”
            And insurance. And HOA dues. And maintenance costs. And legal liabilities if anyone injures themselves on the property. Not to mention having thrown away at least $60k in interest anyway, plus the possibility of depreciating in value since you don’t control the land around it (as we all learned in 2008) and the constant threat of losing everything you worked for if you experience a financial hardship. You overestimate sentimental value and underestimate freedom. You also seem to assume that everyone else is as interested as you are in breeding crotch goblins and giving free houses to them.

          • oz

            What planet and schools you guys went to you are all landlords to trying to get all to rent right lol reading this was funny but a waste something I’ll tell someone I don’t really like to do fallow your words,sounds like people from a head case place ,keep that advice we need people like you so you was my benz!!!

          • John

            Pittsburgh. You can rent a 3-4 Room 1 BR apartment for less than five hundred. Usually with at least one-two utilities included.

          • J_Robit

            ^^^ very dated, now two years after John’s post. My how things have changed in that town.

          • Larry Birf

            Renting is buying air. Either live with your parents or buy even a small condo

          • q

            The comment says “$500 monthly savings” (not $500 monthly rent).

          • wyclif

            He didn’t say you could rent a place for $500, he said you would save $500.

          • OwningSux

            Agreed! Rent in South Florida in good areas is at least $1,500 month. But still… owning is outrageous. Property taxes are over $4,000 yr in nice areas and homeowners insurance due to hurricane coverage can go over $2,000yr. INSANE! Rent is no stress…

          • WolfsongCA

            Well, good thing no one was talking about that–they were talking about SAVING $500 a month by renting.

          • zxoiesru

            $500 is a good price to pay in many places. Places like DC or Orange County sure it’s a dream like thinking about unicorns; but in most rural places, $500 is a normal rent price. When I was in Seattle I rented a large room for $380 per month (very low amount but it exists; average is more like $500 to $600/mo). Now in Orange County the same size room is $700 to $1000/month. Some places in Texas or in the middle of nowhere you can get as low as $100 or $200 (although who wants to live in the sticks?! lol)

          • Holly

            i know of a studio apartment for $550 a month plus utilities.

          • thevaliant x

            LMAO. So, basically $550 a month to have a bedroom and prey that your neighbor doesn’t steal your feel from the fridge, and that the plumbing will work.

          • FreedomOverrated

            Maybe rents don’t rise as much in the swamplands of Florida.. But I’ve never seen rents drop in LA, SF, or NYC markets… atleast not in any dramatic fashion. Studio apartments are over $1000 a month in most desirable areas!

          • IIlI

            rents HAVE gone down in one part of brooklyn new york though – canarsie. this compared to when the area was white italian. now it is filled with ghetto blacks selling drugs and hanging around projects.

          • thevaliant x

            And, they’re complete garbage at that price. Just so one can walk down the street and say he “lives in NYC….”.

          • zxoiesru

            sounds like it’s time to SELL not rent your building!

          • Natashafx

            In my city rents have fallen over the past 5 years. However in certain areas they are outrageous like in San Francisco some people are charging almost $3k for a 2 bedroom! And some are trying to charge renters the HOA fee which could be an extra $700-$1200! Plus s parking fee. Who charges renters HOA fees? Glad I don’t live there 30 miles away is a lot cheaper but close enough to commute into the city for work.

          • kelpdiver

            When you wrote this (2016), San Francisco had a median rent of $3500 for a one bedroom place. (not nearly 3 for a 2 bed). And this is the part that most of you, and esp the author, glossed over. The inflation of rent over time is a serious opportunity cost, and risk. Across the country, rents have been increasing at a rate well over inflation, at least anywhere that most people want to live. Housing starts has not kept up with population growth. Saying ‘you can always just move’ doesn’t mean you can move to an equally nice apartment.

            If you rent in the Bay Area, you might have rent control, but then you’re trapped in that apartment. It’s a nice golden handcuff, but then moving could mean doubling your rent. And yet, at any point you face the risk of an eviction by an owner who wants to move in. Then, with 60 days notice, you need to find another place. Many end up leaving the metro area when that happens.

            If, otoh, you owned, your boat rises with that inflation tide, and your massive downpayment grows at a leveraged rate. Those who bought here in 2010-2012 were greatly rewarded. My PITI for a 3/2 1600′ house is less than that average 1 bedroom apartment. And at any point now I could decide to leave the region and buy a home with cash in most of the country. Retired folks have the option of a reverse mortgage.

            There are definitely situations that call for renting, particularly for single folks. And those who actually invest their excess money, esp those with rent controls, can come out ahead. But the difference in net wealth between renters and owners shows that this is not the norm. Most of you aren’t being realistic, or remotely honest in the numbers you cite to make your arguments.

          • throwsatfeet

            Houses go up in value when there is legitimate economic growth nearby thereby increasing demand OR when interest rates drop making the monthly payments more affordable. Now that interest rates are rising and the mortgage interest tax deduction law has changed, I would expect a large percentage (15%-30%) of the equity in your home in the Bay area is going to evaporate over the next 5 years. Rising interest rates will send the economy into a recession which will have huge impact on on the Bay Area AND make already unaffordable homes even more expensive. The only reason homes have gone up in value over the past 30 years is because mortgage rates have dropped from above 15% in 1985 all of the way down to 3.25% in 2015/2016. We are already back to 4.6%, and once rates go to 5.5% the housing market will collapse and the economy will fall back into a major recession. Sell your home now before it’s too late.

          • kelpdiver

            way off the mark. SFHs are a rare commodity in SF with far more potential buyers, many with cash, than are available. Homes have never been cheap along the Peninsula, no matter the interest rate. During the dot com, rates were 8% and there were still 10-20 bidders on homes. It acts more as a derivative impacting the rate of change.

          • Jeffjr04

            Completely agree. The idea that most (or even a majority?) of folks would take every dollar saved by renting and INVEST it is ludicrious. And that assumes that they just so happen to invest it in something like an IRA. I think all things considered buying is best, because while you make those payments and do everything else life involves you on the back end earn that equity. I don’t honestly believe that renting is cheaper than owning. It’s bogus to make the argument that when you rent you aren’t paying mortgage + taxes + insurance + maintenance + profit. No landlord would be in business if they weren’t covering expenses and earning profit. And how many substandard landlords have we seem cheating on repairs? I once rented a place that didn’t have a properly working range or AC for a month in the dead of summer, from the day I moved in.

          • Gas Bucket

            This is pretty accurate. I bought my first house for $150k. Sold it for $84k this year. When I tried to rent it out, the maximum rent I could get for it was $200 a month below the house payment, and that doesn’t even begin to address maintenance costs. Meanwhile the same apartment I rented before owning that house only increased by $86 per month over a span of 8 years.

          • zj sky

            “That is the beauty of being a renter. You are free.”


          • FreedomOverrated

            The freedom thing is over-rated… Your nomadic… there’s a reason our ancestors stopped being nomadic and settled down. Being a nomad can bring all sorts of new stresses… I rented until i was 30. The first few moves in my early 20s were easy and exciting. Then i met my wife and moved her in with me.. that was a pain… (girls have a lot of stuff). Then we moved a year later because my 1 bedroom was too small. That was a HUGE pain.. it’s amazing how much stuff you accumulate. Now we have a 6 month old.. and our STUFF quotient just rose dramatically. The idea of packing and moving again gives me more nightmares. No thanks, i’ll stay put.

          • J_Robit

            So your point is that you and your wife are overly dependent on material things, and therefore accumulate unnecessary clutter?

          • Najat

            1) Perhaps the amount of things they own is less massive than you might think vis-a-vis the size of the place they rented – you’d have to see it to know but point is since you haven’t, don’t judge.

            2) Suppose FreedomOverrated & his wife were, say, antiques buffs who happened to have acquired an admirable collection of truly beautiful, historically unique items that, into the bargain, gave them joy to live with? Or for that matter, suppose they had the most ghastly collection of shag rugs, chrome and black-glass 70’s stuff ever encountered? Either way, it’s their business and their right. Lastly, for all any of us knows, they could be serious outdoor-activity buffs whose joy is hiking, riding, skiing, snowboarding or sailing…now those unnamed “material things” take on a whole new perspective. Point again is, these are _their_ possessions, which obviously mean enough to them to warrant a larger living space – so don’t judge. Not your place to determine that people you’ve never seen & will never meet are “overly dependent on material things” when those things probably allow them to enjoy life to a fuller degree.

            3) “Unnecessary clutter”? – I nearly fell off my stool laughing. Did you never raise children, at least in the current era?! Ding, ding, Reality calling! Car seats, booster seats, diaper bags, cribs, playpens, strollers, toys, books, stuffed animals, gifts from family/friends…it racks up before one realises the landslide has even hit.

            Even living on a modest two-students’ budget, I could not believe what my spouse & I had ended up with by the time our second child had arrived (number one was slightly over 1.5 yrs old at the time, so both shared babyhood, toddler, etc.), much of it gifted or handed down. Good luck to you if you can raise a child sans “material things” in this day and age, if for no other reason than compliance with federal/state regulations about what the child must ride, sleep or be carried about in…do let us know what log cabin you’re living in (no offense to log cabin living!).

            And, just for the heck of it, a comment on home-owning…I am fighting every last way I can to retain the home I began to lose when my ex quit paying the mtge months b/f leaving me, but never told me until months later when the well-past due reminders started pouring in…it’s three years later and now my former partner-for-life threatens to evict me if I’m not out by month’s end to allow the deed-in-lieu to execute. Why would I hang on so long? Because for some of us, a home is more than just the cut-and-dried figures. Some of us, once or twice in a lifetime, find the place that is everything we dreamt about (esp. those of us who are historic-house crazy) our entire lives. Some of us find complete fulfillment/identification living in a 200+-yr-old place with a couple of acres out back that are ours to plant as we wish, build on or not as we wish (local code respected, of course), blare music as loud as we wish, hunt on, hike on, have gatherings and campfires on, and at day’s end when the stars come out know a peace that is unmatched in walking back from the barn to the house aware that this one piece of earth is ours to care for and live on as we wish. James Altucher says that for everything we say yes to, we say no to some thing[s] else. For me, it is worth it to to say no to quite a few things in life to be (and seek to stay) where I am. Call me crazy..This is a blessing I would not trade for anything.

          • J_Robit

            You are full of excuses. The fact is, you have too much stuff. Kids in the 1970s didn’t need that much. It’s a symptom of modern life, sure, but you just wish to throw in the towel and call me unreasonable. No wonder she left you – you are a long-winded bore

          • Jeffjr04

            It’s funny how folks can preach about life experiences, but can’t seem to grasp the concept that where you live is literally part of the life experience. I can still remember the layout and look of my grandparent’s home before my grandmother passed, and I haven’t been in the home in over 20 years. The concept of having a place to call HOME escapes these people. To them it’s just a pile of 2x4s. They think their IRA will somehow mean more to their kids than Grandma’s house.

          • Natashafx

            Freedom is so NOT OVERRATED! Try telling that to the people who don’t have it!

          • Gas Bucket

            Hire movers, buy new stuff when you move and leave the old behind, or just stop hoarding. Your problem isn’t one of renting vs. owning, it’s one of dumb personal habits, and it’s easily solvable. If you can’t even afford the cost of hiring a moving company, you’re probably living check to check and can’t properly afford a house either.

          • Natashafx

            Right on Ole. Only the crappy, greedy landlords try to raise rent every year. I’ve lived at the same place for over 5 years and my landlord hasn’t raised the rent one penny. I think she is terrified if she does I will move because she has had terrible luck with tenants not paying on time. From the mail I get that I have to Return To Sender…it looks like at least 10 people have lived here before. It’s a nice place, the landlord is nice so it must have been an economic reason all these people moved. I pay on time every single month. And if I’m traveling on the first, I give her the check in advance. She appreciates that and recognizes a good tenant who not only pays on time but takes care of her property. Less stress for her. And the house is in a gated community and nothing has broken but the stove and her husband came the very next day with a brand new one and microwave. No, they don’t want to risk raising the rent and lose a great tenant because I am at the highest I would pay to rent and wouldn’t pay more because I could rent a place of equal quality for a couple hundred dollars less but I like this place, quiet, neighbors are great…the ones I have, 3 houses are vacant in my cul-de-sac…they can’t stay rented. People don’t have money to pay the higher rent in my area when they can pay cheaper. My landlord is happy to have found me and vice versa.

          • Being a good ‘customer’ is also part of being a good ‘investor’ :)

          • Jeffjr04

            You’re delusional if you think landlords don’t raise rent at the risk of losing a tenant, ESPECIALLY in complexes. Having lived in MD I’ve seen what it means to go from $800 to $1400 in 5 years. It’s silly how you folks think rent remains static.

          • Natashafx

            So true Ole. I’ve lived in my place for 5 years and the landlord hasn’t raised the rent at all. I pay on time and she’s afraid if she raised it I will move. She admitted that she had y had the best luck with tenants in the pad so she’s happy to have me. It’s a nice townhouse in a gated community and she’s already getting top rent that some people probably can’t afford alone. If she raised it I would start looking and sure I would find somewhere just as nice for a couple hundred less. Losing a good tenant isn’t worth a few extra dollars.

          • Your lucky, around here rents go up every year…

          • Simonetti

            dont forget the loan interest….

          • FreedomOverrated

            do the math .. our loan interest is $1100 a month on a home that zillows for $500K. Could we rent a $500K home in our neighborhood for $1100… hell no! We bought a fixer in 2011 though… We took a risk and it paid off so far. I based our purchase entirely on “rental parity”. We could buy for less than it cost to rent the same home. So it was a no brainer. I did underestimate the maintence costs… But 3 years later.. we upgraded the HVAC, pool equipment, landscaping…. all which should last 15 years or more. Next up is roof (lack of rain in LA has me dragging my feet on the new roof… lucked out so far.) That should last 30 years in LA climate though.

          • Stephen Ray

            Everybody underestimates the maintenance. That’s why renting can be so good. Even the landlord does it.

            How much was your down payment? How much have you paid in maintenance over the last 4 years? How much does that add to the $1100?

          • zxoiesru

            WRONG! “equity” is just INFLATION which means your house cost 200K 20 years ago now it cost $300K THAT IS LESS THAN INFLATION WHICH IS NOT $100K MORE BUT ACTUALLY IT IS A LOSS!!

          • Jeffjr04

            How is equity inflation? Equity is a concept that isn’t exclusive to homes. Equity is ownership stake.

          • Gas Bucket

            Lol. At the time this comment was written, my first house was starting its decline in value from $150k. It was valued at $85k as of this year, which didn’t quite cover total cost of paying off the balance of $84k + costs associated with the sale (out of my pocket). At that rate it couldn’t even buy a sofa made for a dollhouse. I had to pay someone to take it. So thanks for the fantastic advice.

          • Ewelina

            i think it will be usefull – http://apartmentsinlublin.com/

        • Mas

          It will buy more then $0 will

        • zxoiesru

          Even that “buy” camp you are referring to is completely wrong. They’re acting like if you sold the house for $157K that you would have that $157K back. Except that in reality you spent MORE than $157K EXTRA in:
          * MAINTENANCE: $5k/yr * 15 = $75K
          * UPGRADES: $2k/yr * 15 = $30K
          * PROPERTY TAXES: $1K/yr * 15 = $15K
          * INTEREST: $15,000/yr average * 15 = $225,000 (YES $15K IS THE AVERAGE INTEREST PER YEAR FOR $157K LOAN!!! YES THAT MEANS YOU SPENT MORE THAN THE COST OF THE HOUSE IN INTEREST ALONE!! SOURCE: http://www.homebuyergo.com/Principal_Interest_Payment_1.aspx )

          RENTING: $1,000/mo * 15 years = $180,000
          BUYING: $157K (cost of house) + $75K + $30K + $15K + $225K + = $502,000 – $157K (sale of house, assuming ZERO LOSS even counting inflation) =

          hmm, let’s see, should I rent or buy? If I rent, I spend and lose a total of $180,000 over 15 years. However if I buy, for the same size place I spend and lose $345,000 (AFTER the sale of the house and getting the $157K back!!). Not even counting job issues due to being restricted to a few miles vs the whole country if renting, the stress of having to do the maintenance all the time, etc. etc.

          p.s. I didn’t even count closing costs ($10K+), broker’s fees ($10K+), and other taxes (between $10K and $200K EXTRA on top of all the above things, on a $157K house).

          • Joe

            Your comparison is so ludicrous its not even funny, since when do you pay the same amount of interest on a loan during the life of the loan. Every month you pay on it the interest goes down as you pay the principal down. And for $1,000 in rent, you are also assuming rent will not go up in 15 years, kinda crazy if you ask me. And at last, a $1000 apartment or house which ever you are assuming, will never be the size of a whole home that you get when that that amount is your mortgage. OH!!!… and the kicker is that you are taking the absolute worst case scenario that your property value will never increase. Its not like you are buy an over priced multi million dollar home where it is much more volatile to loose value.

          • zxoiesru

            Your ignorance and idiocy is so ludicrous it’s not even funny.

          • Jeffjr04

            $15,000 a year interest is almost 10%. Nobody bought at 10% interest in over a decade. And as equity rises interest decreases. Brokers fees are typical 6%, not 10%. And why would you consider the enigmatic “upgrades” to be separate from maintenance, they are largely overlapping. You don’t replace your toilet then upgrade it later. It’s easy to make an argument with gross overestimations.

        • zxoiesru

          At a 3.5% inflation rate, in 15 years $157,000.00 will be worth $93,711.83, more than 1/3 loss.

          • Jeffjr04

            And what if the house values doubles? That’s what happened up until 2007.

          • zxoiesrus

            2007 was over a decade ago. Since then everyone except californians lost money on their houses after inflation and plummetting house prices.

          • zxoiesrus

            And what if the house value halves? That’s what happened in 2008.

      • D

        Just used your calculator, I’m going to save 80k in the long run by buying. My rent would have been $650 a month, plus utilities, for a tiny place. I’m now paying $360, same neighborhood, bigger and nicer place.

      • zxoiesru
    • Sprungy

       “The market? It is numbers on a screen. You go to bed, wake up, and the numbers can change, for better or worse.”

      Same with house value. In late 2009 we bought a house that had been assessed for the previous tax year at $205,000.  We thought we got a great value at 166,500 (appraisal 169,900).  Now, in 2012, when we’re divorcing and trying to sell, it’s just been appraised at $161,500.   Hmm. Down $5000 in less than 2-1/2 years, that after already dropping nearly $40,000 before we bought it.

      I’m watchin’ those numbers change… Gimme that flexibility, please.

      • Investor

        You don’t understand real estate and tax assessments.

        • Charles

          You hit it on the head this guy knows nothing about real estate

          • Just One Guy

            Yah… and he’s a multi-millionaire. Got it?…

      • Cluelessinky

        I got a good job in 1994, and moved from NY to the Midwest. Two years later I was offered a better job in Pa, but could not sell the house we bought when we moved. I could not afford to move to the new job. Had I rented I could have moved immediately and only worry about the deposit. My advice – rent.

        • Natashafx

          This is exactly why I chose to rent instead of buy. Mark Cuban just said the same thing in an interview earlier this month. He said when you rent you have more flexibility and more opportunities. His advice was to rent especially if you are young and just starting your career. Too many people get caught up with the notion of owning a home and then struggle for years to keep it.

        • Usefull link – see this:

      • Mary

        Sprungy, you need to learn a little about the state of economics and it’s the way the market is. You have a home and I guarantee you will buiil up equity but you must be patient. The markets always turn around are a cyclic. Have patience spensing money on living is a fact of life. The market will turn around and always search methodically and find out at least the previous 2 owners paid for the house. You need to be proactive in buying a house and that includes all the details you are talking about. I would never give the asking price and research for a home you can call home and love. I’m moving to Hawaii in a few years and did you know the houses are reasonable and you can live there and the state is one of he least paying property taxes in the country. I’m living before I die and always was drawn to Hawaii. Another idea are the New Tiny houses and you buy the pacage and build it just buy a small piece of property and they are Tiny but OK if you are alone. I’m not Tiny so I want a nice house away from neighbors I’m private and love to be private.

  • In my city developers were given free downtown land to redevelop. In exchange they moved all of the residents of the “projects” to apartments owned by the developers. All apartments set aside 1/3 units for low income housing. Logically, apartments are run down death traps now. No one wants to rent.

  • Steve

    We rented for almost 30 years. When we came closer to retirement age, we figured it would be a good time to buy a house. What a huge mistake. Now we’re stuck here in a place (would rather not name it) where real estate is in the total toilet. We couldn’t sell and move even if we wanted to. (Which we do.) For all the reasons mentioned in this blog, owning a home is not the “American Dream” it was cracked up to be.

  • teeb

    The worst thing in renting is the supposedly ignorant, the well-meaning, or the blatantly inconsiderate and ever-so-intrusive landlord.

    Of course you have various legal rights that limit in-person visits by a property owner but those won’t stop a landlord from coming over during the day to look the yard, and sometimes, even the interior of your house over with invented reasons for concern.

    Getting a crummy landlord doesn’t happen all the time but it sure seems to be the main reason people are glad to get out of their rental.

    And I wouldn’t even consider moving into an apartment!! Listening to my neighbors dance, scream, cry, etc.?!?!?!?! NO way!

  • Indianprincess

    I hope to move to Denver. I am now looking for homes to lease.

  • anoter point of view

    sounds like peter pan…i don’t want to grow up…i don’t want to be an adult

  • Elmerfusco

    I knew my wife and I were right to not own. We’ve been married over 30 years.

  • Nancy

    Every time we have rented, it has been a disaster. From having carpets that smell like cat piss to walls where we can here the neighbor snoring. The most recent time we rented, we had so many issues with the “executive rental home” that we spent all of our time dealing with the unresponsive landlord, paying to have things replaced/repaired ourselves, and then dealing with the court system trying to get our money back. Of which we only got part of it back. In the mean time, my husband, who works on contract, was not getting paid every time he had to take time off work to help deal with these issues and attend the court dates. We even wound up having to pay for an attorney.

    All of our rental situations have been “luxury” apartment or “executive” rental homes. Expensive! And we have had nothing but problems. So we now buy homes everywhere we go. And we move ever 2 to 3 years because my husband is a contractor. And when one job ends in his specialized field, we have to pick up and move. But we have had nothing but problems with rentals.

  • Karen Tanboor

    Amazing. I am a 45 year old woman and I was single with a great job until 4 years ago. I never bought the crap that owning a home was worth it. One day I added up what a house would really cost me over my lifetime. Purchase price, interest, bank fees, maintenance, taxes. It far exceeded what I would pay in rent.

    I was almost guilted into it 5 years ago by my family and I backed out. I am very happy and I sleep at night because that house would be worth 50% of what I paid for it.

    Instead I fell in love, found a telecommute job, moved to the Middle East and I am having a grand adventure. All I think about is “where I want to live next in this world”

    Oh and I laugh a little in my mind at all the people that will never do anything other than mow the lawn and pay a mortgage.

    It is nice to know there is someone else out there that hasn’t bought the bull.

    • Karen, great story! What do you do in the Middle East!?

    • Shazam84

      I bought a condo in 1999 and put $2oK down, spent another $25K in improvements. I lost my job and home to foreclosure, so it is money down the drain. Owning a home is a money pit. I was able to live in my home free for about a year, however, before I had to vacate. I agree, I do not want to own a home again, unless I become extemely welthy (ha!). If I am lucky enough to find full time work again (I’ve been unemployed for almost 7 years other than a few temp jobs), I plan to rent a condo, as I don’t like apartment living with neighbors and noise. Susie Orman has an article on line about how owning a home is not a good idea. She says all the money you spend owing a home could be better used in investments while renting,

      • Donnabee2004

        In a great many markets, one does not have to spend $250K to get a reasonably decent home. If you educate yourself a little, you can get a house in my market for $50-$60K. It won’t be huge, or new, but it’ll be at least the size of your basic 2- or 3-bedroom apartment, in a reasonably decent neighborhood full of folks who work for a living; it’ll have space around it, and probably a basement to store stuff in, and the guy upstairs won’t be doing a wardance on your ceiling at 3 AM, and you won’t have a landlord who tells you what to do and to move whether or not you want to — and it’ll cost you LESS than rent. I can’t imagine Suze Orman objecting to that.

    • Anonymous

      “Oh and I laugh a little in my mind at all the people that will never do anything other than mow the lawn and pay a mortgage.”.

      “Instead I fell in love, found a telecommute job, moved to the Middle East and I am having a grand adventure. All I think about is “where I want to live next in this world””

      Why would you think about that, if you are happy in the present? If you found love, it hardly matters where you live, right? People are the adventure, whether in Dubai or Billings, MT. Certainly if you don’t want a house or be tied down, don’t. But you aren’t better or more interesting than someone who has chosen to stay in 1 place. (It’s a Wonderful Life comes to mind..)

    • Yyz100

      Good outlook Karen Tanboor …. email me

    • Donnabee2004

      An awful lot of people don’t care if they never do anything but mow the lawn and pay a mortgage. It strikes me as smarter than mowing the lawn and paying somebody else’s mortgage — which is what you do when you rent a house. The fact that it isn’t what you want doesn’t make you superior to them; those are the people that make the world run, and they don’t deserve to be laughed at, in your mind or anywhere else. Personally, with what’s going on these days, you couldn’t force me at gunpoint to live in the Middle East. You’re welcome to it, and I hope you survive your “adventure”.


        Its her adventure, why wouldn’t she survive it? Who’s to say mowing a lawn that is your’s is smarter? House buying is not for everyone, My mother is 61 years old, and unfortunately was in the factories when they started shutting down some 10 plus years ago, she now is 16 years into her 30 year mortgage and “stuck” where she is with 14 more years to go. This puts her at age 76, had she not decided to buy when she thought she had a “stable” job, she could now move somewhere where she could be more comfortable. At this point, she is 3 hours away from me driving time, has about an acre of land that she has to take care of own her own with my aunt who is also in her 60’s. She has “ok” credit car is paid for etc, but she makes about 12 an hr. Her mortgage is only 550 a month, but at 12 an hr, after taxes and med insurance you are not looking at much. Now factor in taxes, it’s an older house so something is always needing repairs, It’s just a bad situation. People should be more open minded, and just because you don’t Buy a home doesn’t mean you are not thinking about the future, had my mother thought more about the future and not purchased she would be way better off. STOP LETTING YOUR MINDS BE PROGRAMMED AMERICA.

        • progressivethinker

          Excuse me, but no one in their right mind would sign up for a 30 year mortgage at that age unless they intended to sell and move elsewhere long before the mortgage would be paid off. Period. I am planning my payoff to happen 5 or 6 years before I retire. Then only taxes are owed and maintenance costs to account for.

    • westisbest

      thats fine for now but when your old and dont have a place of your own you may end up in a tent on the desert and driving a camel

    • Lld01

      Sensible people would never buy a house at the very peak of the market in the first place, they would buy now and end up with at least 40% equity in there home in less then two years, Further more if you dont buy more house then you can afford it is assine to think homeowner spend all there time repairing things. Please learn this statement DIVISION OF LABOR I own home and rental property I do not mown the lawn or repair the faucet etc etc other people do that and I pay them. Good luck with that swinging renting pad when you are 80

    • OpenMindedAmerican

      AMEN, i agree totally. people are so closed minded its crazy. By a house do this do that. Live your life as you feel. If you have income, you can take care of the bills wherever you are then live life and enjoy.

  • Jay Noyd

    Good discussions and information. I wish some of you people would have some class and limit your profanity. We are what we speak.

    • Jay, its an interesting point. People get very upset about these issues to the point of making it personal. Its all psychological.

  • Conniesyardsale

    I lived the “American dream” for 12 years with my ex. No dream. We still had homeowners associations telling us what we could put on our property and what we couldn’t, and we had to PAY them to do this. No fence taller than this, no sheds, no pools, no extra cars in the driveway, no paint this color, etc. What part of that is true home ownership??
    We struggled to make payments towards the end. First house, 5 years in, filed bankruptcy, back then you could reaffirm on the homes and cars, so we kept it, only to sell it at a horrible loss, magically, we were financed to build a new house.. funny huh? Bankruptcy in 99, moved into newly build home in 02. Shows how easy it is to get a house, made me think they wanted us to fail again. 5 years in second house, with our house payments going up every year by 100.00 – 150.00 a month due to taxes, by our fifth year in that house, we were facing foreclosure. (ex was a firefighter, together we made approx 90k a year). Left that house, and got a rental home. He left me 2 weeks after moving me and the kids into the rental. He went back to live with mom, then remarried and owns a condo again, guess he didn’t like renting. I on the other hand, LOVE it.
    I have moved 4x in the past 4 years, once a year. First place was old, didn’t like the neighbors, Second place was WONDERFUL, expensive, then I had a friend and her 2 kids who lost their home move in with me, after 4 months, I decided I wasn’t getting rid of them easy, they weren’t helping with rent or bills, talked to my landlord, and was granted permission to get out of my lease early. (at 1 yr instead of 2yr) Moved to a much cheaper place, the fist one ever in a connected type condo (like a duplex or apt). HATED the neighbors. 2 very old ladies on both sides of us, who must have thought they lived in a retirement community. They were evil to the point we found ourselves going other places instead of home.. only went there to sleep. Lease was up… with a little grinding I hit the gold mine. Finally, after 4 moves, found a quaint little home, with a 2 car garage, large fenced in yard, and the BEST landlords ever. The neighborhood is right across from my kids school, backs up to the community pool, walking paths, 4th of July City Celebration location, etc. They bought the house VIA cash in foreclosure, paid CASH, own the house outright, So, they are not going to LOSE this home. I am safe here, love my neighbors, My landlords even sent me a 30.00 gift card for a “house warming” gift, and a 50.00 gift card for Christmas. Crazy huh? My rent will never go up, because their house payment CANT go up, there isn’t one. Did I mention my landlords said painting is ok, as long as it is beige again when we move, nails are expected for pictures and such, they don’t care how many, and I can do the landscaping however I want. Every time we have a storm (like the ice storm) my landlord comes and cleans up branches, cleans the gutters on the house, and manages to spend about a half hour in either a good game of catch with the football or a one on one game of basketball with my son. I don’t plan on ever moving from this house, until my kids graduate and I can do a smaller place. I got lucky. They are out there.. The taxes in my city keep going up, we have a school levy about every other year, but my payment wont. All you have to do is find someone who owns their rental OUT RIGHT, they won’t have a bank trying to take it away.
    I like renting. Only way I’ll every OWN a home again, is if one is given to me in a will (won’t take one unless it is paid off) or if I hit the lottery… and can buy one with cash.

    FYI: Just because you rent, doesn’t mean it is an apt or a condo connected in a building with halls and people above you. The one place I rented that was “connected” was a condo (3 stories) no upstairs neighbors.. and there were 5 in a building.. all had their own private front and back door, along with a small area in the back.. (they called this limited common area) Funny.

  • Fiorellap_77

    Love your article…and I have to say that my husband and I currently own a house and we have come to the point of saying most of the things you mentioned in this article….we want to move for a change, but of course we have to find out what to do with the house, rent? if we are lucky to find tenants and then have the headache of dealing with that…sell? we won’t get anything close to what we paid for, in this market, so like you said we are trapped, and I don’t like it…will we buy again?….I don’t think so.

  • Janellebeam

    Loved this article. Never in a million years did I think I would be reading an article about never buying a home. I am getting ready to put my house on the market and sell it so I can rent once again after 25 years of maintenance, property taxes, foundation repairs, roofs, you name it. The day I walk out that door and give the key to new owners is going to be a day that a burden has been lifted off my shoulders. I am divorced with kids grown up and moved out so why the heck not??? I will call the landlord and not spend a dime out of my back pocket.

  • Virginia

    Agreed. I am trapped in my house. We bought in November of 2006 at the height of the market. I can’t even pretend to imagine how much less it’s worth now. Nothing is selling in our town. Fortunately, we bought within our means, so the payment is low, but still, we are stuck.

  • Bryncomeaux

    in 15 years i will pay my house off then no more payments just associated costs rent will always go up my mortgage payment total is less than 900mo i get a house and land i couldnt rent for 2500mo does anybody believe that assosiated cost arnt included in rent? like hell there not. by he way in all the years iv rented the only repair iv seen a landlord make is to replace a refrigerator!

  • Jay Noyd

    A pitfall for senior citizens! You are looking for that special assisted living center where you are catered to for dinner and free wine at happy hour. In this instance the building has 19 floors and you can really get that view at higher elevations of Mt.Rainier and the Cascades or the Olympic Range. It is an $80,000 buy in, prorated 5 years plus the rent. In 3 years, high rise condos completely surrounded the place. You either died, listened to loud construction noise starting at 6:30 am, viewed downtown skyscrapers and now your to old to leave!. Change is inevitable.

  • Castleofberries

    Its all an EGO trip…I have owned houses, there a pain in the A$$!!! I now invest all the money that I was wasting on a morgage . I am now able to fund my 401K in full, I have plenty of money in savings, I rent a nice place in a beautiful area and my 12 year old son goes to a great school in town. Get over what people think…let your EGO go and live your TRUTH!!! The truth is owning a home does NOT make you a success…living your true does!!

  • Robashlock

    Region matters. I’ve owned homes in the NE and they were serious money pits between freesing plumbing line and leaky roofs. Things are just inherently harder to maintain in these cold places. In the Southwest the maintenance is minimal. You can even cool your house by evaporation. If it breaks it’s $300 to replace and the running expense is $60 a month unlike the NE where you have to have AC which is both fragile and expensive to purchase and expensive to run.

    On a more general note, every place I have rented I have always been burdened with pretty rude neigbors; it’s the transient population. Homeowners generally are pretty civilized to each other in my experience.

  • Please keep writing articles like this. So we homeowners can have a large pool of renters that we can make $$$ off of. I can’t believe this is still a debate… it is a testament to the short sightedness of the human race.

    You HAVE to live somewhere. Shelter is one of the necessities of life. Yes, you can pay LESS right now on rent. Guess what? As inflation comes, rent prices will increase in time. Whereas a mortgage stays the same (if you get 30 years fixed). You think you will be paying less in RENT than what my 30 year mortgage payments are going to be in 2041?

    Also please keep touting the low return on housing… What is your return on your rent payments? Your return is the worst possible return: -100%. And like I said before: RENT PRICES INCREASE OVER TIME. Ok, I understand historically the S&P 500 is a better investment than a house. Can you live inside a stock? Can you rent out your stock and get rent payments until perpetuity? Note: I own real estate AND stocks. Diversification.

    You’re right, owning a home isn’t for everyone. If you like to move around alot or can’t COMFORTABLY afford a home, then go rent. Alot of it has to do with the piece of property that you buy and the neighborhood you’re in. I just bought a condo in a beautiful part of LA and it’s a very rentable place. I’m pretty confident I can move when I need to. Yeah, I know I have to maintain the place and pay for a plumber once in a blue moon. Boo hoo, it’s not that difficult.

    After paying off my mortgage, I can sell my house and get $ back. Even if the house loses value (unlikely after 30+ years), I get something back. What are you going to sell with all of the money you paid for 30 years of rent?

    • my return on my potential downpayment in other investments is a lot more than it would ever be for owning a home. AND its liquid, i dont pay property taxes, and you get to do all my maintenance and shoveling. Be careful!

      • Yes, you can put the $ you would normally pay for a downpayment (eg $100k) in stocks/bonds/etc. Yes, these are liquid. Doing so, you can look at your rent payments as an additional fee for putting all your money in these investments rather than owning your own home. Whether this is a smart decision for you depends on how much rent you will pay over the course of your lifetime. Maybe you’re right based on how cheap the rent is in your neighborhood or how expensive houses are. Paying $1000/mo on rent (LA prices) would equate to $12,000/year. Would you invest $100k in a fund that charges you 12% annually?
        I live in LA in a 2BR condo that I own. I just bought the place. I am renting out one of the bedrooms. Taking all my payments (mortgate, prop tax, HOA, etc.) and subtracting rental income, it is very comparable to paying my own rent in a 2BR in a place of comparable quality (this is a new condo with new appliances). But this is today. What about 10 years from now, when rent prices have risen and I am paying the exact same amount on my mortgage and possibly charging my renter even more to live with me? Or maybe I move out and rent both bedrooms; the increased rent would easily cover the entire expense of the place 10 years from now. Like I said, it depends on how affordable your housing is and how much rent costs in your neighborhood. But the longer your timeframe, the clearer the numbers support owning rather than buying.

        • Aboutjoshua

          Landon, here’s some info to think about. When you buy, you usually need a down payment. Let’s say you have $10,000 saved up. You could buy $10,000 worth of stock or mutual funds. You set up an account with Ameritrade and make the order, which costs you $10 and now you own the stock. First of all, the stock is designed to move up in value. That is, the company is constantly trying to improve it’s profitability and increase the value of the stock. Of course, it doesn’t always happen, but the S&P 500 has returned an average of 9.8% per year since 1926 according to CNNMoney.com, so it’s safe to say you could earn that rate. So, at the end of 30 years if your stocks and/or funds continue at that rate of return you’d have $165,222.88 or a 1652% increase. If stocks are too “risky” for you, long term US treasury bonds increased at an average of 5.4% over the same period, that would net you $48,441.58 or a 484% return. Then, when you want to sell, it’s another $10 order and you are done.

          Or you could make a down payment on a house. Let’s say it’s a $100,000 house at 5% interest for 30 years with $1500/year taxes and $400/year insurance. These are numbers close to my situation here in Columbus, Ohio. Obviously it’ll be different everywhere, but it’s an example. Existing homes appreciated at 3.4% from 1987 to 2009 according the Case-Schiller index for home values, so your $100,000 house should be worth $272,656.69 after 30 years if appreciation continues at that rate. Seems pretty good at first glance, but here’s what people miss. Your house payment including insurance and taxes in this example is $720/month. Seems pretty cheap at first glance, sign me up. But $720/month for 360 months is $259,200. Of course, you have to add in your $10,000 initial “investment” and maintenance of around $9000 (2005 census data says around $300/year x 30 years) so you’ve now paid $278,200 for the house.

          So, on your $278,200 investment, you’ve lost $5,543.31 or 1.99% over 30 years. Now it’s time to sell and cash out of your investment. Quite an upheaval to cash in an investment, btw. So, you get lucky and sell your place for the asking price of $272,656.69 and now you owe the realtors 6% or $16,359.40 for a net sale of $256,297.29 and now you’ve lost $21,902.71 over 30 years. Not to mention the opportunity cost of tying up your money in a liability that is costing you money while you could own an asset that is making you money. You could argue that you also lost that $165,222 from not investing in the stock market during that time.

          So, as far as investments go, a house is terrible, mainly because you’re investing with the bank’s money and need to pay them so much back. You’re better off investing with your own, smaller amount of money. I know you can’t live in a stock, but why not invest that $10,000 and then just rent something for the $800? Obviously, I’ve shown that you’re not “losing” the rent money – you’re gaining the opportunity not to live in a money sink hole while your $10,000 actually works for you. Think about it. Later.

          • Claire

            Abo-you provide some interesting thoughts. The main part, however, I disagree with is in the last paragraph. Renting for $800. Over the course of 30 years, that $800 per month will increase.

            I think homeownership is not just about location, location, location. I believe it is also about timing, timing, timing. If you buy low, and sell high, then it is a great investment. If you bought at the peak and are trying to sell today, it is a terrible investment. And, like everything in life, we don’t always have control of when we need to sell. (This goes for stocks too.)

            Btw-I pay a mortgage now. I own 2 investment properties. One has always done great and one is a looser that I can’t sell. I also have a portfolio of stocks/bonds/commodities. However, I am looking into buying additional investment properties at this time to rent for a while. I will use the cash flow from the properties to rehab the houses when I am ready to sell. (I don’t need the cash flow to live on). I won’t sell them unless they are profitable. My intention is to use those proceeds at a later date to pay off my primary residence.

            Then maybe I’ll sell my primary residence and go rent on a beach somewhere :)

          • Good points, Joshua.
            A few rebuttals.:
            1) Going to a basic mortgage calculator, calculating a $90,000 loan ($100k – $10k downpayment) for 30 years at 5% interest is $483. Adding in your example of taxes and insurance + maintenance that is $641 house payments, and you get around $240k payment for the house over 30 years. That is a GAIN of $32.6k after 30 years (based on your numbers). Subtracting the realtors fee, you gained $17k over 30 years. Not that great, but still a gain while owning your own place and not paying rent. You did not account for tax deductions, which are actually quite significant.
            2) You mentioned this in your last paragraph. You did a great job of listing every single expense of homeownership and attempting to calculate a hypothetical return. But your calculations on the gain of investing your money is flawed. Like you said, you did not account for the money lost on rent (something you pay for because you do not now your own home). I don’t know what Columbus rent is like from 1987 – 2011, but you need to subtract the 360 months of rent from your return in the stock market. And it must be for an EQUIVALENT housing situation as the hypothetical house that was purchased because to be fair you must keep quality of living equal (e.g. if the house was a 3 bedroom house, for the comparison you need to calculate rent for a 3 bedroom house). Let’s assume $1200/mo is what it costs to rent out a house that is worth $272k right now, which I think is pretty reasonable. That is $14,400 in rent just in 2011. Working backwards 5 years and assuming that taxes cost 4% LESS every year, you already pay almost $67,000 in rent. That is only from 2006. I’m lazy, but if you want you can continue calculating all the way back until 1981. Then tell me where your $155k in stock gains are really going… :)
            3) Yes, you are right that you gained the opportunity to invest that $. You also missed the increasing opportunity to invest in the stock market as rent prices outpace the mortgage payment. For example, I calculated $641 in house payments based on your numbers. The renter is paying $1200 for 2011. So I can invest $6700 more this year. Over the course of the 30 year loan, I have more and more money to invest while the renter has less and less.
            4) Not to nitpick, the annualized stock market return from 1987 to 2009 (the same time period you referenced for housing) is less than 8%, not 9.8%.

          • “Working backwards 5 years and assuming that taxes cost 4% LESS every year, you already pay almost $67,000 in rent”.

            Replace “taxes” with “rent” in this statement. Sorry.

          • Aboutjoshua

            Landon, you must’ve used a different mortgage calculator than I did and that’s cool, but my numbers were fine. You can move the numbers around if you want and we could argue them back and forth all day, but that wasn’t my point. The point was to illustrate that most people are in a losing or break even position in their home. Aside from all the people in the articles you can read every day who actually realize it and complain about it loudly (how can you ignore that, btw?), there are tons who don’t see how much they are really paying for the home and that’s what I was getting at. Shedding some light on it for people who don’t see that their mortgage payment is paying for the house 2-3 times over. By the way, $300/year maintenance on a home was the only stat I could find, but it’s very low in my book. Home renovation companies couldn’t survive. According to the census bureau and Bloomberg, there are 128,203,000 houses in America and they will spend approx $125 billion this year on improvements. That’s $975 per house, which is more in line with what I was thinking. My sources are below since I know you’re very interested in checking everything. There’s also an article about a survey that says people were planning on spending an average of $6200 last year. Of course, all of this is on top of what you would pay as a renter.

            Anyway, here’s the meat of it for me: You can choose to look at your rent as some sort of fee to be invested in the stock market if you want to, but it’s not, period. Your finances are all related in the sense that it all comes from the same pool of money you have, but it’s like saying the cheeseburger you bought at McDonald’s last week is part of the cost of dinner tonight. It’s not. I only sited opportunity cost loosely to remind you that there’s an extra hypothetical cost to everything you buy because of what you’re “not” buying, but it’s just that – hypothetical. Also, requiring the people in your examples to rent the same level of accommodations as if they were buying a house is incorrect. In fact, that’s actually part of the point you’re missing big time. The guy who wants to avoid buying the house in order to buy stocks is ideally living well below (not just “within”) his means in order to save the extra money. He could be living in his parents’ house or have $200 rent because he lives with 4-5 roommates in order to save, so it’s a variable you’re attempting to control in your argument, but it’s out of bounds for you to stipulate, in my opinion. People can live in a studio and eat ramen and buy stocks if they want and your scenario is something you’ve unfortunately invented for your convenience.

            That said, look at rent a little differently for a minute. Maybe it’s a convenience/freedom fee as opposed to throwing money away. Maybe it’s for people who don’t want to fix things or take care of a lawn or want to be able to move every year without realtor fees. Or maybe they just prefer the feel of an apartment complex or being able to move where the hot chicks are. I understand that you’ve bought a condo, so you’re obviously defending your choices and way of life, but no one is saying that what you did was wrong for you. Just saying that renting is making a big come back because people are realizing that home ownership isn’t everything it was supposed to be. Thanks.

            Here’s the article I was referencing on the S&P’s average return. I realize it’s a different time frame, but it was just what I happened to reference. http://money.cnn.com/magazines/moneymag/money101/lesson4/




          • Aboutjoshua

            *cited opportunity cost


            The point was to illustrate that most people are in a losing or break even position in their home *and there are better “investments” to make.

          • Dan

            Hi Joshua,

            I know I’m very late (by about a month). I feel that I need to make a point though that you all missed (and that could have helped your argument). In the initial scenario you made ($10,000 in stocks for renter vs. $10,000 down-payment/$90,000 debt) what struck me as most obvious is that you all made assumptions, but didn’t conjecture as to when the home buyer would finish paying off his loan–if he had to take a loan out for the home, most likely he did not have money for much else, so…assuming he made some money, and started paying off that loan, then he decided to rent it to someone for that additional income that was talked about earlier, where is that homeowner then going to live? Is he going to live in the same home with his new tenants (thereby losing some measure of privacy and comfort in the process)? If not, then is he going to take out another loan to buy another house to live in and thereby more debt? If so then there goes his rental income to reinvest in the stock market (also that money would not be invested in anything up until then whereas the original renter did have his money in stocks all this time). Another thing to consider is that owing a home requires more than just maintenance [yard-lawns(water, fertilizers, pesticides, lawnmower, oil, gas, time–or pay someone to do it every week); trees/shrubs/flowers(water, fertilizers, pesticides, trimming, time–again or pay someone to do it every season which can run from a few hundred to a few thousand dollars); if installing a sprinkler system–add a few more thousand to hire someone; general house care [wood panel refinishing/replacing, exterior paint, roof(shingle replacements, tar, fittings, wood, rain gutters, etc), plumbing (and in old homes, older than 30 years, it has to be completely redone), fixtures, bathroom amenities (tubs, toilet, tiles, flooring,etc.), carpeting/flooring, termite control, heating/cooling systems, kitchen(appliances, tiles/flooring, cabinetry, fixtures, etc.), if a pool is there (pool maintenance; whereas renting you can choose a place where there’s a pool and costs are already included in rent), driveway repaving, window replacement, etc.]. That’s only basic maintenance, now lets talk about the possibility of catastrophic insurance payments you’d have to pay if you live in a disaster prone area (which is just about anywhere), be it earthquake, floods, fires, tornadoes, hurricanes, winds, etc. (or else risk losing everything and starting over again). When you rent if the building is damaged you simply move to another place–and because most apartments/condos are usually multilevel solid buildings, there is a smaller chance that the entire building will have structural damage, meaning that most of your possessions will most likely be safe after the fact. Finally, I chuckled at the comment Landon made about renting a house in Malibu for $20,000 a month–the original home-buyer ($10,000 down-payment/$90,000 debt) would most likely not be able to afford a home in that area and wouldn’t even qualify for the large loan needed to buy said home.

            Bottom line, look I grew up in a family who lived in one house or another since I can remember( and occasionally worried about being able to make the mortgage payment), and yeah, I won’t lie, I liked it, it offered stability, a lawn to play on growing up, privacy, etc. However all the things I mentioned above, we had to fix at one point or another–sometimes several times. My dad was handy so we saved money here and there, but he wasn’t a jack of all trades, so we would occasionally have to hire a professional. As for the park sized yard maintenance–I did a lot of that, until I didn’t have more time (thing called school, work, having a social life), and then the yard went to hell in a hand-basket because my dad would only occasionally take care of it. On top of that, if we wanted to move to say another state that would have been far more difficult than if we had been renting. Thing is there are so many expenses associated with owning a home most people don’t even realize it. At this stage in my life, I don’t want to put roots down anytime soon, and more-so than that, I don’t have the time or energy to constantly worry about what needs to be done around the house and how I’m going to pay for it. Maybe one day, I’ll change my mind (and in fact I’m not entirely opposed to home-ownership as long as its the perfect home, and I do mean perfect). For now I’m happy to be free in the world.

          • Dan

            In previous comment when I typed “owing”, I meant “owning”. Also a PS point–some of the most relaxing, homebody, and comfortable homes I’ve been in have been apartments and condos that my friends made their own, and with much love and creativity. Some people don’t even know what to do with all the space they have when they own a home–simply more utility (water, electrical, cooling/heating) bills to pay, and it doesn’t even look inviting.

          • Dan

            Also when looked at the scenarios posted, we have to assume that both renter and homebuyer had upward mobility all this time and slowly made more money equally as their careers stabilized–yet it doesn’t change the fact that a lot of their earnings went into mortgage payment and rent.

          • Joshua, you have to include standard of living if you are going to make an accurate comparison between housing and renting as an investment. It’s not fair to compare somebody who bought a 3BR house and somebody renting a studio apartment and saying the person in the studio is coming out on top. The person in the studio is sacrificing his living space, it has NOTHING to do with the fact that he is renting compared to the person who bought. (I would actually argue the homeowner still comes out on top, but I digress). Who said the home buyer is buying above his means? I can just as easily compare somebody renting a 3 bedroom house and somebody who purchased a small studio condo. You have to make the variables equal if you want to make a fair comparison. That’s a no brainer with any argument.

            And you HAVE to account for rent as money lost if you are comparing housing vs. renting as investments. You’re right: rent has nothing to do with the stock market… but YOU brought up in your argument the extra stock market investments by the renter. You included everything under the sun for the homeowner’s expenses such as maintenance/upgrades (sometimes optional to the owner) in your housing calculations. You tout the extra stock investment returns of the renter yet you ignore the fact that he’s paying rent and the homeowner isn’t? You state the fact that the homeowner (in your calculations) loses 5% total on the entire sum of his house payments after 30 full years but ignore the fact that the renter loses much much more if you subtract his 30 year rent losses from his 30 year stock gains???

            People are complaining about housing now. Some of them lost their jobs because the economy tanked and they can’t afford their houses anymore. Some of them bought their houses at the wrong time and are now underwater. Some of them bought variable rate APR mortgages and are getting screwed.

            Some people are also complaining about their STOCK portfolios also (at least those who bought in 2007).

            Everybody’s complaining.

            That doesn’t change the long-term benefits of homeownership.

          • “You state the fact that the homeowner (in your calculations) loses 5% total on the entire sum of his house payments…”

            Replace 5% with 1.99%.

          • Aboutjoshua

            The problem is, I’m not and the author is not comparing owning vs renting as INVESTMENTS. No one is saying renting is an investment, except maybe you, but I don’t know why you would. My premise was comparing owning a home, which a lot of people say is their “biggest investment”, against another well known investment. The obvious implication is that if you don’t own, you have to live somewhere and that’s where the rent aspect comes in, but you’ll notice that I’m not touting renting – I am touting investing. And as I said, you could live in your parents’ basement, rent from someone cheaply, live with roommates, etc. I was just saying maybe some people enjoy renting for certain reasons.

            And if you go back to the original article, he’s giving reasons NOT TO OWN and again the renting aspect is given a couple points, but it takes a complete backseat in his argument. You’ve installed renting as the direct opponent of owning and it’s not. My argument has been owning vs stock investing. I don’t care where you live, really. Saving money by living cheaply and trying to grow your money through liquid (paper) investments is more important in my opinion and I think owning a house takes away from that because of all the maintenance, illiquidity, closing costs, realtor’s fees and other reasons I’ve given.

            So, no, you don’t factor in standard of living or rent as lost money. Absolutely the guy in the studio who’s saving money is “sacrificing” living space, that’s exactly what I’m talking about. People think they deserve a house and lots of living space and a nice car and they end up living in debt to get it and can’t understand why they can’t get ahead. Rent is an “expense”, but so is everything else you buy and I’m not here to compare grocery bills – I’m talking about investing. Let’s say the renter has an iPhone with an expensive data plan and the homeowner still has a flip phone. Do those factor into your equation? Because even though you’re bringing up rent as a way to even the playing field, you’re actually skewing it. Rent doesn’t belong in the discussion, because it’s just a variable expense like groceries or your mobile bill and has nothing to do with the disadvantages of your home being your biggest investment.

            A mortgage, on the other hand, is legal DEBT aka LIABILITY. That’s what you’re missing. The homeowner is paying down a liability – legally secured, obligated debt. The renter is paying an expense, plain and simple. I’m sure you would argue that the year’s lease for $12,000 is legally obligated, and it is, but it’s about a tenth of the amount and doesn’t go on the person’s balance sheet, because it’s not a true liability. And some places have a sixth month lease or are month to month, anyway – another variable. So, look at it this way: The renter with $10,000 in savings and stocks and the homeowner with $10,000 in equity and $90,000 in debt have basically the same bottom line on their balance sheet, but the renter has less debt, is liquid, has less maintenance costs, more time not mowing the lawn, etc. – again, advantages of not owning. Their monthly expenses such as rent have nothing to do with it, that’s why I cited the mortgage payments and not the rent in my example. If you are adding rent under liabilities for the renter, you might as well add cheeseburgers and his grocery bill, because it’s all stuff that doesn’t belong under liability on a personal balance sheet. Here’s a link to a specific page of an accounting journal that explains that a lease is accounted differently from a purchase. An apartment lease is called an Operating Lease whereas a home purchase is a Finance or Capital Lease and there is a difference.


            Anyway, I can understand looking at it the way you do. You’re in the majority which is sad, but you’re wrong, my friend. Good luck, either way. Take it easy.

          • Rent IS the direct opponent to home ownership because you have to live somewhere. If you have free housing (AKA living with your parents) then I agree 100%: it is better to invest your money in the stock market than buying a house.

            James’ article makes no mention of living in his parent’s basement, so I assume he is touting renting over home ownership. The argument the RENTERS keep bringing up is that they have extra money to invest. My argument is that the return on their extra investments cannot make up for the cost of rent, which is expensive and provides no return. The home owner will see most if not all or more than the money he is putting into his house (your calculations said he lost 2% after 30 years). The renter will get a nice return on his stock portfolio but the returns will be eaten up by his housing costs. I have repeated this point like 6x already. I guess ignoring rent is your only way to convince yourself that you are right in your mind.

            You say that I am missing the “point” of the article and it’s really about living beneath your means? OK fine… then my new counter argument is that owning a home is not necessarily living above your means. If you have enough and make enough, you can find a house with affordable mortgage payments. Are you going to challenge me there also?

          • You also seem to be making two false assumptions:
            a) We are arguing about accounting.
            b) Everyone who buys real estate is buying a mansion that they can barely afford.

          • Aboutjoshua

            Actually, I think I can clear this up for you, Landon. Have you ever had a discussion with someone about something and someone comes up and brings up a different discussion? You could say, “Yeah, I appreciate what you’re saying, but that’s not really what we were talking about…” and politely excuse yourself or you can engage them.

            You were talking with others about renting vs owning and I brought up a different discussion – owning vs traditional investing. And you engaged me, but now seem to want to drag me back to the other argument that I’m not interested in.

            So, to sum up.
            I. I’m simply saying live cheaply and invest.
            A. Most people tend to have a cheaper apartment, save money for a down payment and buy a house.
            B. I never said the above situation is the absolute, but it is pretty standard, you and I both know that.
            C. Nor did I say that living cheaply and owning a home are mutually exclusive.
            1. In fact, I said I don’t care where you live, the idea is just to live cheaply and invest.
            D. Having said the above, in GENERAL, real world terms, a person could live in a $300/month room (I had one a couple years back) and save up money and start a stock portfolio. But most people, given the extra money, will take it and put it down on a house and go into debt.
            1. All I was suggesting is reevaluate where that money should go at first instead of jumping right to a house.

            II. Home ownership is not “bad”, it just has disadvantages as your biggest investment.
            A. I never said home ownership is bad or that everyone is buying a mansion they can barely afford. You’re putting words in my mouth there.
            B. Again, I’m not here to discuss renting vs owning, but I’ll humor you for a minute. In your “everything is equal” scenario, the person who is paying $800 rent, yes that money is an expense and is “gone”, but that’s the end of it.
            C. Although the homeowner who is spending $800 on a mortgage is “investing” it, he also has all the extra costs of home ownership.
            1. Closing costs
            2. Maintenance
            3. Home improvements
            4. Realtor’s fees, etc.
            5. Most good investments don’t require ongoing COSTS, they provide profits, dividends, income, etc.
            6. Again, I’m not saying buying a home is bad. You should buy a cheap house to live in if you can afford to while still saving, but most people have their savings partially or completely eaten up by the above costs and end up not being able to save or invest. Just check out statistics for how much people have saved for retirement. It’s abysmal.

            III. Yes, we were arguing about accounting.
            A. How else would you judge who is making out better than comparing personal “balance sheets”, so to speak?
            1. We can’t skip ahead 30 years to see who’s got more money, it’s hypothetical.
            B. We can’t compare two hypothetical balance sheets without using the same definition of what goes onto one.

            That’s it. Again, I know all renting isn’t cheaper than all owning, but I was making the suggestion that people live in a small apartment or with someone else or with mom and dad – WHATEVER CHEAP WAY YOU WANT – and avoid the extra so called “hidden costs” of home ownership while investing in something that doesn’t require ongoing costs for at least awhile. If you can’t accept that suggestion / idea, so be it.

          • OK, I read your post in full and there was a huge misunderstanding from the very beginning. You were arguing something different than I thought you were.

            Your statement was “live cheaply and invest”. I agree 100%, no debate there. You say that you suggest people do so by living in a small apartment, living with mom and dad, etc. etc. I agree also, just like I believe living in a small house, living in a cheaper neighborhood, etc. are ways to save money as well.

            You raised my points of contention when using the hypothetical stock market returns. Buy a cheap house and use the extra money on stocks. Don’t rent simply so that you have the extra money to play stocks. Why? Because you don’t get a return on your rent and the costs will outpace your investment gains. That was the point I was trying to make. There are many good personal reasons to rent over buy (not enough savings, unstable employment, want to move around, etc.). Saying that renting is a smarter investment decision than buying is false. Maybe that wasn’t your point, but it sure sounded like it with your first post.

            As for your last bullet, I believe a debate between the costs of home ownership and renting should include rent costs. Doesn’t matter what the legalities of a balance sheet are; this is a debate on cash flow. When you pay rent, it exits your account. If we were debating coffee cakes and home ownership, we would talk about the costs of coffee cakes. Taking rent out of the equation is like me debating the costs of free housing vs. home ownership. Of course I will lose if I support owning a home.

            Anyhow, I apologize for any misunderstandings. And for breaking my promise of leaving this forum not once but twice. ;)

          • OK, I read your post in full and there was a huge misunderstanding from the very beginning. You were arguing something different than I thought you were.

            Your statement was “live cheaply and invest”. I agree 100%, no debate there. You say that you suggest people do so by living in a small apartment, living with mom and dad, etc. etc. I agree also, just like I believe living in a small house, living in a cheaper neighborhood, etc. are ways to save money as well.

            You raised my points of contention when using the hypothetical stock market returns. Buy a cheap house and use the extra money on stocks. Don’t rent simply so that you have the extra money to play stocks. Why? Because you don’t get a return on your rent and the costs will outpace your investment gains. That was the point I was trying to make. There are many good personal reasons to rent over buy (not enough savings, unstable employment, want to move around, etc.). Saying that renting is a smarter investment decision than buying is false. Maybe that wasn’t your point, but it sure sounded like it with your first post.

            As for your last bullet, I believe a debate between the costs of home ownership and renting should include rent costs. Doesn’t matter what the legalities of a balance sheet are; this is a debate on cash flow. When you pay rent, it exits your account. If we were debating coffee cakes and home ownership, we would talk about the costs of coffee cakes. Taking rent out of the equation is like me debating the costs of free housing vs. home ownership. Of course I will lose if I support owning a home.

            Anyhow, I apologize for any misunderstandings. And for breaking my promise of leaving this forum not once but twice. ;)

          • Aboutjoshua

            Yeah, I don’t agree 100% with everything you’re saying here, but we’re more on the same page and that’s all you can really ask for in most cases. Take care.

          • Aboutjoshua

            Yeah, I don’t agree 100% with everything you’re saying here, but we’re more on the same page and that’s all you can really ask for in most cases. Take care.

          • Guest man12345

            I recently purchased a townhouse, i pay $115 dollars a month in strata fees that cover all outside maintenance costs, fire, water and (other) Insurance coverage’s, sewer and garbage disposal, lawn care, snow removal, and any other bill considered outside the unit. I pay $30 dollars in content insurance. The lawyer was paid for by the developer, the Realtor was paid by the developer. when i purchased it was a brand new building, accessing warranty on everything attached to the building for a 10 year full coverage. All appliances and fixtures have manufacturer warranties starting at 2 years and up. I am a first time home buyer, so i received some extra help. 1 – no closing costs, 2 – a tax break on property tax bringing my yearly taxes to $350, 3 – access to $25,000 maximum rrsp contribution to down payment free of any interest/costs as long as i repay that amount in full by 15 years. ( meaning my tiered Albertan 40% tax rate on my above $100k salary for $25,000 is 0% and thus being tax free) for simple sake that makes out to be $40,000 of income before tax i would have had to earn for the same amount of non taxable income. 4 – my mortgage is $300,000 bi weekly at a 25 year 5 year 2.89%. making my total mortgage monthly payment $1450. assuming i do not change my RRSP contribution of $25,000/year i use to reduce my taxes then the repayment regardless of if i rented or owned is negated. utilities per month = $200 at most in the harshest climates. some simple math makes my monthly cost $1825 when summed. I rent a room out for $1000 to 2 people ( 500*2) leaving me with a total cost of $825/month. $825/m and no overhead, no hidden costs, no lawyer fees no maintenance. i am a plumber/electrician by trade and thus even if something were to happen, the cost to replace.repair is so minimal that my time to fix would most definitely be less that the headache of being a renter and dealing with a landlord to do the same for me. My ” $825/m cost” is a lot lower than the standard $1000 rent fee at an average rental property where i live. and so i end by saying this. to argue each others points is void in a specific scenario. if you are smart you can win in any climate…situation…geographical location… i have a wife, a dog, and a kid… i have investments in rrsp’s mutual funds and stocks. i have liquid cash and i have a house which costs less than a rental property. my only “loss” is my 2.89% interest on $300,000 which is quickly offset by inflation and investments interest. my “net worth” is going up. This principle can be scaled to any average income. i say my apple is red. you say your apple is green. are you both right… or are you both wrong. I thought these sights were for insightful arguments to help open the eyes of the blind. instead the blind are arguing over the insightful. BTW i started with nothing, was kicked out of my parents house at 18, and did the whole rental property thing. It is achievable if you want it bad enough. And to those who argue over simpleton ideologies… And to those looking for help… Rent OR own, if it is what YOU can afford, do what you can to get ahead… not behind. Sometimes you have to do things you don’t like to do the things you do like.

          • OK fine. Let’s ignore standard of living. You’re right, it’s totally irrelevant (sarcasm ON). Here’s my example: a homeowner and renter make the same salary. The homeowner buys a cheap, small condo in an affordable part of town and is paying $1000 a month on his mortgage plus taxes. The renter is renting a 5 bedroom beach house on the shores of Malibu and is paying $20,000 a month in rent. The homeowner is coming out on top. I win; owning real estate is better.

          • Aboutjoshua

            Another stipulation implied. I said I don’t care where a person lives, just said that I think it’s best to live cheaply and invest. I just happen to think owning is more costly than other alternatives in general, not that it is definitively always more costly, which I never said. Most people get a home to “move up” in the world, so they’re generally buying more expensive than they were renting, which you know perfectly well.

            But keep going. How many more different angles can you take and words can you put in my mouth to challenge “live cheaply and invest”, I wonder?

          • Rent isn’t cheap. You don’t get a return on it and it grows over time.

          • Also, you can live cheaply by buying a cheap house. ::flush::

          • Chris

            I really enjoyed you guys comments on the pros and cons of home ownership versus rentals. I’m a homeowner myself and always tell friends and family your personal resident is not an investment. An investment pays money (profit). I think as long as one knows this going in good!

          • Evy

            Yes – a personal *resident* is most definitely NOT an investment!


            A personal *RESIDENCE* might be (which is the subject of this heated discussion).

          • tuna

            If you are not going to take into account rental expense when comparing stocks vs property in order to compare investment vs investment, then the landlord comparison would be apt.

          • ShinyRoboto

            Your assertion that the rent must be deducted from the stock investment is logically and mathematically incorrect. Under your assertion, if someone in your situation purchased coffee and a slice of banana nut bread at $8.00/day over a period of 30 years, then you must deduct that $10,950 from any profit you made upon selling your house.

            If one chooses to direct a stream of funds into one vessel (apple) versus another (orange), and one vessel proves to be a zero-sum or even negative-sum, one does not subtract it from any net gain achieved in the other vessel. It is a loss one time.

          • Landon

            No, you’re wrong ShinyRoboto. The argument that the renters are presenting is that they have MORE money to invest in other vehicles such as the stock market because their money is not being tied up in real estate. Using this argument, they say that their additional return on the stock market makes them come out “ahead” compared to the homeowner. They neglect to account for the ADDITIONAL expense of rent payments that the homeowner does not incur. I can’t believe you guys can’t see this.

            I know stocks have nothing to do with rent. Hence the fact that I own stocks but I do not pay rent. It am challenging the renters’ argument that their additional stock capital makes them somehow “richer” than the renter.

            Your example is irrelevant because nobody is arguing that owning a home provides additional cash to buy banana nut bread and coffee.

          • Landon

            Uh, typos again.

            “It am challenging the renters’ argument that their additional stock capital makes them somehow “richer” than the renter.”

            should say

            “I am challenging the renters’ argument that their additional stock capital makes them somehow “richer” than the homeowner.

            Seriously, I can’t believe you guys can’t understand the point I’m trying to make….

          • Aboutjoshua

            Read the other reply I just made, Landon. You can argue with people on this forum all you want, but you can’t argue with the Financial Accounting Standards Board. Here is a link and the text describing the difference between renting – AN EXPENSE vs owning – A LIABILITY. An expense is on par with banana nut bread and cheeseburgers and groceries. Therefore, as I said above and as Shiny said, rent doesn’t belong in a discussion on investments because it’s FACTUALLY- according to standardized accounting procedures – an expense and not on par with paying down a liability such as a mortgage.

            So, if you personally decide that rent or banana nut bread and your cell phone and cheeseburgers belong on your personal balance sheet, so be it, but you should at least acknowledge to yourself, if not to us, that you’re doing it incorrectly according to actual standardized practices. I do this type of thing all the time and just say that I like my way better, but you’re claiming that we’re incorrect and we’re not – you are. There’s more shame in being wrong and stubborn than being wrong and able to admit it in my opinion.


            Accounting for leases by the lessee

            The accounting profession recognizes leases as either an operating lease or a capital lease (finance lease). An operating lease records no asset or liability on the financial statements, the amount paid is expensed as incurred. On the other hand, a capital lease is recorded as both an asset and a liability on the financial statements, generally at the present value of the rental payments (but never greater than the asset’s fair market value). To distinguish the two, the Financial Accounting Standards Board (FASB) provided criteria for when a lease should be capitalized, and if any one of the criteria for capitalization is met, the lease is treated as a capital lease and recorded on the financial statements. The primary standard for lease accounting is Statement of Financial Accounting Standards No. 13 (FAS 13), which has been amended several times; it is known as topic 840 in the FASB’s new Accounting Standards Codification. In July 2006, the FASB and the International Accounting Standards Board (IASB) announced the commencement of a joint project to comprehensively reconsider lease accounting. The boards’ stated intention is to recognize an asset and obligation for all leases (in essence, making all leases capital leases). The projected completion of the project is now mid-2011. [4][5] The basic criteria for capitalization of a lease by lessee are as follows:

            * The lessor transfers ownership of the asset to the lessee at the end of the lease term.
            * A bargain purchase option is given to the lessee. This is an option that allows the lessee, upon termination of the lease, to purchase the leased asset at a price significantly lower than the expected fair market value of the asset.
            * The life of the lease is equal to or greater than 75% of the economic life of the asset.
            * The present value of the minimum lease payments (MLP) is equal to or greater than 90% of the fair market value of leased property. To understand and apply this criterion, you need familiarize yourself with what is included in the minimum lease payments and how the present value is calculated. The minimum lease payments include the minimum rental payments minus any executory cost, the guaranteed residual value, the bargain purchase option, and any penalty for failure to renew or extend the lease. The amount calculated is then discounted using the lessee’s incremental borrowing rate. However, if the lessee knows the implicit rate used by the lessor and the rate is less than the lessee’s rate, the lessee should use the lessor’s rate to discount the minimum lease payment.

            These are called the 7(a)-7(d) tests, named for the paragraphs of FAS 13 in which they are found.

            If any of the above are met, the lease would be considered a capital or financing lease and must be disclosed on the lessee’s balance sheet. Conversely, if none of the criteria are met, the contract is an operating lease, and the lessee will have a footnote in its balance sheet to that effect. Both parties (lessor and lessee) must review these criteria at the outset and determine independently the classification as it is possible to classify them differently (it is quite common, in fact, for a single lease to be considered a capital lease by lessors and an operating lease by lessees).

            If the term of the lease does not exceed 12 months, the lease may be considered neither of the above criteria. These contracts are “rentals” and do not need to be disclosed in lessee’s footnotes.

          • Ugh, this is my last post and statement on the subject:


            Banana nut bread, coffee, etc has nothing to do with home ownership vs. renting. Rent payments has EVERYTHING to do with home ownership vs. renting. Your clever argument is flawed and invalid.

            Boasting about extra investment returns from renting is equivalent to boasting that you own a mutual fund that consistently returns 20% a year while ignoring the fact that the mutual fund’s fees are 25% a year.

            That is all.

          • Aboutjoshua

            Hey, you’re right that rent payments have EVERYTHING to do with home ownership vs renting, which has nothing at all to do with my point that owning a home as your biggest investment has a lot of disadvantages. Very clever of YOU to ignore everything I’ve said in an attempt to defend your position. I think it actually worked, you’re invisible!

            Hey, is that a floating ball over there?

            No, it’s Landon, he’s taking it and going home.

            Oh, why?

            Well, because when having a discussion with someone, if you bring up a point outside of his very narrow point of view, he can’t adapt and speak to your argument and admit that he’s never thought of it like that before. He would rather ignore you and logic and definitions and just repeat his argument on his self-invented terms until he gets frustrated and takes off. I think he needs to learn that when someone says that one of his stipulations is not a part of their argument (ie. they never said everyone lives in the same level of accommodations, etc.), that that’s fair play in a discussion. And attempting to hold someone to invalid stipulations that they never agreed to is unfair and childish. Also, he should probably learn that some things such as fiscal terms and comparisons are defined and you shouldn’t just throw someone’s rent, car repairs or lap dances on their balance sheet to make yourself and your choices look better.

            Damn, dude, shut the hell up.

            Haha. Ok, that was pretty after school special….

            Good luck in life, Landon. Hope you can improve your attitude and learn to listen to people and take other peoples’ points of view into consideration. Later.

          • Hahaha, sorry I had to come back one last time (I promise).

            You just told me to “shut the hell up”. Then you say I’m the one who needs to improve my attitude? LOL. I guess your definition of bad attitude is: “anyone who disagrees with me”.

            You started this argument supporting renting over housing. I did a comparison of renting and housing with equivalent standard of living and showed that renting was more expensive than housing because you don’t get a return on rent payments compared to the return on owning a home. You bring up stock market returns and I show that rent costs outpace the returns.

            Then you say your whole argument was about “living cheaply and investing” and say its unfair that I used equivalent standards of living in my example. You’ve never heard of buying a small house at a good price? It’s impossible for somebody to pay expensive rent beyond his means?

            Ok, I’m out!

          • Aboutjoshua

            Yeah, I was afraid you would take the shut the hell up part wrong. That was the other person talking to me, not me talking to you. It was just meant to be funny and my attitude is perfectly fine.

            Anyway, for the millionth time, I didn’t support renting over owning and I’m actually starting to think you’re awfully unintelligent for continuing to say that. Go back and read my very first post to you. It’s about what to do with your first $10,000 that you’re able to save up and you saying anything else is just starting to get stupid and boring.

            I just made another post that answers your last questions, hopefully you get it now. Later.

          • Evy

            I think you CAN make out better/get ahead financially by renting IN THE SCENARIO where you aggressively invest the down payment on the house in aggressive investment strategies such as covered call writing, put selling, etc.

            I’ve borrowed money from my credit cards at 0% (albeit with a 3% balance transfer fee) AND invested it in the stock market.

            THAT is how renting is BETTER than investing (financially speaking – I’m not going into the psychological feel-good grow-my-own-organic-produce-while-enjoying-complete-silence-in-my-fantastic-backyard-with-mini-tea-rose-bushes argument).

          • accounting

            Thanks for the mildly amusing back and forth, Landon and Joshua. You each make some good points and some bad points. And each of you seems to keep missing the other one’s points!

            “You can argue with people on this forum all you want, but you can’t argue with the Financial Accounting Standards Board.”

            Actually Joshua, as an accountant I’m telling you this is a specious argument. Not only can you argue with the FASB, you should always argue with any so-called authority that pretends to hand down answers from on high. If you argue with them intelligently, they may even welcome it! The FASB’s pronouncements are frequently updated, which means they listen to arguments and change their minds fairly often.

            Just as lawyers need to keep up with changes in laws and court decisions, and doctors have to keep up with the latest diseases and cures, the FASB’s “standards” are a work in progress. Be cautious about over-reliance on any so-called experts, especially appointed ones!

            In any case, regarding your argument about expenses vs. liabilities, I think “Bob Loblaw” makes an excellent point that resolves the issue between you and Landon. Looking at rent vs. buy from a landlord’s perspective is a neat way to work around the conflict about how to treat the rent expense. Renting the house from yourself, as your own landlord, allows for the fairest comparison.

            However, the real reason this is a specious argument is that the FASB pronouncements apply to business accounting, while the standards for personal financial statements are somewhat different. In short, while you are correct about how to differentiate expenses vs. liabilities, Landon is correct about the need to account for those expenses, even though it is not done on the balance sheet.

            Hope this is clear, what I’m really saying is that “Bob Loblaw” is not really “bringing up a brand new point” at all, instead he’s right on target in addressing your discussion with Landon.

          • “Renting the house from yourself, as your own landlord, allows for the fairest comparison.”


            “Brevity is the soul of wit.”

          • Grapenut

            Really great points by all. Landon, you are doin great, I think you are right in the points you try to make, and regardless of what is said here, I can see that you know you are right. I am amazed at the creativity with which people are defending the argument for renting. Most recently our attention is directed to the “Financial Accounting Standards Board.” Wooooooooooo. First off, regardless of what FASB says, or how rent (or home ownership) is classified in the FASB annals -shelter is a product; and we as individuals can obtain the product of shelter through renting, mortgage, or purchasing from our savings (in general). Banana-nut-bread and coffee are 2 different products; they can (generally) be obtained by purchasing them on the street, purchasing the ingredients (in bulk) and making them, or I could own my own coffee shop -purchase the ingredients in bulk -make my own and deduct the overhead as expenses. Entities such as FASB will classify these things differently; and because these things are classified differently, at the end of the day a homeowner may be able to deduct mortgage interest from their taxes whereas a renter would not be able to deduct rent; and some families may be able to use food stamps to buy the bulk ingredients for banana-nut-bread, but not the finished product from the local coffee shop, and a small business owner (selling coffee and nut bread) can deduct the cost of the ingredients as a business expense. These things are classified differently but the finished products are essentially the same: shelter, banana-nut-bread, and coffee. rent is-to home ownership is-to owning a rental property -AS- buying a banana nut bread and coffee is-to making your own is-to owning your own coffee shop (that sells banan-nut bread). By the way I don’t have a degree and don’t know the first thing about accounting.
            I’m just a simple man, who owns some rental properties.

          • Kevin

            It all
            depends on where you live. And if you are going to compare rent versus buy, you
            really need to look at the same property in both situations. I live in Vancouver, BC,
            one of the most expensive housing markets in the world. I love where I live. 19th
            floor, expansive ocean views etc. And I rent. I rent because I am a “one
            percenter” in Canada
            based on income and can’t afford the mortgage on the place I live in. In Vancouver, renting makes
            sense. Hear me out. The following are for the property I live in:


            Down payment:

            cost: $1,500

            payment: $3,400

            Insurance: $381/year

            Tax: $1,653/year

            (strata): $4,119/year

            Repairs: $600/year


            house expense: $4,063

            rent: $1,900 (includes heat, hot water, taxes… all of the above)


            Mortgage: Place
            would be paid in 21.5 years, total cost $1,048,184 (2.9% mortgage)

            If I invest
            the $2,163 difference at 3.3% in dividend income (easy to do and tax free in Canada up to
            $48K per person) I would:

            Lose $11,751
            on the house in 5 years if it increases 10% in value.

            Lose $80,253
            on the house in 10 years if it increases 20% in value.

            Lose $133,204
            on the house in 15 years if it increases 35% in value.

            Lose = make less money versus investing the $2,163 each month.

            I accounted for sales cost, brokerage fees and all that.

            So it depends on WHERE you live and you MUST compare the same property. Making the
            argument that housing is always better to buy is a folly. You have to do the


          • zj sky

            Maybe it’s a convenience/freedom fee as opposed to throwing money away.
            Maybe it’s for people who don’t want to fix things or take care of a
            lawn or want to be able to move every year without realtor fees. ”

            Bravo – my wife and I rent in NYC and although we pay a lot we love the idea that once our lease is up in a year that we could move to Mars if it was possible. That and we love having a super that replaces things while we are not there and does not charge us for it. My parents have a house and their AC broke last summer requiring them to spend over $8,000 to get a new system. That does NOT happen to my wife and I!!!

          • Lets pretend that both Joshua and Landon have scraped together $10,000 to invest.

            Let’s also pretend that, due to similar but different life experiences, they have both decided to live large for the next 30 years renting expensive penthouse suites and eating sushi every night. Living paycheck to paycheck they will never save another dime but they will be happy.

            Joshua, being the astute reader of Buffet’s annual letters to shareholders, decides to put his $10,000 into the stock market.

            Landon is a simple man and instead decides to use his $10,000 to incur $90,000 of debt and buy a house for $100,000.

            Using Joshua’s figures, after 30 years, he would net $165,222.88 from his original $10,000 investment in the stock market (9.8% year compounding).

            Simple. Buy the ETF today and sell it 30 years from now. He now has $165,222.88 in 2041 dollars to do whatever he wishes.

            Landon on the other hand, is in a different situation. After buying his home, he decides he doesn’t want to alter his lifestyle and decides to rent it out to a nice family while he continues to live check-to-check, eating sushi every night, and renting a nice condo he can barely afford.

            Landon rents his house out for $1000/month, and pays the local kids to do repairs.

            Joshua, thinks Landon is crazy, because according to him, expenses for the house, including taxes, repairs, and insurance would be $178,200 after 30 years. He forgot to mention mortgage interest but we will include that ($93,963.64). And if he were to sell the house to realize the capital gains he must pay the realtor 6% or $16,359.40. Total expenses equal $288,523.04.

            However, Landon is not so simple after all. For after 30 years, the 5% compounding return (annual rent increases) on the rent (dividends) generated from his $100,000 theoretical home totals $837,129.48.

            And, based on Joshua’s implied rate of appreciation it is now worth $272,656.69 after 30 years (but why would he want to sell it is generating $5,186.33 per month and is now paid for?), so the net total is $1,109.786.17.

            Minus expenses ($288,523.04), after 30 years, Landon has accrued $821,263.06.

            Joshua has $165,222.88.

            That is the power of leverage and compounding dividends (rent) that stocks cannot beat.

            James Altucher is a well connected hedge fund manager living in NYC and can make many multiples better than 9.8% per year by investing in start-ups and leveraging information.

            Josh in Ohio is not James Altucher and would probably do better buying a rental house and fixing the plumbing once in a while. He will likely take that as an insult but it is not.

          • Aboutjoshua

            Bob, I’m not insulted. You’re doing as I did and bringing up a brand new point that is correct: Buying a rental property is more profitable than buying stocks or traditional home ownership. I agree and never said otherwise, because we haven’t been discussing it. Of course bringing in rent money to pay for the mortgage and provide some profit is better than paying the mortgage down with your wages.

            However, not everyone has the time or inclination to fix the proverbial plumbing and I prefer stocks currently. I assume the average apartment dweller who has saved up their initial $10,000 would also, but that doesn’t make what you said untrue. If a person wants to continue living cheap in mom’s basement or wherever and put the $10,000 into a rental and fix plumbing, then, yes, that’s probably the best way to go. I have always planned to buy some rentals in the future, but our current situation doesn’t really allow for it. Thanks.

          • Aboutjoshua

            Bob, I’m not insulted. You’re doing as I did and bringing up a brand new point that is correct: Buying a rental property is more profitable than buying stocks or traditional home ownership. I agree and never said otherwise, because we haven’t been discussing it. Of course bringing in rent money to pay for the mortgage and provide some profit is better than paying the mortgage down with your wages.

            However, not everyone has the time or inclination to fix the proverbial plumbing and I prefer stocks currently. I assume the average apartment dweller who has saved up their initial $10,000 would also, but that doesn’t make what you said untrue. If a person wants to continue living cheap in mom’s basement or wherever and put the $10,000 into a rental and fix plumbing, then, yes, that’s probably the best way to go. I have always planned to buy some rentals in the future, but our current situation doesn’t really allow for it. Thanks.

          • Landon

            Great points, Bob Loblaw (great show also). I believe we are making the same exact argument, although you presented it in a less obnoxious way than I did. You are arguing using the additional income if you rent out the house. I am arguing about the rental savings (not having to pay rent) if you live in the house. Your way is easier for people to visualize. Cheers.

          • accounting

            Just replied to Joshua about this post above.

          • This is a great post in theory, but the reality is that Landon (as the example) cannot afford to do both, because as he stated he cannot even pay for his current home without renting one of the bedrooms.

            It also explains why Landon is so bent on supporting buying  home, because he already did.

          • Landon

            Ah, slinging arrows at me long after I left. I don’t recall saying I couldn’t afford my place unless I rented one of my bedrooms. Also, you didn’t think that maybe I decided it buying was better than renting BEFORE I bought my property? What excuse do you have for being on the wrong side of the argument?


          • Landon

            Btw, thanks for acknowledging that both me and Bob Loblaw are right “(in theory)”. LOL

          • Broke Bum that use to own

            UMMMM u missed a huge subtraction, the net rent has to have the mortgage payment subtracted out of it, so Langdon will only be making 100-200 a month profit for the next 10-15 yrs, then another 300-400 in the next 15-30, so dont be so quick to compound that 1000 my friend

          • Hugh

            James is smart man and I respect him much (love his blog). However, Bob is correct. Owning property even paying taxes, is a better investment for the average investor than stocks. Depending on where you live, owning a home is better than renting. You can observe a house and with a little research know pretty close how much it is worth. With stocks, they can cook the books. How many stocks have I bought where the balance sheet looked perfect but I lost money. The house i live in is a old farm house I purchased for 18000,00. I invested 60,000 and is worth 150,000. I have no house payments. I owe absolutely nothing to know one. The numbers just don’t add up that renting is better than owning.

          • IIlI

            the best investment in life is investing in your own body – i am talking about exercise, eating very healthy, getting beauty treatments, etc. everything else can fail you and is out of your control. no matter what happens, you will always be the owner of your own body.

          • trader

            You forgot to mention that Landon blew his brains out 3 years into his small-time rental business because being a landlord sucks in America.

          • Lets pretend that both Joshua and Landon have scraped together $10,000 to invest.

            Let’s also pretend that, due to similar but different life experiences, they have both decided to live large for the next 30 years renting expensive penthouse suites and eating sushi every night. Living paycheck to paycheck they will never save another dime but they will be happy.

            Joshua, being the astute reader of Buffet’s annual letters to shareholders, decides to put his $10,000 into the stock market.

            Landon is a simple man and instead decides to use his $10,000 to incur $90,000 of debt and buy a house for $100,000.

            Using Joshua’s figures, after 30 years, he would net $165,222.88 from his original $10,000 investment in the stock market (9.8% year compounding).

            Simple. Buy the ETF today and sell it 30 years from now. He now has $165,222.88 in 2041 dollars to do whatever he wishes.

            Landon on the other hand, is in a different situation. After buying his home, he decides he doesn’t want to alter his lifestyle and decides to rent it out to a nice family while he continues to live check-to-check, eating sushi every night, and renting a nice condo he can barely afford.

            Landon rents his house out for $1000/month, and pays the local kids to do repairs.

            Joshua, thinks Landon is crazy, because according to him, expenses for the house, including taxes, repairs, and insurance would be $178,200 after 30 years. He forgot to mention mortgage interest but we will include that ($93,963.64). And if he were to sell the house to realize the capital gains he must pay the realtor 6% or $16,359.40. Total expenses equal $288,523.04.

            However, Landon is not so simple after all. For after 30 years, the 5% compounding return (annual rent increases) on the rent (dividends) generated from his $100,000 theoretical home totals $837,129.48.

            And, based on Joshua’s implied rate of appreciation it is now worth $272,656.69 after 30 years (but why would he want to sell it is generating $5,186.33 per month and is now paid for?), so the net total is $1,109.786.17.

            Minus expenses ($288,523.04), after 30 years, Landon has accrued $821,263.06.

            Joshua has $165,222.88.

            That is the power of leverage and compounding dividends (rent) that stocks cannot beat.

            James Altucher is a well connected hedge fund manager living in NYC and can make many multiples better than 9.8% per year by investing in start-ups and leveraging information.

            Josh in Ohio is not James Altucher and would probably do better buying a rental house and fixing the plumbing once in a while. He will likely take that as an insult but it is not.

          • Fastpaws

            Your computation is invalid, as in addition to investing the $10k in the stock market, you need to consider your monthly rent payment.

            Oddly, landlords typically dont rent a house for less than the payment…

          • Aboutjoshua

            Fastpaws, you’re a little late to the party. Thus, I shall dub you Slowpawz. I put the z on for cool.

            Keep reading and you’ll see that I’ve already gone round and round with someone about that point. Also oddly, stocks don’t require rent payments.

          • Josaar

            Good points on both sides, however Joshua, You also did not include the tax that you’ll have to pay on your stock(s) when you cash them out in 30 years.

          • evy

            A ROTH IRA’s earnings are NOT taxed upon withdrawal if you meet the requirements. I assume a savvy renter like Joshua would have thought of that ;)

          • Slipmatwax

            Public companies go bankrupt, stocks are wiped out.

          • Peter

            What if your not the one making those taxes and mortgage payments your tenants cover everything and theres still $400 left over every month ? Then is it a good investment?

          • Mas

            Yeah you have the stock and thats great…..where you gonna live? in a dumpster?

            You have to pay rent or mortgage unless you plan to stay in your old bedroom at mom and dad’s house. Which is also great but not everyone can do that… Life goes on right?

          • Jonboy

            Sorry you had to deal with someone who couldn’t even understand the valid points you were making. You didn’t bash home ownership, you just said it’s not as good of an investment vs using that huge down payment for other means like investing in an index fund or assets if you don’t mind renting. Simple compound interest calculators based upon when you start investing have proven time and time again that $10,000 to start investing today can be worth the same as waiting 10 years and then needing to invest $20,000 year after year to make up the same gains as if you’d just invested earlier and let compound interest do the work.

            Once again, I thought you made your argument very clearly with facts to back up why homes are a liability and renting is just an expense not a liability, but oh well, I guess that’s why many people aren’t financially well off because they can’t even understand financial basics like what are taught in Rich Dad Poor Dad.

        • That is truly the most clueless analysis of anything I have ever read, anywhere.

          • The See Organization

            So clueless that you provided zero counter arguments.

      • Trishfriss

        My Kind of Guy Exactly….some of these dumb sxxxts just don’t get IT!! Let them pay their property taxes on their stupid homes unitl the day that they die….and you and I can meet on the beach sometime because WE can AFFORD to vacation and party…those guys will all be home putting Duct Tape on their leaky faucets or spraying $50 worth of poison to kill their weeds…ha ha ha

        To each their own!! I’ll spend my extra money on Margos!!! ha ha ha (<:

        Keep rocking James!!!

        • Lizee_g

          How old are you? Your vocabulary needs an update and your thought processes have obviously been influenced by whatever substances you use to “party.” Most of the replies are well thought, honest and open discussion, without invectives and swearing. Grow up little girl.

          • Titsnfannys

            Shut up, bitch. Get back in the kitchen.

          • Anonymous

            What does the posters age matter? Seems to me a relevant point about property taxes, or at least an opinion on the topic of home ownership..

          • Anonymous

            What does the posters age matter? Seems to me a relevant point about property taxes, or at least an opinion on the topic of home ownership..

      • I Jarosewich

        Mmm… if you live in the NY metro area – with the highest property taxes and insurance rates (home, car, everything) and a solid supply of decent upscale rental options – then yes, I think JA is right – the numbers don’t necessarily work for owning a house – at least not around here.
        But the premium you pay is for the difference between “house” and “home”. Between the ages of 19 and 45, I lived in five different cities and countries and in 10-11 rentals – some good, some awful. I prided myself that all I needed was a passport, some cash, a credit card, a pair of decent shoes and I would get by. It was a GREAT life, no regrets.
        But now I have a small brick, Georgian colonial with a fireplace that an Italian mason crafted perfectly for his daughter, a house he built for her as a wedding present in 1940 in North Jersey. I sit outside in the morning on the great patio he built, eat breakfast under the grape arbor (no kidding) that my husband built, eat the organic heirloom tomatoes (also no kidding) he grows and fuss around with my really pretty irises and lilies, peonies and roses. The snow shoveling sucks – whether we do it or wait for somebody to come by and pay to do it, so does getting the new hot water furnace, roof patching, leaf-raking, lawn mowing – all totally true. But my living room wall is a perfect shade of light green (no kidding) that I adore and soothes me, my neighbors are stable, I don’t smell other people’s cooking or hear their arguments or TVs or “small” dogs.
        JA is probably right – a “house” may not be a great investment, but a home is and very few rentals offer the stability, flexibility, freedom, options to make a great home. What’s the premium on peace of mind?

        • Tracylynnfordoct111963

          And why couldn’t someone rent such a home? You’re comparing owning a house to renting an apartment. I’ve been a homeowner and have rented houses (I now own). In both cases I’ve enjoyed the amenities you describe. In the homes I rented over the years, I never smelled my neighbors cooking, heard their arguments, tv’s, or “small” dogs. There are advantages and disadvantages to owning versus renting, but I’m astonished at how bent out of shape people get when someone suggests that renting can be financially attractive. Piece of mind is somewhat subjective. If folks like James Altucher get more piece of mind by renting, more power to him. I just don’t see what the big deal is.

          • Beachbaby_58

            I cant agree more. I just purchased my first house last year, and I am a single female. Sure.. its alot of work, but it sure beats listening to your neighbors B.S. There is zero respect while living in apartments. Its a shame so many people occupy these residents. If it wasnt for annoying neighbors. I wouldve rented the rest of my life. I cant tell you how much I enjoy being a homeowner. It is totally awesome.

          • Slipmatwax

            They rent “these properties” because they can’t afford a “real” home.

          • mmm not sure about this. I’m a homeowner and a tenant. My choice.

          • sdlfh

            A real home? Oh ok, then I won’t have to pay real rent then. Fucktard.

          • Cindy

            what about owning a condo?

          • Cat

            I own my own home and both my neighbors keep me up all night with the noise they make.

          • Natashafx

            Beachbaby, apartments are noisy that’s why I rent houses. I will never rent an apartment again if I can help it. Renting a house feels just like you own it except when something breaks, you make a phone call. I’ve been very lucky to have had very good landlords. I’ve only moved because of job relocation. When I look for a home to rent I am interviewing the landlord as much as he/she is interviewing me. I have good credit, make good money, always pay on time and take care of the property as if it were my own so there are plenty of options. If anyone call any pass landlord they will say how they hated to see me go. The main thing I like about renting is the freedom. If there are bad neighbors it’s easy to move. So far, I only had one neighbor for about 6 months that wasn’t all that great but they foreclosed quickly and are now gone.

          • FreedomOverrated

            We looked for decent homes to rent in the Los Angeles area… It was cheaper to get a 30 year fixed mortgage on a home than to rent it. Apartments are cheaper yes.. But it’s usually cheaper to buy a Single-Family home than rent the same home if you do your homework. Obviously not in Beverly Hills or near the beach.. renting makes sense in highly desirable areas… BUT, once you work your way out to the BURBS.. owning vs. renting is a no-brainer.

          • R A

            Plant heirloom tomatoes at a rental property and hope that the garden patch at my next rental will have soil and lighting just as conducive to those tomatoes?

          • Cat

            I hear all that and I own my home.

          • Natashafx

            Right on Tracy…I rent a very nice home, been here for over 5 years and I love it. No one knows I rent but myself and my landlord oh and my boyfriend. He owns his home…inherited it…and he doesn’t like it at all. It needs some work that he can’t afford at the moment so he spends a lot of time at my place. Home is where you make it.

        • victoria

          i love that this worked for you…and we built our home and never borrowed to do it…because we lived within our means all the time…every pay cheque went for more materials or contractors… but most people are not able or willing to live like this…unfinished floors, walls or siding…and i do wonder how my sons will ever be able to afford and own outright a home of their own…in the 20 years since we did this, real estate prices have quadrupled or more…no easy answers…. but i love owning my own place…and working on it too…

        • Cat

          I live on Long Island and yes to the over priced everything and now my house isn’t worth anything since Super storm Sandy. TRAPPED

      • LFE49


        • RenterHere

          BUILDING is another story completely.

          Here in México you can build a house for a solid 60-50% of the current asking price of the same square footage. That means that builder’s profit is somewhere between 60 to 100% of their cost. On your dreams.

          Add to that the 150% you pay the bank for using their money for the next third of your natural life!. Still thinking “Oohh, buying a house is such a great investment, poor renters” ?

          Kudos to LFE here. That’s sound investing.

          • rent and own

            Agree. Built a house in mexico as well, property and building costs 1.2million last year. A similar house would be 4-5million in Canada where I live. Renting it out for 5k per WEEK. Occupied 80% of last year. Maintained for peanuts. btw, built far out of the drug and gang belt in a small quaint town (not resort-esque). Riskier investment given the country, but hey look at what the US housing market experienced a couple years ago and now USD purchasing power is just getting slaughtered. Own another home which I do not rent, and a condo which makes little money. Have been a renter and will stay one. FWIW

          • Marie

            My husband is Mexican. We have a home there. When you buy a house in Mexico it is yours. You won’t pay outrageous taxes that feel like a ball and chain that just getts harder to carry each year. We rent in NYC. When something breaks, we call maintenance. We have our own parking space even though a subway train is 3 blocks in either direction. The children have their own private playground for the building and the park is right up the block. I love NY because it is the ultimate Playground from the Bear Mountain to 42 Street to Mastic Beach. However, owning a home here was a total headache and a total drain on our finances. The tax break was a joke as they always went up and so we always owed which didn’t feel like a break. We could “live it up”  in Mexico on the yearly property Tax in NY. Like we say in Mexico “No vale la pena!” but for some of you maybe it is worth the trouble. Maybe you feel like an apartment isn’t a Home. I feel just the opposite. I like the freedom renting brings. I only have to be responsible for my 3br and 2bathroom apartment. The laundry is right here as is the  community room which we can rent for parties. When it snows, my parking lot and side walks are cleared and when the time comes, we can just go and not have to worry about selling or taking a loss or renting if you can’t sell by your deadline and risking people destroying your house and/or not paying. We have friends who do the same in  Puerto Rico and Dominican Republic  and Mexico. I am American but this country is becoming too harsh of an investment in the area of property ownership as far as I’m concerned.

          • Marie

            My husband is Mexican. We have a home there. When you buy a house in Mexico it is yours. You won’t pay outrageous taxes that feel like a ball and chain that just getts harder to carry each year. We rent in NYC. When something breaks, we call maintenance. We have our own parking space even though a subway train is 3 blocks in either direction. The children have their own private playground for the building and the park is right up the block. I love NY because it is the ultimate Playground from the Bear Mountain to 42 Street to Mastic Beach. However, owning a home here was a total headache and a total drain on our finances. The tax break was a joke as they always went up and so we always owed which didn’t feel like a break. We could “live it up”  in Mexico on the yearly property Tax in NY. Like we say in Mexico “No vale la pena!” but for some of you maybe it is worth the trouble. Maybe you feel like an apartment isn’t a Home. I feel just the opposite. I like the freedom renting brings. I only have to be responsible for my 3br and 2bathroom apartment. The laundry is right here as is the  community room which we can rent for parties. When it snows, my parking lot and side walks are cleared and when the time comes, we can just go and not have to worry about selling or taking a loss or renting if you can’t sell by your deadline and risking people destroying your house and/or not paying. We have friends who do the same in  Puerto Rico and Dominican Republic  and Mexico. I am American but this country is becoming too harsh of an investment in the area of property ownership as far as I’m concerned.

        • Hymod

          Hmmmm.. I want to know more about where…And I sure hope that tenant of yours does not lose his job.

        • Hymod

          Hmmmm.. I want to know more about where…And I sure hope that tenant of yours does not lose his job.

      • 124dog

        You seriously think that you don’t pay property taxes? Its worked into your rent…

        • Stocks0223

          Not in mine. We rent from a large and respected property management firm. They don’t have to work property taxes in because the own a lot of communities with a lot of units in each. It’s called economies of scale. If the tax is worked in it’s no more than a buck or two a month. Not so if I owned a condo of the same size. Then I would have to pay the full property tax. If you are renting from an indivdual landlord the taxes are probably factor in but they usually are not with large properties and firms. They have to remain competive with other firms going after the same demographic.

          • Crazy Weasel

            What? How does having more properties reduce their tax burden? If you have more properties, you have more taxes in direct correlation to their value. I don’t think you quite get what “economies of scale” means.

          • 124dog

            Its called the price of doing business they pay taxes it is passed on to you in your rent no matter how large the community is….

          • Kidane01

            It’s irrelevant. So long as the rent is affordable to the renter, it doesn’t matter whether the owner is using that money to pay taxes, or to play the card tables in Vegas. To the renter it doesn’t make any difference, so long as the rent remains affordable to him/her. The money he pays in rent is solely for the roof over his head. What the landlord/owner does with it doesn’t really enter in to the equation for the renter.

          • 124dog

            I don’t thinks so…if the property owner didn’t have to pay property taxes rent would be cheaper.

        • gimmieshelter

          Not always. My rent is about HALF of my landlord’s total monthly expenses in mortgage, taxes, insurance, HOA, maintenance, etc. Why are landlords willing to rent out a place for only half of their monthly expenses? What choice do they have? They can’t charge more than the market rental rates or else nobody will rent the place. They can’t sell the house in this market because it’s near the bottom and they would take a huge loss from their purchase price. There are plenty of landlords out there in the same situation. The people who benefit are the tenants. We get a great house at a much, much lower price than if we bought. And, no, the taxes, maintenance, HOA, insurance, and not even all of the mortgage is factored into our rent.

          In the meantime, I keep my significant down payment in cash in the bank earning compounded interest. How much will that nest egg be worth in 30 years? Probably more than the value of the house in 30 years. I’d much rather have the bank pay me interest every month than for me to pay the bank interest every month. And that nest egg will be enough for me to pay my rent until I die. And who cares what happens after you die? You can’t take your house with you, can you?

          • 124dog

            Banks are not where you invest your money! Any smart investor will tell you that.

            Not sure where you live but rentals are quite alive and doing well here. All the people who lost there homes need to live somewhere. I don’t have any issues renting my homes and all my expenses are covered.

      • Debk888

        You get to deduct property taxes come tax time.

      • Juanmehris

        Property taxes are factored into the rent payment; the landlord pays the property taxes collected from your rent payment; not accurate to portray property taxes as an extra cost tacked on for comparison. If property taxes go up, so will the rent payment…you pay property taxes.

      • Xasj

        Here’s the thing though…if you don’t have a lot of money, and you have to live somewhere, and you’re not somebody who’s big into investments … owning a home is a practical way to make an investment. After 30 years, you own the home. That same person who rents will own nothing in 30 years. The end. There is no other argument for that. If you are somebody who owns 3 homes, a trust fund, and goes to Singapore for fun on the weekends on a private jet, then maybe sure it makes sense to put money in a different higher yield investment than buy a 4th home. However, for most americans in this economy who are barely holding onto a job and need to support a family, if they can hold onto their home, it may be the only investment they can afford to make right now and if that’s their situation, I disagree with your assessment. Also, there are several people on this forum using the property as an income stream so they can rent it out after 30 years. I know several people who do nothing but rent out one of their many great properties to other people and kick back and live the good life renting wherever they want to…using the money from renters who are too lazy or committed to save and invest wisely in a great property. Renting isn’t a one-size-fits-all solution. It shouldn’t be presented that way. Buying at the right time in the right location could be one of the best decisions ever made in 10 years. People could be looking back at this article when their rent doubles thinking, I could have bought this place for a lower payment. The falling dollar value alone is good reason to buy a hard asset like a house. It’s just not as simple as, I don’t want to fix the dishwasher, so I rent and that’s a better investment. I don’t want to fix the dishwasher either, so I buy one and they install it and it’s energy efficient and probably looks better and adds value to my place than the one my landlord is going to buy refurbed off craigslist to get you to the end of your lease.

      • Longino

        Why do these renters keep saying they don’t pay property taxes. I promise you the property taxes on your apartment are paid in your rent. Just because there isn’t a line on the rental agreement that states now much rent money is going toward the property taxes the apartment complex is paying doesn’t mean you don’t pay it. Simply put it costs X dollars to live somewhere. Either you can pay X or you can pay a third party X+their profit. Which will be cheaper? I can honestly say I have never seen a middle man provide something for cheaper than without the middle man.

      • Jtiernan07

        …and in the meantime, you are still paying rent. You have to look at the big picture, not just one puzzle piece.

      • Kmt030

        You do pay taxes in your rent… plain and simple. Landloards want to make money… it’s figured in.

        Also, say you purchase a house at age 27. At 57 you pay it off and are mortgage free and only left with typical maintainence of the home and taxes. On the flip side you rent for 30 years and are now 57. Who know’s what your rent is going to be and you still may pay rent for another 30 years until you die!

      • Gregseitz

        I do my own shoveling.  I like it.  It gives me visible, tangible results and satisfaction.  Shoveling is exercise, and if I get thirsty I reach down, grab a mitten full, and I eat that snow.  I am connected to the world, and each bite is like tasting snow for the first time.

      • Jsinger

        You do get write offs for owning a home.  For me owning a home is not an investment to make money.  It is an investment to make a nice life for my wife and daughter. 

        I understand it is a liability on my balance sheet but I do not care. 

        At the end of the day if my family is happy…that takes a backseat to everything else.

      • Agreed.. I’ve never owned and never wanted to. in the meanwhile, I’ve rented a couple of gorgeous places in the last few years. In 2009, after studying $the company deeply, I put the equivalent of a down payment on a house into AAPL at about $100 per share. AAPL hit a new high of more than 609.65 this this. Find me a house that did that in three years. :)

      • Brian Flynn

        This assumes the “other investments” achieve a decent rate of return, or any return at all. If you have access to the type of information that JA apparently seems to, then repurposing housing down payments and property taxes elsewhere may make sense. If you are like the majority of people, your probability of success decreases greatly in other investments with only ordinary information.

        You cannot live inside a stock or a portfolio. Try as you may, your physical gold and silver will not keep the rain off of your head. You need a house, and if you like the area that you live, buying vs renting makes a boatload of sense.

        Full disclosure: I own two houses, one that I rent and the other I call home. I’m cash flow positive on the rental, and my home was a foreclosure that allowed me to get it for literally $200k under market. As a result, I have plenty of equity which I have been able to borrow against (at 2%) and invest achieving rates far higher than my interest. None of the above is possible through renting. So, home ownership has worked out for me.

      • Jeffjr04

        Who do you think pays the property tax? You think the city just exempts rental properties?

    • check your lease — all of my tenants pay for repairs — the first $200 is all theirs — house maintenance is time consuming — but hell I need the exercise == I rented for a long time and when i left all I got back was my deposit — There are few decent white collar women in Houston that would consider dating a man without a house — would rather date at the top of the gene pool — marry a woman with as much power as me

      • You must be , The Fonze of real estate

      • Mike

        Marry??…now THAT”S a bad investment.
        Get back to me in 10 years after you fulfill your dream of marrying a “powerful” woman.

      • Stocks0223

        Good thing renters have choices. I would never sign a lease in which I was liable for repairs to property or any property maintenance. People in Texas must not be that bright if they are willing to do that. Also the dating seen in Houston if all of the white collar women are so utterly shallow but then Leo here seems pretty shallow as well. I live in Maryland, rent and married a white collar woman who earns slightly more than me and in fact has better career track than I do because I got a degree in business and she is a scientist. Don’t fooled scientists in the right fields and locations make money, most around 6 figuers in our area.

        So if you are a guy in Houstan and not a complete pratt like Leo here come out to the Maryland/DC area where not only can you rent without being liable for maintenance but you may even be able to date professional women who don’t care if you own or not.

      • Seduction101

        What, are you like 60, Muscarello?? (Then you DO need some excercise! :P Oh, and FUN idea of exercising you have, btw…)

        It’s old-fashioned and sexist to imply that women would want to marry men because they ‘own’ (i.e. BORROW from the bank) expensive things, like a stupid, boring house. You know, these days women can actually have jobs, too and simply look for a great and fun guy they actually like to spend time with (not one who offers shelter in return for sex or companionship, or something). I bet you don’t get a whole lot of interest from especially younger women when they find out that you are stuck to your big fancy house and have to work all the time, so no time to play. It makes good sense to rent or lease big, capital goods. That’s why airlines don’t own their fleet – they lease. The point is that you can’t use that money for anything else.

        And that’s where flexibility and adventure come into the picture. But hey, that’s one of those personal reasons – just like attracting women with your house! LOL

        Seriously, let’s dump this old myth that you are better when you are ‘owner’ of whatever (being it cars, houses, etc.). In the end, it’s about how fulfilling your life will be. If that is bragging about your house, then so be it….

        • smiths

          What is this thing you keep referring to called women?

      • Living in Houston is like living in a sweaty armpit. Seriously though, I’m surprised you can find renters willing to pay for repairs. In my 20 years of renting, both apartments and houses, I have never been charged for normal everyday type of repairs. I also don’t go around punching holes in walls and I don’t keep pets which tend to ruin things. I can see paying out of pocket for stuff like that, but if the dishwasher craps out, the landlord is fixing that on his dollar.

      • Living in Houston is like living in a sweaty armpit. Seriously though, I’m surprised you can find renters willing to pay for repairs. In my 20 years of renting, both apartments and houses, I have never been charged for normal everyday type of repairs. I also don’t go around punching holes in walls and I don’t keep pets which tend to ruin things. I can see paying out of pocket for stuff like that, but if the dishwasher craps out, the landlord is fixing that on his dollar.

      • Living in Houston is like living in a sweaty armpit. Seriously though, I’m surprised you can find renters willing to pay for repairs. In my 20 years of renting, both apartments and houses, I have never been charged for normal everyday type of repairs. I also don’t go around punching holes in walls and I don’t keep pets which tend to ruin things. I can see paying out of pocket for stuff like that, but if the dishwasher craps out, the landlord is fixing that on his dollar.

    • anna65

      I totally agree Landon. We were fortunate enough and saved enough so we could pay off our house in 5 years. We use to rent and only saw rent costs increase while low life continued to infiltrate our building. Complaints to the landlord and the police solved nothing and we did not live in a bad area.

      • Christopher_martin27455

        in agreement Landon. as a wise man once stated, “real estate is one thing they arent making anymore of.” and some people think the equity of the most rapidly disappearing commodity (2nd only to water) is going to DECREASE??? ok.

        • own a triplex

          you mean “land is the only thing they are not making anymore” make sure you quote literary geniuses properly my friend. 

          • Yeah, wouldn’t want to screw up a trite and meaningless quote that the clueless mistake for some sort of profound observation.

        • ‘…some people think the equity of the most rapidly disappearing commodity (2nd only to water) is going to DECREASE???’
          Uh, do you read the papers, Einstein? Do you have any idea how many people have been ruined in the real estate market in the past five years? “Some people” = anyone who isn’t as utterly clueless as you are. 30% of the homeowners in the country are underwater in their mortgage, which means not only have they lost 100% of their investment, but more on top of that too.

          • meh

            “Do you have any idea how many people have been ruined in the real estate market in the past five years?”

            I’m sorry, but this is completely wrong. Nobody was ruined by the declining housing market (except house flippers who had to find something else to do because what they chose to do only works in a growing housing market). No, they were “ruined” by not being able to afford their house, either because of loss of employment (which is a result of the job market, not the housing market) or because they could never really afford the house they bought anyway.

            Think about it. If you buy a house that you can afford, it doesn’t matter what the housing market does or even whether the value of your house rises or falls in the short term; you still make the same mortgage payment. If you lose your job then that’s an issue for you, but that has very little to do with the housing market unless your job is _in_ the housing market.

          • andrewi

            If you rent a house and the job market fails, you move house to a smaller one and go find a job elsewhere. If you have a mortgage on your house your stuck with the location AND the lack of employment which will eventually take your house.

            Sure, people talk about renting their home out and moving elsewhere, try telling that to the people who used to live in Detroit.

          • The See Organization

            Don’t you have to smart to be a scientist, let alone a Top one? You are dumber than a bag of rocks.

    • Trissfriss

      Obviously, you don’t value “Peace Of Mind” very much, do you?…oh well…..I’ll pray for you!

      • Oh, what’s your definition of “Peace of Mind”? Putting all your life savings in cash in a suitcase underneath your bed (losing 4-5% every year due to inflation)? Putting your money in a savings account earning 1% a year (losing 3-4% every year due to inflation)? Putting money in the stock market (Gee, that’s not volatile…)? Please, I want to know. I’ll pray for you, too! :)

    • Mike Melillo

      Good points landon, but all you have to do is read some of the rent vs. buy articles out there.
      Here in NJ, it is not uncommon to pay 10-12k in taxes for a decent home. That’s 300k in taxes over the life of your mortgage. By the way, taxes go up as well. I will not get into maintenance and repair. Maybe I will…1,000 per year just in yard mowing, cleanup, seeding, etc.??

      I own. I’m seriously considering renting. I guess it’s just what you’re comfortable with.

      Good luck to you.

      • Mike, have you tried comparing that 300k in taxes to how much rent you would’ve paid over the life of a mortgage? Factoring in an equivalent living space/quality? Factoring in inflation? Also factor in that you will see 0 return on that rent money?

        Comparing renting vs. buying as investments makes no sense. Renting is NOT investing. Sure, you can make a bad investment with buying a house (financially, mentally, etc.): buying a house you cannot afford, buying a house in a bad neighborhood, buying a house with huge maintenance fees, etc. That is what investing means: you take risks in the hope of a return/preservation of capital.
        Renting is NOT investing. You are losing money 100% of the time, you are paying for a service. Sure, you can invest what you normally pay for a house into something else, but now you also have to pay rent which you can pretty much view as a fee for making this decision (see my other post).

        Comparing buying vs. renting is like comparing stocks vs. leaving cash in a suitcase under your bed. One has risk but has a chance of growing in value, the other has much less risk but is guaranteed to lose value.

        And to all those people saying “I have more money to spend and I can move around every year without a house and buy more stuff”, SHUT UP! You don’t invest, you like to spend. This discussion doesn’t involve you. Go to Vegas and have fun!

        • happytobe

          A couple of things. First, each person has to choose the path that works best for them – renting, buying, it doesn’t matter, so long as it suits the lifestyle that you choose. Second, I’m not quite sure why you are so angry that some people – JA, and some of the posters here – see the value in an alternative choice to the one that you’ve made. If it makes them happy, why does it bother you so much? Next, mortgage=rent, the taxes, maintenance, etc. are all items that if you didn’t have to pay for, you could invest. Which leads to my final point. You are absolutely right about one thing. Rent is not an investment, but the money you save from home ownership can be invested.

          Both ways work. There are many ways to achieve the same outcome. Remember the old saying “It takes all kinds to make the world go round”?

          By the way – I own my home. And if James’ ideas bother you so much, and you can’t open your mind, maybe you should read elsewhere, instead of attacking others commenting on this site. Differing opinions are one thing, but there is no need to be mean, judgemental and close-minded.

          • I’m not angry at all, I’m sorry if I come of that way. I’m responding alot because I’ve been bored at work lately haha.
            I strongly disagree with people’s arguments against ownership, that’s all.

          • Tracylynnfordoct111963

            You say you’re not angry, yet tell people to “SHUT UP!” because they’d rather rent than buy? You don’t sound like someone I’d be interested in taking advice from.

          • The See Organization

            Yeah? Go cry about it. bwahahaha

    • LFE49


    • GD

      Yes, absolutely agree.

      I would add that many home buying decisions are emotional and do not take into account how sell-able the real estate is at the time of sale or a year down the line. As real estate agents often tout its all about location, location and location that allows you to maintain value.

      New York and other high value areas in the states are still not as dramatically affected by this housing crash. Now if you go to any of the other areas in small town USA look out! Some results were devastating.

      I don’t agree that you need to keep your home long term if you have something that is sell-able and keeps its value over time. Peoples needs change over time and many get tired of the home they are in after a while.

      BTW, I am in Canada so things here were not as bad here. I sold at the bottom of the market and upgraded to a bigger and better home and it has increased 15% over that last 1 1/.2 years and I expect it to continue to in the future. I think that outside of major cities people had much more difficulty with properties, commercial property especially.

    • Debk888

      Good post! I would like to add that lower middle income people (like me) get a good return because of the deductions given on interest paid from a house payment and property taxes.. If renting, no deductions at all.

    • When renting you can invest the money that you save on repairs and maintenance at a much higher rate of return than your house will give you. Yeah, markets fluctuate. But in the long term you would still be at advantage

    • Trekkergal

      Please spell “a lot” as it should be. There is no such word as “alot”.

      • Trekkergal

        Having said that, it’s refreshing to read a post like yours from someone who actually knows what they’re talking about.

    • Dianne9042

      Amen. I don’t rent my house out, I bought it originally to buy cheap, fix up and sell for a decent profit. After fixing it up, I decided I liked it too well to leave. I’m here now 23 yrs. My house payment is about 1/3 of what rent goes for around here and my house is much bigger than those tiny apartments or house. Yes, I pay city and county taxes and insurance which is all less than $1200 a year. Include that and I’m still way under what I’d be paying in rent right now. If you buy high or have bad enough credit that your interest rate is high, then no, you shouldn’t buy a house. If, on the other hand, you have decent credit and can get a house at a great price, go for it. You win in the long run.

    • cavmag.com

      Thank you for this thoughtful comment. I keep reading these articles advising us to put that mortgage money into stocks for a better return, then I guess you just live in a alley, kept warm by your stock certificates…

    • Pallen2270

      You say that your mortgage won’t increase with inflation? Are you crazy?? In two years of ownership mine has increased twice, WITH a fixed rate. This year alone, my escrow has increased $600. So that in turn makes my payment higher each month. Each yeah your taxes are going to increase, so you will pay more each year. Just look at it this way. After paying 30 yrs on a mortgage you will get a nice chunk of cash back. But this is after paying DOUBLE what your house cost originally, plus whatever your taxes and insurance increases each year. Home mortgages are the biggest ripoff in america. Where else are you going to borrow $100,000 and have to pay back $200,000 at a minimum and it not be illegal.

      • Landon

        Rent is even more of a rip off. You get nothing back. After a mortgage you have a house.

        • Anonymous

          Your interest payments double the original cost of the home over 25 years at normal market interest rates. So you sit on your 75 or $100,000 down-payment, pay $1500 mo(+ inflation) to rent and in 25 years – no home equity – nothing – But your down-payment has been earning money in a perhaps a stock market investment, gold, commodities whatever! Over a 25 year period you could have enough to buy a house cash.

          Or you can cough up $75 or $100 K of my hard earned money to the bank just for their assurance that if you default, they carry no liability.

          At today’s low interest rates you pay $1650 mo principal and interest – mostly interest only for the first 3-5 years. If rates rise to 10% (which is where they should be) your payment could double in a short time. Plus you pay for realty fees, legal fees, strata fees or property taxes, repair maintenance costs and never forget that your investment is not liquid because you can’t up and sell – you need to sea place to live. All your equity is tied up in something you cant sell

          All in all a bad idea IMHO

        • Anonymous

          Your interest payments double the original cost of the home over 25 years at normal market interest rates. So you sit on your 75 or $100,000 down-payment, pay $1500 mo(+ inflation) to rent and in 25 years – no home equity – nothing – But your down-payment has been earning money in a perhaps a stock market investment, gold, commodities whatever! Over a 25 year period you could have enough to buy a house cash.

          Or you can cough up $75 or $100 K of my hard earned money to the bank just for their assurance that if you default, they carry no liability.

          At today’s low interest rates you pay $1650 mo principal and interest – mostly interest only for the first 3-5 years. If rates rise to 10% (which is where they should be) your payment could double in a short time. Plus you pay for realty fees, legal fees, strata fees or property taxes, repair maintenance costs and never forget that your investment is not liquid because you can’t up and sell – you need to sea place to live. All your equity is tied up in something you cant sell

          All in all a bad idea IMHO

        • Anonymous

          Your interest payments double the original cost of the home over 25 years at normal market interest rates. So you sit on your 75 or $100,000 down-payment, pay $1500 mo(+ inflation) to rent and in 25 years – no home equity – nothing – But your down-payment has been earning money in a perhaps a stock market investment, gold, commodities whatever! Over a 25 year period you could have enough to buy a house cash.

          Or you can cough up $75 or $100 K of my hard earned money to the bank just for their assurance that if you default, they carry no liability.

          At today’s low interest rates you pay $1650 mo principal and interest – mostly interest only for the first 3-5 years. If rates rise to 10% (which is where they should be) your payment could double in a short time. Plus you pay for realty fees, legal fees, strata fees or property taxes, repair maintenance costs and never forget that your investment is not liquid because you can’t up and sell – you need to sea place to live. All your equity is tied up in something you cant sell

          All in all a bad idea IMHO

          • Landon

            Once again, people keep ignoring the same question: While you are waiting for your gold/stock portfolio to pay off over 25 years, where are you living? Calculate your rent payments (including the effect of inflation) over 25 years and tell me how much that is.

            I have said a hundred times not to buy a house if you are expecting to move very soon. Nor should you buy a house that sucks up your entire paycheck. Nor should you buy a house in a bad area that makes it hard to sell. Of course, nobody knows the future. But doesn’t that apply to commodities and stocks as well (look at the recent charts for chrissakes).

        • Anonymous

          Your interest payments double the original cost of the home over 25 years at normal market interest rates. So you sit on your 75 or $100,000 down-payment, pay $1500 mo(+ inflation) to rent and in 25 years – no home equity – nothing – But your down-payment has been earning money in a perhaps a stock market investment, gold, commodities whatever! Over a 25 year period you could have enough to buy a house cash.

          Or you can cough up $75 or $100 K of my hard earned money to the bank just for their assurance that if you default, they carry no liability.

          At today’s low interest rates you pay $1650 mo principal and interest – mostly interest only for the first 3-5 years. If rates rise to 10% (which is where they should be) your payment could double in a short time. Plus you pay for realty fees, legal fees, strata fees or property taxes, repair maintenance costs and never forget that your investment is not liquid because you can’t up and sell – you need to sea place to live. All your equity is tied up in something you cant sell

          All in all a bad idea IMHO

    • Pallen2270

      You say that your mortgage won’t increase with inflation? Are you crazy?? In two years of ownership mine has increased twice, WITH a fixed rate. This year alone, my escrow has increased $600. So that in turn makes my payment higher each month. Each yeah your taxes are going to increase, so you will pay more each year. Just look at it this way. After paying 30 yrs on a mortgage you will get a nice chunk of cash back. But this is after paying DOUBLE what your house cost originally, plus whatever your taxes and insurance increases each year. Home mortgages are the biggest ripoff in america. Where else are you going to borrow $100,000 and have to pay back $200,000 at a minimum and it not be illegal.

    • Pallen2270

      You say that your mortgage won’t increase with inflation? Are you crazy?? In two years of ownership mine has increased twice, WITH a fixed rate. This year alone, my escrow has increased $600. So that in turn makes my payment higher each month. Each yeah your taxes are going to increase, so you will pay more each year. Just look at it this way. After paying 30 yrs on a mortgage you will get a nice chunk of cash back. But this is after paying DOUBLE what your house cost originally, plus whatever your taxes and insurance increases each year. Home mortgages are the biggest ripoff in america. Where else are you going to borrow $100,000 and have to pay back $200,000 at a minimum and it not be illegal.

    • homeowner

      Agree. I think this guy misses the mark. Some of his points are silly (painting walls?). Looks like he’s been scarred from buying high at the dot com.

      I bought my house in 1997 for $169K. Today it is worth $300K. I paid it off 10 yrs ago, and have not had a house payment since. Had i taken the $169K and simply used it for rent, that would have lasted 7 years and at the end i’d have nothing to show for it. Today, i have a house that has ~doubled in value, I have no cash monthly payment, and I’m a whole lot better off. Has it cost me in repairs, etc? Sure. I’ve probably put another $20K over the last 14 yrs, and I pay taxes ($2k/yr), but that is still way ahead. I could turn my house probably in 90-120 days, so liquidity is not an issue really.

      Renting? I have nothing but a bill forever. The big value of home ownership is that it reduces cash flow. Rent will only increase over time. And i don’t buy rent doesn’t cover taxes, maintenance, etc. Only if the landlord is brain dead, or in those cycles where the market dictates, but it always corrects.

      There is a reason why landlords exist – there is economic value in that business. If that were not the case, landlords would not exist. There would be no wealth generation. And I know a lot of people who are wealthy because of rentals.

      • Ssohara

        I think the key is that different people value different things. Some people see a house ONLY as an investment. For other people, however, it represents many other things. Plus, different situations call for different strategies.

        For someone who moves around a lot, or who is not handy, who enjoys researching stocks, a home might be a bad idea. For someone who wants to live in the same town for 30 years, who doesn’t want to spend a lot of time following the stock market, etc.,  a home might be a great idea.

        For myself, we sold our house back in 2002 and didn’t buy a new one and it was a good decision FOR US as we were moving around quite a bit, I like investing in stocks, etc., plus the housing market at that time was high. Now, however, we’ve found a place where we actually WANT to settle down and the housing market is quite soft – so we are thinking of buying a house, probably next year.  We might get a duplex or 2 houses in the same neighborhood and rent one of them out. I think RIGHT NOW a house might actually be a decent investment because the markets are very unstable and housing has been beaten down to decent lows… but a house is more than an investment.

        For some people, there are a lot of intangible pleasures from owning a home. For others, it’s just a place to sleep.

        Another thing people may not be considering is the diversification aspect. From an investment POV, a house or rental properties are just one part of your portfolio. If your stocks are down, it might be a huge relief to have your house paid for so you can manage even on a low income. It’s sorta stupid to put all your eggs in one basket.

        Another thing people may not consider is discipline – some people are very disciplined and can make a lot more money in stocks. However, there are also people who are poorly disciplined. A house FORCES them to invest. If someone knows this about him or herself, he or she can use home ownership as a tool to force investment.

    • Funninnup

      Landon assumes buying is reasonable everywhere. Lets take Manhattan where a 2 bed room 15,000 sq. ft apt is about 2 million bucks. If you put down 1/2 million (a pile of money I keep to invest in much better returns) I have 1.5 million nut to crack. Payments add to about $7,000 a month on top of which is $1,200 maintenance cost and then another minimum $1,200 property tax. I pay $4,500/ month to rent it not $9,400/ month to own it. I take that saving (YES THATS SAVINGS) and use that money to make much, much better investments with much better returns (I invest in fine art) and have an even better return by the time I am 75 and live a much more relaxed, less “strapped” life for the next 30 years.

      • Landon

        I never assumed that at all. If you are such an expert in fine art, great. Not everybody is. And you make the same mistake everybody else does in comparing renting vs. buying: you account for the extra money you save by paying less for rent without accounting for the EXPENSE of rent (a fee). Whereas the higher cost of the mortgage will give you a piece of property in Manhattan (an asset).

    • denny

      After paying 5% interest on a $200,000 for 20 years, you will have paid  $114,000 in interest alone. So, in total, you will pay $314,000 for your house, plus the down payment. I doubt most people will sell their homes for more than what they paid for the principal and interest on the mortgage. Sell you home for $250,000 and you lose $60,000. This is not including up keep on the home during the 20 years. Good luck on that investment.

      • Landon

        OK, based on your calculations I lost $60,000 after 20 years of residence. Please tell me how much I would have lost on rent payments after 20 years. I feel like a broken record.

        Are you basing historical prices on your $250k return? How much did houses cost in 1990? More like the house is worth $400k now.

    • Landon, you’re totally off the mark, and not entertaining the points in the article. You’re partly discussing investing in a home with intent to rent it to others. James is speaking abut the majority that live in their home for the full term.

      So you say when you sell your home that you’ll get your money back, well, where do you live then? On the street? No you have to buy something else or rent losing a part of your “return.”

      Also where you reside is a factor, I’m in Long Island NY and after 30 years I will be ahead over $300K by renting. Including annual rent increases, insurance etc, the taxes and mortgage etc.

      And if you really want people to respond, stop choosing words that make you appear arrogant.

      • Landon

        Responding months after the fact. I could care less what you think about me Rock Star.

        To answer your question: if I pay off my mortgage I have an asset that can be sold or passed down to future generations. I also don’t pay anything except property tax to have a place of residence. YOU will continue paying rent.

        And you missed my earlier points against AboutJoshua. Yes you can invest more with less expenses. But mortgage payments aren’t an expense, there is a return for them. Rent is an expense. So you actually have MORE expenses if you are paying rent.

        • Landonsucks

          Landon, you suck!

          • The See Organization

            Landon rules!!!

      • The See Organization

        LOL, I’d love to see your figures. You’ll probably start sobbing if you saw how much money you would’ve made if you bought a condo in Long Island back in 1985 for like $50,000. And stop crying about arrogant words, you wuss.

    • Slipmatwax

      “…as inflation comes, rent prices will increase in time” As inflation comes, so do higher interest payments and less purchasing power for your dollar. Home repair materials and labor will become more expensive. The ownership debate is easy to have when interest rates have been below market for almost 20 years and a financial bubble building for most of them.

      But what do you know about making a mortgage payment on a $400,000 house with interest rates at 8-10% instead of 3-4% uh? My payment would go from $1,650 mo (+ taxes) to over $3,000 mo in this scenario. That would mean house prices will drop until they are worth what the market can afford, $1,650 mo. This would translate into a reduced home price of $180,000. Based on current household earnings to house value ratios, this is where housing should be.

      So you think home ownership is a good deal? It’s a good deal for the bankers and lawyers and people who bought in before the bubble – that’s all. For today’s first time home buyer it’s very daunting. So let’s get this straight shall we?

      1) I give the bank $100K for a down payment so they can eliminate all of their exposure to risk and shifts it onto the home buyer.
      2) The bank will loan out $1,000,000 to other customers at interest on the strength of my $100K down payment to them – effectively increasing their returns by a factor of 10
      3) They charge me monthly interest on my balance which will eat up 90% of my payment in the first few years of ownership
      4) They will penalize me if I have to, or want to move before my term is up.
      5) They will evict me if I fail to make my payments to them
      6) They will take my house if I am unable to settle with me
      7) They will bundle my mortgage with others and sell it as a security for other investments to further line their pockets
      8) They will get bailed out if they make mistakes on their investments
      9) They still charge me bank fees every month
      10) They make billions of dollars every year on the back of the middle class

      Home ownership has become a scam, perpetrated by the Big Banks, The Central Economic Planners, the Real Estate Association, Lobbyists and Government officials

    • Byron24

      i love articles like this too got my 1st house a few months ago & it cost less than my 1st car put about 10k into it & now its on the market for 65k i will buy multi unit apartment buildings soon so please do not buy always rent btw my 1st car was a 1994 tbird used

    • Dash

      The underpinning assumption in your point is that you stay in the same place, in the same line of work etc etc.  There are those of us who like to move – who have income streams providing the flexibility to move.  Who like to live a light & agile life.  I’m one of those people.  If I want to rent a place in Italy for a month or so in summer, I can.  Also, I almost died in a freak accident a few years ago 4 days before my 30th birthday.  I’d been putting off really living and enjoying my life for some ‘reward’ years in the future.  I came a hair’s breadth from being dead & buried, and at the time I was not enjoying my life, enduring a lot of crap for a promise in 20 years time of being able to finally live.  I almost died an unfulfilled, unhappy man.  I won’t do that again.  I will live today to the best of my ability.  We could die at any time.  There is absolutely no guarantees you will be alive at the time you’re planning for all your eggs to hatch.

    • LinRP

      Yup. Agreed. The only way we survived 17 months on unemployment with 2 kids in college is through using some of our equity. Our town in NE is highly prized for the school system. Housing prices barely budged during the crash, and have rebounded better than ever. There is no way ANY investment we could have made would have had the rate of return our house has over the past 30 years.

      We call it “living in the bank.” :) Suits us and our long-term financial planning just fine. My parents were renters, died broke, leaving me nuthin’.

    • Shazbot

      THANK YOU for your sane and sagacious comment. Renting a place is throwing money in a hole. You’ll never own it. You can’t change it much to suit your tastes. When you leave an apartment, you can’t sell it; all the money you put into it stays there, with the landlord. I have rented all my life. I hate it. I want a house of my own. Period.

    • IIlI

      yes we have to live somewhere. notice i said somewhere, not here and only here. owning a home requires you to do that. i have lived all around new york city. it has been a great ride with no worries of repair, fire insurance, etc. i simply don’t care what happens to the property. i just enjoy my life and move around based on a change of job, new friends, or other reasons. i will die one day and possibly before retirement. i have no interest in looking at housing as an investment. if i wanted to invest, stocks are far far superior.

    • 9kids

      I recently read an article who compared total costs for renting vs owning in 100 different scenarios over the last century (rising interest rates, falling rates, good job growth, bad job growth, city, suburb, country, etc.) Quite surprisingly to me (we have owned our home for over 36 years), his analysis showed that renting was the more prudent choice in 100 of the 100 scenarios. In thinking about the extra costs of home ownership, i now see his point. New roof, A/C systems, taxes, carpets, appliances, etc., have added up tremendously over the years. Even with a 30 year fixed, the property taxes have risen very dramatically.

      What i am now advising my kids is to buy a 4-plex and move into it. The other 3 renters will pay most of their costs, and they not only get to write off the homeowner’s interest, but they can deduct costs each year that a homeowner could not recoup until he eventually sold the property; but the deal maker is depreciation! (A homeowner cannot depreciate his home, but a landlord does! At a 27.5 year depreciation schedule, the landlord gets to write off $10,000 from his income on a $275,000 building. Nice!) After a year or two, move into another landlord’s very nice rental and let him pay for the roof over their head, the carpet under their feet, the hot water heater when it goes out, etc., so you can get a positive cash flow from the rising rents (which historically go up faster than home values), as well as write off the full 100% rather than merely 75% available while they are in one of their 4 units. It’s profitable for the landlord, but a drag to a homeowner. You get the freedom of renting, the financial benefits of renting, but the dramatically improved investing benefits of being a landlord. Win, win, win! If you buy in the right area and rent out to high quality tenants, you will very seldom have the landlording nightmares that people believe in. (We bought rentals before we [foolishly, from a financial standpoint; but it’s been a great place to raise our huge brood!] bought our home. Landlording is not the hassle everybody thinks it is — or at least, it doesn’t need to be!)

    • Alison N

      What do I get for my 30 years of renting? The memories of all of the trips I was able to take because I didn’t have to pay insane interest, taxes, maintenance and all of the other things that come along with buying a house.

    • Larry Birf

      Why sell the house

    • Jeffjr04

      Like everything else, the advice to buy or rent comes down to individual preferences and circumstances.

  • Ladydxxxx

    Very good points. For me however whose life revolves around animal rescue, owning a home is the only way to set up a good working environment for these animals who need homes. Renting rarely allows for this.

  • Gudfhart

    When does the 3.+ % obama tax start on real eatate sales ?

  • idlehands

    After owning a home for 20+ years, all of the above is true. Yes, I had my own home, but, I had to repair it, maintain it, pay taxes, pay insurance, pay a mortgage with a huge amount of interest (even though I paid it off in 10 years rather than 20). Sure, I made money (on paper) when I sold it, but I am sure that I would have more money in the bank if I had rented. If I had invested the money I put into my home over and above a theoretical rent amount, I would have more money in my pocket than when I did when I sold it. There are exceptions but houses aren’t liquid and stocks and cash are. That alone makes the house purchase a bad investment.

    • Thanks for the defense, idlehands!

    • Where do you guys live — you must pay less than 500 per month — that is what a middle class 1500 square foot home in Houston costs — geeze

  • Weglinsa

    My friend owns 3 rental properties with a total of 8 apartments and he lives in one of the apartments. After paying for his mortgages, taxes, any utilities or maintenance that is not included in tenant rent, he still has a $2,000 monthly profit. This is also in Keene NH which is a lot cheaper to live than NYC. Some things in this article make sense but most of it doesn’t. For instance, having to go to the laundromat twice a month. Having a place to entertain, which most apartments don’t have unless you are paying the same amount in rent as it would cost to pay a mortgage. Not only that…you always have rules to follow if you rent. No pets, can’t paint, typically don’t have a garage. If I want to do woodwork…hold on let me do it in my kitchen. Have a party…not going to happen unless your neighbors are the ancient and deaf. Paper thin walls remember. Also…try to get a loan…more difficult because you have know history and no collateral. I think this article is extrememly incorrect. Maybe it works in urban locations…but I can’t afford to rent in an urban location which is why I moveed out of NYC and into NH.

  • Red_kira

    I saw my mother try and sell the house she and my Da bought when I was in college. After more than 20 years, she made ONE SINGLE DOLLAR on the sale. And her buyer? Her real estate agent, who felt sorry for my Mama and had her husband buy the house as a fixer-upper. DEPRESSING.

    My husband and I are 40/50-ish, have never owned a home, and never will. We love to be able to up stakes and move whenever we want. We love to be able to call the Super when I accidentally drop a penny in the garbage disposal and it starts making hiddeous noises. But I have always – even with the example of my mother – felt like a loser and a slacker and a perpetual tween for not buckling down and buying my own home. THANK YOU SO MUCH for stating, so cogently, why I shouldn’t feel bad at all – and have, in fact, been pretty smart into the bargain!!!!!!

    • katierp

      Red Kira – don’t feel the least bit bad about ‘not buckling down” and buying a house. I have owned 5 homes over 40+ years and been burned badly twice by recessions. I am one of the latest to lose a job and property. We are now living in a lovely luxury apartment building with great amenities. I shudder when I hear my friends with the huge homes and the thousands they put into their homes in maintenance and repairs before selling to down size. This is the first time in the history of our generation that renting is preferrable. We are free of much worry and are living the ‘ birds of the air parable. The freedom is great!

    • So they did not save — as if they rented all of their lives and went to move and sell the equity in their apartment — there isn’t anything — they got some money I am sure — If you are reclusive and do not entertain more than 5 folks at a time apartments are perfect

  • Johndoe

    If you do a 30 year mortgage, he is right, but dead wrong on a 15 year mortgage. Run a calculator. Oh and guess what, once you do a fixed mortgage, you payments are fixed for the life of the loan. Your rent keeps going up. An guess what, you don’t build up equity so unless you want to move your family around every few years when your landloard spikes your rent, you might want to think about owning.

    • I think the “building up equity” thing is a myth. Property taxes are going up faster than inflation. I’d rather use the cash on downpayment to build up equity in stocks and/or other investments so i have access to liquidity WHILE building equity. and i hedge on inflation by buying a diversified bucket of assets.

  • What about equity?? Nobody is talking about this Owning a home forces you to save the proportion of the mortgage that does not go to interest. For people living 10 + years in their 200k home, they are creating a nest egg of $500-$700 per month each time they pay their mortgage. If you are renting and I do agree that you become way more liquid in that scenario, do you have the discipline to save $500-$700 per month? if not, you are better of owning, even if you sell your house for the same amount you paid for it. (which is very unlikely in a long term situation) So my point is that I admit buying a home is a crappy short term investment and the author of this post seems to be very mobile. So he is making a wise choice. The freakish housing bubble of the 200’s made people mistakenly believe it was normal to make money in the short run, which in turn lead to people buying homes they can’t afford. However, home ownership still remains on eof the best long term investment. you can’t argue that since you build equity. You can argue that nobody knows for sure if they can live in the same place for 10-30 years but if that turns out to be the case, your house is definitely gold!

    • Actually, everyone is talking about that throughout the comments and in the article.

  • Smash Alley

    Interesting & valid
    i bought my condo during the Internet bubble. In Los Angeles, where, typically, only the hyper wealthy of screen, stage, sports et al can autograph the escrow docs.

    Miraculously, i qualified for a zero-down loan. Otherwise, my little $5K savings account would have made the the point of financial ridicule among number crunchers hither and yon.

    A home warranty was included.When — not IF — something goes awry, i call American Home Shield, they send out a repair contractor, i throw down a $60 co-pay, and the $300 computer board in the central AC is chill. The leaking refrigerator is back online. Irreparable? i get to go shopping for a new one — gratis.

    Yes, the HOA dues will only ever go up. But they haven’t even doubled in the 11 years i have lived here. My $400 a month pays for EVERYTHING in this hillside community, where rain is problematic, the forestry is problematic, the fire zone canyon of a back yard is problematic, The pool, jacuzzi and landscaping are left to the experts. All i have to do is show up. (No, i don’t work for AHS; the company works for moi.)

    As a music journalist and scribe of PR propaganda (translation: unemployed artiste), my condo has been the gift that has saved my dog & i from my license plate becoming our home address. That and mi beloved padre. Fortunately, my property is still worth considerably more than my refi.

    Ultimately, though, Mr. James Altucher is correct; i would like to sell it and escape Babylon. But good luck with that.Yeah, i could rent it, but this is Babylon, and its inhabitants would surely cause me more strife and buggary in one fell swoop than a year of rent and two years of therapy could possibly recoup. (i’m still in recovery from a trauma parade of roommate “friends” from not-so-bright ideas past.)

    i also know that if i sell this 812 square foot quirk of Bohemian chic, i won’t ever buy property again.

  • Seriously, did I get duped by the Great American Myth TWICE? First, there was college, now home ownership?! I wrote the book; “College is For Suckers” (www.collegeisforsuckers.com). My next book will be “Home Ownership is For Suckers”. For us, this is the year of the House Cash Cow. We were one of those couples that banks made it easy for. Now, we are upside down on our mortgage and our “starter home” is the box we are trapped in for years to come. If only we had known…

    • The good thing, April, is that there are second, third, and fourth chances. You are going to do fine and you have humor on your side, which is key. They don’t teach that in college.

  • Jollygoodmate

    Wow!! I have never seen an article that produced this many comments!! I will tell you your article really emotionally moved me and reaffirmed what I’ve suspected for quite some time. I bought my home in 1996 feeling I had finally achieved the American dream! I began painting, planting flowers, decorating and creating a home for my daughters. However over the years my daughters got older and no longer needed a large yard to play in. My oldest went off to college when the company I worked for closed in Missouri. I went from 45, 000.00 a year to 25, 000.00 a year..that HAMP program? My lender began playing games with me, couldn’t refinance..I began renting out my daughters room to make ends meet..A COMPLETE NIGHTMARE in itself. They raised my property taxes to 2000.00 a year, yet the value of my home continues to go down!! My insurance went from 600.00 a year to 1200.00 because of storms in the past..More and more every day I LITERALLY FELT ENSLAVED!! When I wasn’t working my @#$ off to make the mortgage payment I was spending every weekend raking leaves, power washing, maintenance and cleaning..I had no social life!! I finally decided if the bank won’t lower my payment they can have it!! The value fell from 120, 000.00 to 85,000.00 in two years! Homes are sitting on the market for months..at least in my area. I’m tired of paying the taxes on a property that I invested the money in to improve. I’m letting them take my home and returning to school. I really believe the saying that sometimes the things you own truly do end up owning you. I can’t wait to rent again and call maintenance when something goes wrong!! I really will not miss owning a “Money Pit”!! I thought I was losing my mind when I would get excited about not being a homeowner anymore, but your article made me realize I’m not the only one who feels like it enslaves you. I also picked a career that won’t tie me to a building for the rest of my life either. It feels good to have choices. Thanks for the affirmation, you made my day.

    • Interesting. on all the comments it seems like when things “work out” for owning a home, it only works out ‘ok”. But when things don’t work out, it gets really BAD. I’ve had at least 3 really bad situations. I have yet to have a good one.

      • Mick

        Here is a good one.
        When i went to university I rented the first year, fought with my room mate (my girlfriend and I made to much noise), so moved out. I then convinced my parents to cosign and put a down payment on a 3 bedroom condo (64,000) 4 blocks from the university. I rented 2 rooms to my buddies for 250 each (which was really reasonable rent) which covered my mortgage (500). We split utilities 3 ways.
        Finished school after 4 more years, sold the place for 97,000.
        Split the profit with my parents after giving them back their downpayment. The condo board was happy to see me sell :)
        Paid my own way through school.

    • Eduga33

      I totally agree with you!!! I used to work for Indymac Bank and let me tell you, Their so called “modification program” is all BULL#^%@!! Their won’t help you at all!!! Right now, it is much better and stress-free to RENT!!!! Good Luck!!!

  • Kenn

    I bourght a big 2 stories 2005 built house with extra guset house suit at the back yard recently. Paid 20% down for it, which is 2/3 of my free cash.I loan $600,000 from the bank with 4% interest.I got $10,000 from the state tax rebate.The house was priced over $ 1 million at 2008. Now,I enjoy the luxury life style daily and make use of cheap interest rate money from bank and invest it at mutual fund which by average will give me around 10% profit return. I plan to paid back the entire load money at the end of 15 years. At that time, who knows how much the true value of the US$ will be. By the way, after deduct the tax credit from my monthly interest mortgage, the money out of my pocket is more or less equel to the amount of money I used to pay for my rent when I lived in a small 60 year old house.


  • Cooltara

    I agree with somethings in the article. Some people need the write offs,. My husband and I have no other write offs. We both are professionals and have W2 income. We need some deductions.
    I agree with all the maintenance it is a pain. I would love to rent a house and not have the headaches.

  • Dbahniuk

    There is a difference between a home and a house. You cant quantify the benefits of owning a home. Moreover, investing in real estate is very difficult. Renting simply transfers the risks and benefits to someone else.
    Fact is when fools like this start telling people not to buy, it is time to buy.

  • Samantha

    This is exactly why i will buy a house, so that you can rent from me and i pay my mortgage and at the end of it, i will own property and you will not.
    If this article wa written to encourage investment in stock then thats really sad.


    I just watched your video on Yahoo! Finance and then found your blog. I’ve read several of the posts now. You, sir, have earned yourself a bookmark.

  • Rebelroy11

    My mortgage on a 3300 sq ft home is $725/mo. The average rent in my area for a home half the size and equally as nice is between $1,000-$1300/mo. Me being 27 will have my home paid for when I’m 56. You? Never. When youre 80, 90, 100 will be paying the rising cost of rent. My home also appraised for $30k more than I paid. It does suck to have to fix things and spend money. But it sounds more like laziness to never want to do anything and never learn new things. There are pluses and minuses to both, but you have to be able to think long term when buying a home. That obviously isn’t you.

  • Spdisp

    I believe you are 100% correct as I have owned 2 homes and I am now renting and enjoy it. I do take care of 3 rentals plus mine for my landlord. If I can’t do the work then I call someone to fix it and then he repays me when he returns to town. He has a 42 foot motor home and travels most of the year he only in town about 2 months out of the year. Its not money out of my pocket like it is when you own your home and like you said can move anytime I want.

  • Kb5

    the negative issues are all correct…But the one major issue for home ownership is you can lock in your overhead for the rest of your life if you stay in the same home, and if you are lucky, and it’s time to retire, you can cash out and possibly have lived your entire life for free in your home if you home’s worth goes up enough. If you out live your mortgage, you can also live rent free and only pay taxes and insurance which is generally a lot less than the mortgage or renting in the area… All very good reasons to buy. If you buy don’t be stupid. Pay the right price and be able to afford the payments and have enough in a safety fund for a rainy day or year. Then you can live stress free..

  • Madgolfer31

    Excellent advice. And me, the landlord, will rent out a property to you that I bought low and and making a 12-20% yearly ROI on (almost tax-free, yay deductions!).

    I am all for this approach… for other people :)

  • Toucanchuck

    We paid our mortgage off after 12 years. I love owning my home and not owing the bank. Our annual costs for insurance, maintenance, and taxes at this point are lower than it would cost to rent a house similar to the one we own. We found that if we worked hard at getting out from under the bank as quickly as possible, our cash flow greatly increased along with our peace of mind. Perhaps this post is anecdotal, but our experience (and numbers) do not line up with the premise of this article. On a side note, we bought the house for $82,000 (including fix up costs) 15 years ago and it is now worth $220,000. Granted, the equity is not liquid, but then again I have been able to build up significant cash reserves since I no longer have a mortgage payment. Buying (and paying for) our house was the best financial decision we have ever made.

  • Ronkar

    I’ll only start with 5 Reasons Why I Would Buy Another Home:

    1. I was tired of landlords kicking me out, and having to move place to place… moving is quite a hassle.
    2. The money I was giving to the landlords was converted to money being invested in my own place.
    3. I was able to get a home equity loan and purchase another, while renting the first and thus providing another source of income.
    4. Owning a home does not restrict me from moving. I can always rent or sell, but atleast I know I have own a place and no one can kick me out.
    5. Although I spend much of my time at work, and in my car, it’s really relaxing to spend time in a home that I can build/decorate/fix up the way I want.

  • M_monogato

    There is nothing really worst than having an illiquid investment.

    Have you ever had a car that you bought just one year ago, stalled, in the middle of nowhere? If you have had that experience, you know how you wished you had rented.

    A house near fked up neighbors — I can hear the whining and barking of my neighbor’s 7 dogs at least 20 hours a day — is worse than a stalled car.

  • Mad_monte_mccrae

    Where is the landlord at that allows me to own 15k in Guns, Reload 100,000 rounds of ammo in the garage, weld in the garage, restore a 65 Mustang Fastback 2+2 in the garage, own large pets aka horses.

  • Sugar Land

    All good points… but not so easy when you’re raising a family. Apartments and even rental homes are not the best situation for guys in the burbs. You’re right. A home is not a great financial investment. Most of us do it to provide as nice of an environment as we can as we raise our kids.

  • Mrdelurk

    I call it “unreal estate”. First, does land cost $$$,$$$, because dirt (what a parcel basically amounts to) cost more per pound to produce than customer electronics? Secondly, the very idea that one can really own a piece of land seems silly like owning a piece of sky or a piece of sun. Plus, after a $300,000 mortgage, who “owns” who? Finally, any time one of the 50+ US government agencies feels like, it can take this imaginary property from any “owner”, together with the structure he built. “Inviolable personal property?” A three word phrase of which neither of the three words is true. What’s “real” in this estate?

  • J.V.

    Mr Altucher,

    Aren’t you contradicting yourself when you say a home purchase is leveraged — meaning that the downside losses are potentially large — but then say that the upside gains are limited?

    Leverage is leverage. If I’m leveraged 5-to-1 on a home, then I can lose at a rate of 5X (I’m speaking metaphorically here — the exact numbers depend upon circumstances, of course) or I can gain at a rate of 5X.

    You also contradict yourself when you say that you are kissing the $100,000 down payment goodbye, and would rather invest elsewhere. This is not true. It’s extremely rare that someone would sell their entire stock market portfolio. Which means that if you opened a brokerage account with $100,000, and you end up “selling everything,” you’ll just put that $100,000 back into another instrument. Same difference.

    Also, you can always get equity back with a line of equity. I bought a mortgage a few years ago for something like 4-7/8%, then within a couple of years opened a line of equity for prime minus a penny. I maxed out the line to pay off the mortgage, thus bringing it under the jumbo line, and am not doing that bad for interest. To make a long story short, I had a nice lump of liquid money in my line, were I to need it, and there’s almost no difference between an equity line and a margin loan, except that margin loans cost twice as much.

    Sorry, but let me just squeeze one more thing into this long reply. If you buy a home where the land itself is a substantial proportion of the home price, then your downside is protected. If you buy a condo, where you own no land at all, then your entire purchase price is at risk. I could go on.

    So. At the end of the day, the difference between a mortgage and a rent is not that large. The reasons should be personal ones. You rent, I buy. Neither of us is going to have a life-changing experience from it.

    Thanks for providing this forum. Keep up the good work.


    I’ve bought and sold three houses. Total of about $1.5 million. After three transactions, net, I’m up about $50K over an entire decade, and I feel good to be out and completely free of housing now. But the real estate agents made over $100K and maybe, MAYBE, put in two weeks of work total. The options for a normal person are: not get involved in real estate, use FSBO which is difficult, or suck it up and pay the agents. If someone needs a good idea for a business, come up with a disruptive technology for real estate sales. Figure out how to make selling a house quick and easy. You can buy or sell $200K of stock in under a minute for less than $50 in fees, but real estate agents can take months and 5 – 6%. If you stop and think about it, real estate agents de facto own 5 – 6% of most of Americans’ net worth. It’s a crock.

  • Joaomoreira

    rent costs will always exceed buying a house, you rent until you die…you only pay mortage for a determined period of time, especially if you do a 15 year mortgage, its paid for before you know it, I purchased a house at 25, Im 30, I have 10 years left. Guess how much rent I’ll be paying when I am 40 years old, $0, my taxes are $3,600 a year, that $300 a month. Oh yeah, did I mention I also earn $1200 a month in rent for the second floor apartment, and my morgage is $1100 a month….be smart then buy a house. This is all matter of oppinion and personal experience. Bottom line, buying a house is a good investment if done right.

  • Ckibel1

    Thank you for dismissing the myth about home ownership. Personally, my husband and I have bought 5 and sold 4 homes in our 30 year marriage…….thus far. While young and with children, we wanted ‘stability’ for the children…but now…NOW they are all raised on their own. We are in the process of selling our LAST home! We are also in the process of an estate sale to finally get rid of all those ‘things’ we really don’t need! We have RV’d for a while in our spare time and we fell in love! The view always changes AND our ‘cash flow’ increased dramatically! We have become very resourceful and found that we actually make a better living ‘on the road’, have more fun, meet some fabulous and exciting people, and get paid to travel! With all the moons in perfect alignment, we will be making our first trip out of the US in 2012. When we do leave the US, we will rent out our RV, so it will actually make us money while we are gone! We spent an entire weekend calculating the ‘real costs’ of homeownership and when finished, we were overwhelmingly disgusted! We now are committed to a truly ‘free’ life with more time, cash, excitement, travel, and fun! Fortunately for us, we are both still young enough to enjoy the next 50 years…doing it right! My advice would be the same! Rent or purchase a ‘used’ RV then live ‘light’ and watch your tub overflow with cash!

  • SWJ

    What you are saying might make sense if you live in a place where real estate is silly expensive like the coasts and rent is actually cheaper than a mortgage. That isn’t true where I live, unless you rent an apartment or a considerably smaller or less desirable home than the one you are buying. I’ve searched the price on comparable rentals in my area to the house I’m buying (been in it for 10 years now), and rent would be about the same as what I’m paying on my mortgage, which includes insurance and property taxes. Which brings up another point — most people seem to also forget to figure in what they’ll pay on renter’s (personal property) insurance or the risk they are taking if they don’t have it (even if a landlord’s liability insurance covers you, chances are you won’t get any personal property coverage in case of fire, theft, weather damages, etc). And if you have no liability coverage or aren’t fully covered by your landlord’s policy then one lawsuit can wipe you out or even ruin your credit for years. And sure, I’ve had some maintenance expenses, and I’m also sure that as my house is now 10 years old I will start having some more. But I’m also getting into the part of my mortgage where I’m starting to build equity more quickly, and because home values here didn’t have a huge run-up and then bubble burst like they did on the coasts, most if not all of my maintenance expenses will be made up for in equity if I don’t outright come out ahead of where I would be if I’d have rented. I don’t know how it works out cheaper to rent in other places, but here if you rent you are paying the landlord’s mortgage, his taxes, his insurance and a probably a little profit to him on top of that, at least in terms of he benefits from equity being built. Why in the world would anyone be a landlord if they weren’t making money at it? And the people I know that own rental properties mostly seem to be doing pretty nicely.

    I do agree that perhaps if moving every few years is a requirement or you don’t mind living in small spaces or sharing walls with others that you might be better off renting at least in the short term… But it doesn’t work that well for others. I for one will never share a wall with a neighbor again. Last time I lived in an apartment I had bitchy neighbors who complained about everything. Since I’ve lived in a house I’ve enjoyed playing my guitar again and other things that would have had the neighbors screaming bloody murder and complaining to the landlord. And like I said if I was renting a house there would be little to no savings even in the short term for me.

  • Ok…. pending on what income bracket you are in — I am a landlord and I will tell you — some people have a choice between a home in the projects or an apartment — they would rather have a home — if you are in the upper middle class tax bracket and live in a high rise or resort type living then maybe it is okay or if you are single — I love my home– In Texas we did not have the artificial inflation of houses — if you are upside down — live in the house for free until you are evicted … save money and get another home — cash is king =— if you don’t mind noisy neighbors — or don’t entertain or have children — then apartments are just fine —

  • An average Jane

    I find the article provocative. It drives home, to me, the issue of rent vs. buy is really a choice based on personal priorities and less on financial investing (though I don’t deny the investment aspect).

    The points James lists are the same assurances I made to myself when I rented. How much freedom I had, not being tied down to a house. How much more money I had because I didn’t own. But here was the reality: What good is the freedom if you never exercise it?

    I had owned a house, with my ex-husband. It was a fixer-upper that we weren’t equipped to fix up (monetarily, emotionally, or practically). I hated the walls in that house. I hated the house. And it did make me feel trapped. But actually, I misplaced some of my feelings towards my ex-husband and redirected them on the house. That poor house. When we divorced in 2006, I walked away from it all. I took nothing from the marriage. I fought for nothing. I swore I would never own again. Possessions (houses included) are all just “things” (and anyone who has lost something important: a loved one, confidence, sense of self, would nod their head in agreement). I told myself I was free. Free from the burden of physical possessions.

    Really, though, it was just a period of reacquiring possessions. So that one day, sitting in my non-committal apartment packed full of “things” I had acquired since the divorce, being tortured by raucous neighbors (because you don’t have control over that when you rent) I had decided, “Hey, I rent, I don’t have to put up with this crap!” and so I moved. To a house, this time, with a yard. I rented it. With a roommate, so I could afford more house, of course. And for a while, life was good. But eventually, the roommate thing became creepy, and so I moved again. This time, to a beautiful turn of the century 13-ft ceiling, gem of an apartment in a blighted neighborhood. I’m hip, I thought. I can handle the blight. I’ll even join neighborhood groups and help turn this blight around. How naive. I last all of 3 months in that apartment. I never did get used to my neighbors walking around with “pieces” tucked into their back pockets and yellow police tape instead of landscaping.

    So I moved again, to my parents house. It wasn’t a move, so much, as fleeing – from a neighborhood that wasn’t ready to change, maybe didn’t even want it. And so I stayed at the family homestead, swallowing pride and stashing cash. Until, one day in November 2011, when I wasn’t even considering buying a house a friend included me in a blanket email to her real estate investors about a small brick bungalow (smaller than my beautiful blighted apartment) that had just gone into foreclosure. And the wheels in my head started cranking in overdrive. Within 48 hours, I had an accepted offer. I switched lenders twice during the process and got historically low rates on a historically low price. The house is brimming with “character” and by that, I mean problems. But 5 years of renting make these problems seem welcome. So the cycle beings again. Home sweet home.

    But for those that scoff at real estate as an investment or claim it ties you down. I have this to say… you can always rent your house out. Let your renters pay down your debt.

    • just another independant woman

      But, what if the horrible neighbors or neighborhood were there after you bought, by then you are locked in? Speaking as someone who has rented out a home before, it is a losing proposition. Renters will destroy your home, stick you with bills you can’t afford for lawyers to make them get out, or to try and recoup the cost of the destruction they have caused to your property, or unpaid utilities because they move somewhere they don’t care about getting utilities in thier name again…. yes, the utility companies want thier money for unpaid services before you can rent the property out again. Worse, all it takes is one bad renter for every one of these things to happen! Plus, you are still stuck in the area because renters will do all sorts of things to your property if they think they can get away with it because you don’t live in the area. It’s a horrible idea to think you can simply rent something out if you change your mind.

  • Mkalamo2

    couldn’t agree more! I write in my blog(www.myripcord.com) about the very same thing. Custodial parents go crazy over who gets the home. they believe it provides stability to the kids. Nothing could be further from the truth. A stressed out and broke parent is not good.

  • trapman

    I bought a modest home in 2003, because that is what Americans do, to be near my mother who needed some help. I realized a few hours after signing that the moment I signed the house started to disintegrate. But I thought I was doing the right thing. Making an investment. It’s the American dream. The problem is that the mortgage, which is a good one, and my car payment, eat up most of my paycheck. Random bills and expenses eat the rest. I stopped having the yearly maintenance inspection done on the AC/Heat systems several years ago because I never seemed to have $70 extra at the right time. When/if it goes I’ll have to go without or get a home equity loan I guess. I cringe at the thought.

    I’d really love to sell and get an apartment. I am working on it but hate to paint. I’d rather spend my free time pursuing my creative passion, reading books, hanging out with friends than doing renovations which I don’t know how to do and can’t afford to do. After years of doing yard work on my parents home I have no desire to cut grass and dig holes. Moreover, old growth hardwoods blanket the property in shade all day. No sun loving plants and grass that buyers want to see will grow. I had three trees taken out once because they were in danger of falling on the house and that cost me $800. I live from paycheck to paycheck and do not foresee being able to do that again. I do not use the whole house (1200 sq ft). Two of the bedrooms are not used. I could get roommates but I’ve never had a good roommate and so am shy about it.

    I am the classic trapped person that should not own a home. I’d love a decent apartment with a pool and gym and social events where I would not have to worry about roofs, water lines, and paperboard siding. I’d love to live in a walkable area where I can get out and meet people, go to restaurants, and parks.

    I’m not finding many allies among the people I know. Most are married, two incomes, nice salaries. They think I am crazy and think I should “own” something for the benefits. They spout the usual stuff. Investment, tax break, return if I sell in a good market. They don’t hear me when I say I cannot afford to maintain the home. It goes right over their heads. Meanwhile I come home every night and sit in this house and worry about the day it needs a roof.

    My Realtor tells me to fix this that and the other. Gasp!!!!! Painting I can do. Fixtures and siding and landscaping and everything else ugh! It adds up.

    I feel trapped.

    Nice to read an article that backs me up.

    This article, actually the author, is being slammed on yahoo. Well it is yahoo. The level of dogma and vitriol is dismaying. People are not considering that it is different for everyone. People are so selfish.

  • Malton

    I own a home (for now), and I feel like an idiot. When I look back at my decision to purchase, I don’t even recognize the person who made that choice — why in the world would I think I would want to live in the same place for the rest of my life? Of course, someone with my limited financial knowledge could not have foreseen that the house I owe $100,000 for would be two doors down from a house that was recently purchased for $19,000 (no, that is not a typo) and would therefore be unsellable for the far foreseeable future. For some, I’m sure homeownership works out, but for me it has been a total trap. The recession caused my formerly nice. middle class neighborhood to hit the skids big time — we lived next to a prescription drug peddler for the last four years (he’s finally gone) and a house down the street is being converted into a halfway house for recently released criminals. I have a young son being raised in this environment. Why? Because we are chained up by a mortgage. If I ever get out of this mess, I will NEVER take the risk of owning a home again. You may love your house, but you have zero control over who moves in next door. If you rent and a criminal moves next door — you can leave.

  • Nnrs1

    You must be a landlord.
    Renters have no control over their home. Can’t paint, redecorate, etc.
    Landlord goes broke, house gets foreclosed on, the renter is out.
    Landlord can raise the rent at the end of every lease.
    Often times, rent is higher than a mortgage payment WITH taxes and insurance.

    And if EVERYONE took your advice, those housing related stocks wouldn’t be so good, now would they?

  • Tocassandra

    Give me a break, where are you figuring in the rent escallation? Rents go up and up, 30 year fixed mortgage stays the same. So if you are staying in the home for a long time, you win. Period. Who wants to be 65 and have their home paid off? Who wants to still be at the mercy of the landlord? And hey, if rentals didn’t PAY a profit, they wouldn’t still be there.

    • trapman

      My mortgage is fixed however my payments went up when property values went up. Recently values went down and now my payment is the lowest it has been. But they do not stay the same.

  • Bryan

    I am 33 and I own my house outright. We lived below our means and paid it off in 9 years. My wife stayed at home with the kids for the past 4 years, and no we are not rich, never made more than 90K combined. So for the next 30-50 years I only need to pay off my taxes and insurance. If I lose my job I don’t have to worry about where the rent money is coming from. So while the people 3 doors down are paying $1100 a month in rent to my old neighbors that moved I will just be piling money up to invest in my kids education and retirement.

    If you live below your means, and you live in a reasonable cost of living area you can buy a home pay for it, without spending 2 times as much in interest and then have the security, yes security knowing that as long as you can keep up with the real estate taxes and insurance you will never have to worry about where you are living for the rest of your life.

    You listed stress as a big negative. I now have no stress in reference to my housing situation.

    • trapman

      Good for you. Sounds like you did well.

      • Bryan

        Raised by parents that lied below their means, and following in their footsteps

        • trapman

          Hmmmmm my dad would disappear for half a day on Saturday and come back with a brand new F150 pickup and 29′ travel trailer. Used to burn my mom up. :) For many years my spending habits mirrored his. The good new is that except for house and car I have very little debt which I am paying down. I can’t remember the last time I used a credit card.

          These days I live frugally because I’ve learned a lot of hard lessons. And out of necessity I don’t eat out much, don’t have cable TV or even a TV, budget my gas usage when I run out I don’t drive, wear clothes forever, eat twice a day, buy stuff used, go to the library for books. I have just an inexpensive pay as you go cell phone. I can’t remember the last time I used a credit card.

  • kaya_sf

    I hate moving and have no idea why anyone would want to do it unless absolutely necessary. Now that I have 2 kids, it’ll be a cold day in hell before I move again.
    It’s true I never understood why anyone would throw all that $$ into a house unless you want a SFH for your 2.0 + kids, but neither was I ever wont to do much in the way of other investment…. it’s not something I’ll ever be good at. There’s retirement $ and then all the $ I was hanging onto “in case sh1t happens.”
    So I put it into a house where I truly enjoy spending extra time making it into exactly what I want. I couldn’t rent it for close to the mortgage payment.
    Anyway, I’ve read this renter’s manifesto before… it makes sense for many situations. It also doesn’t for many, as well.

  • Brian

    James, I love most of your thoughts on this (especially since I sell stocks, not real estate..), but… what about retirees? I think typically retirees who have no house payment or rental payment are better off then those that do…

  • Oddgirl

    It’s not the house, it’s the yard. I could live in a tent, albeit a biggish tent with a hot shower, but it’s the garden. Not a community garden, but my own garden with fruit trees and flowers and raised garden beds for every type of vegetable I like to eat. And the wildlife that comes into a yard that is well-planted. That’s why I bought a house, small house, big yard. No worries about a landlord who will sell the house (garden) out from under me, or doesn’t agree with my vision of landscaping. All the rest about owning a house is a bunch of hooey and worry. Future plans for the garden? A bee hive!

  • Outregeous

    Fantastic narrative, James. Wish so many of my friends and family had listened to me cautioning the same things eight years ago. Most of them miserable – but not all.

    Home ownershipt has worked very well for folks who were well-situated, loved their place, loved their location, loved fixing it up (yes, one Martha Stewart-style), had young kids & secure positions – or no family, had a yard that rewarded them, and in one case, knew when to sell and stay out.

    But as an investment? Thanks, Dad, for talking me out of this twenty-five years ago. I’ve saved so much money – and made so much more on my investments that I work where I want and go where I want when I want. (I do have a small “recreational lot” that has paid off in sunsets and costs me pennies.)

    I’m not rich or famous nor do I make a pile of money, nor do I care. Most importantly: I don’t need to. So few expenses, great rentals out there… and when I retire in twenty years, I’ll already know what it feels like.

  • Tourismprofessor

    You know my husband and I felt the same way. He lost his job 9 months after we married(2nd for both) and built a combined home for our family. After struggling to keep it after 2001, the tech bust etc, we filed bankruptcy and started renting. We found a cute little home as our youngest was going to college, then when he was gone rented a really nice one with a pool. The landlord decided to sell and the house wasn’t worth what they were asking so we started looking for another rental with a pool. Our real estate friend suggested we really consider buying so we did. Very little money down with new home incentive because we hadn’t owned in 3 years of which helped pay off our tax bill from prior years, we found a forclosure with a pool in a established neighborhood with growth surrounding it. Perfect I hope. My husband and I are both in our 50s and after being put out of our last rental started thinking about the idea of having to move every 2 years if we didnt want to. If we were a little younger and mind you we are very young active 50ish I became concerned about having to look for a new place at the whim of a landlord. We really didn’t want to buy again but trying to improve our retirement situation since we had lost everything before we felt it was a good move. Yes, we’re spending our travel money this year investing in the house. But we feel very good about the fact that if I have to vacation at home this year I’ve created my paradise right here. Next year I’ll take my home improvement money and go to Tahiti as long as everyone’s job stays in place. But our house note can be paid by one person’s job and we have a pool, lots of room for our future grandchildren to play and our kids to bring their families in the future, a place to call home since their childhood homes no longer exist. I hear you about moving every couple of years, but as rents increase and landlords want to sell I think we’ve done ok.

  • Crushlymbug

    The most important reason for owning your home is privacy.You don’t have privacy when you rent

    • I hear this argument all the time. Why is your *privacy* so important to you, and what does that mean, anyway? I used to live in a (rented… from my father… who didn’t pay his f-ing mortgage and got us foreclosed out of the place!!) house, and we heard everyone around us fighting, and they heard us fighting. Perhaps it’s a matter of how and where you grow up. In say, Texas, where lots are huge, you come up thinking it’s like that everywhere. I grew up in California, and houses have always been pretty close together, and this mythical privacy was never something I got wrapped up in.
      Are you cooking meth, or running a prostitution ring, or something? if you don’t have anything to hide, why is it so damned important?

  • Tlc1145

    This is easily one of the most worthless and badly thought out articles on the web and one of the reasons that the internet is a joke. Because it gives clueless people like you a forum to influence people.

  • Petewysong

    I want to send this to my son but he is about to close on his first real estate transaction, a condo that he is going to rent out.
    I will say New Yorkers have a distorted view of how easy it is to rent and find something you want to rent. Most of the country it is not so easy and the choices not so good.

  • Ladychozens

    I’ve got two homes and an apartment. Just goes to show: you’re right. I like my apartment better. With one home, i plan to sell it. The other, i opened a business. The note is cheaper than ANY strip.

  • Prometheus

    ahhhhhh, the poor man didn’t save money in the bank….he probably bought a hot tub, a plazma tv, and a satalite to watch hundreds of channels. What happened to saving money in the bank? You could live in an appartment for all your life for all I care (although it’s inadvisable-costs more than to live in a house) but if you buy a house to rent out then that’s extra $$$ in the pocket. Maybe you should change the “own” in your title to “live”

  • I own my own home OUTRIGHT. I took the money from my inheritance and paid cash for a home in Arizona(low property taxes and lower housing costs than CA or NY or other f__ked-up huge cesspool metro areas like NYC, L.A. or Chi-town)and love it! No bills(piad off all bills), home is furnished with brand-new appliances and furnishings, and I love the desert climate.
    I’ll agree with housing being a huge money pit that many dump $$$ into, thus renting where I live in L.A. till I retire in 17 months(yes, I’ve actually got a pension plan with money in it!)and just paying utilities, taxes and insurance on my home in AZ after I retire.
    Loans cost money, although you couldn’t have told anyone that 4 or 5 years ago when RE was smoking hot……how do you think they make their money? Not from me……….people thought I was a fool for not taking a 2nd out on my home, now those same people are upside down and several have lost their homes entirely due to the money pit factor. Why is our country in the bind that it’s in now? Go figure…….Mr. Altucher has some really good points here!

  • Freddie

    you sound like you know what you’re talkin bout!!! Lets do it. Not buy a house!

  • Liz

    I have rented and I have owned houses. As a renter, I have little control over what I can do in my house. As a homeowner, I can do whatever I want. paint the walls whatever color. Yes, I know, beige sells but I can always repaint to sell. Rentals limit how many pets, I can have as few or as many as I want in my own home. If I am in a single detached dwelling, I don’t have to deal with obnoxious neighbors sharing a wall with me.

    With renting, I have to worry about rental increases when the rental agreement is up or move. And moving is not only expensive it is time consuming and tiring. Owning a home, you don’t have to worry about the mortgage payments going up if you were smart enough to get a fixed rate mortgage.

    Yes, you do have to worry over things breaking but they break in a rental as well and not all rentals are fast at fixing things. Or do it properly. Smart homeowners set aside an emergency fund for the things that need repair and hone up on their diy skills for things they can do themselves. You don’t have to break the bank to fix things or renovate things. Research can pay off.

    To me, buying makes sense. I just can’t see renting long term, maybe being the rental agent but not the renter.

  • Jdhf

    I Completley agree. I did not buy a home, my brotherhas been a home owner for a while now. He is stuck in a city thats economey went to crap. I on the other hand moved away and I am doing fine and he is stuck and SUFFERING

  • Pacman2044

    You are an idiot. I bought a townhome here in AZ from a bank for 25k I spent another 20k fixing it up with high end materials and it looks like a palace inside. So I spent 45k and have an awesome place. My HOA and Property Taxes are 250 a month. The only thing I need to pay for is electricity and Insurance… the same thing I would have had to pay if I rented. Also to rent a place like this would be 1k a month and would not be nearly as nice as I have made it. So basically, yea… I shelled out 45k up front an invested a few months of my life… but lets see what I get….

    A great place to live in… .better than anything I could have rented.

    Plus I save 750 every month.

  • Joey

    We just bought a house and now can
    1. rent out a portion to offset mortgage and utilities,
    2. plant edible perennials, an annual garden and trees to feed ourselves for much cheaper/healthier and draw income from produce and lumber,
    3. paint the bathroom purple if we dang well please :) and
    4. invest in renewable energy systems to eliminate utility costs. (Done in a modular fashion, with an eye on reducing demand first, you can do this for much cheaper than is often realized.)

  • Couldn’t disagree more. Every ‘reason’ listed is nothing more than knee jerk, soda fountain children’s fables. First off, the down payment that you mistakenly referred to as ‘an investment’ couldn’t be more of an uneducated ‘point’ if you tried.

    1. Down Payment: The down payment is for one reason, to show the lender that you have skin in the game. It shows that you are a good credit risk and that you’ve shown good faith of repaying the investment. All of these ‘whoa is me’ people that lost their homes could probably be traced back to the fact that they overinflated their income and put zero down on the house because of relaxed lending regulations.

    2. Closing Costs: Yes, unfortunately in America you have to pay for things that you want. This includes having attorneys review the title to ensure that the person that is selling the house, OWNS the house. This also helps take care of little things like, someone coming back and assessing a lien on your house because of repairs that the seller didn’t pay… I know, DARN this capitalist society!! We want everything free!

    3. Maintenance: Your whole ‘my landlord will fix it’ routine is the same thing I said when I; couldn’t afford a house so this helped me self-soothe or too young to know how money works. Tell me how it is when your landlord raises the rent because you keep breaking things in HIS house. Also, I don’t know where you got your math figures; the average roof lasts 30 years, the average water heater lasts 15 years, the average heat and air units last 15-20 years. Get better math or stop living in dumps.

    4. Taxes: There’s not a single, educated, homeowner that thinks that they’re going to get rich from their tax returns in writing off their property taxes. This is the cost of having roads to drive on, lights to illuminate the streets and welfare for broke apartment dwellers that carry your same mentality.

    5. Trapped: Do the voices in your head keep you up at night? Are you the one that saw the second gunman on the grassy knoll? Your delusions of ’employers wanted to limit job choices’ is about as valid as me saying, ‘Mother’s Day was created by Hallmark so they could sell more cards.’ As a HOMEOWNER, I have options when/if I am moving; I can rent my home and make cash off of suckers like yourself, my company will handle the sale of my home or buy it outright. As a renter you have zero options. You move, you have no value.

    6. Walls: You obviously have a rat in a maze mentality. You’re so busy running the maze, you don’t realize that if you OWNED the maze, you could knock out walls and get to the ending. As a renter… run mouse, run.

    7…. ah, you know what, screw it. You’re delusional by even telling one follower that it’s better to rent than to own. You sound bitter and honestly, your logic and ‘points’ equate to that of a pissed off teenager that’s mad at his parents.

    What a waste of time.

    • Jessica Lynnem

      I agree!

    • Jimzfifty7

      Epic Post!! I couldn’t agree more! : )

    • Jeff Agan

      Faulty logic? Lets examine your logic for a minute.
      1. Downpayments (or the lack thereof) When the housing market crashed it didn’t just affect people who were in mortgages they couldn’t afford. UNfortunately everyones property values tanked and if you needed to get out of a house during that time you were shit out of luck.
      2. Closing costs…ok I will give you this one.
      3.Maintenence. Your figures are just plain wrong. You will be lucky to get 15 years out of that 30 year roof. 15 years on a water heater? A 15-20 year old furnace/AC/ or Heatpump would be so horribly inefficient that you would be throwing money out the window and repairing it at least once a season. Then look at the cost to replace that roof or heat/ac.
      4. The fact is, however you choose to shade it, that properyy owners pay real estate taxes and renters don’t so it is a consideration for someone who is deciding whether it makes better economic sense to buy or rent.
      5. Yes, trapped. If you have an employer who will by your house when you are moving ( obviously not changing jobs) then you are damn lucky. I have tried the long distance renting thing and let me tell you the ways you can get screwed are practically endless. The fact is that as a renter you have te option to move, as a home buyer (the bank usually OWNS the damn thing anyway) it is much more difficult to relocate.
      6. Walls. Not even sure this one is worthy of comment. If you do choose to “knock out the walls” you are talking about another large expense.
      7. For lots of people it does make better sense to rent than own. That doesn’t make them inferior to you, it is an individual choice based on a persons individual circumstances, there are pros and cons either way. Bet you won’t sound so arrogant when that great company downsizes your ass.

    • Horse8four

      Are you the one that saw the second gunman on the grassy knoll?

      Come on…we ALL know there was more than one gunman. Geesh.

    • KevinWoodruff

      Me thinks thou doth protest too much

  • Puppychow

    I was startled when my father, who has owned his home for over 20 years and has lived in it and raised a family in it for 50, told me “Don’t buy a house. It’s not worth it, especially since you don’t have kids.” When I asked why, this was his answer: Taxes. You never really own your home, you rent it from the town/city you live in. What happens when you don’t pay your taxes? They take your house and everything around it or in it! He told me this before the recent bust in the economy, when I almost bought into the hype when you could buy a house with no money down. I know it sounds negative, but at the bottom, he’s right. You buy a home, but only rent the land it sits on from the town, no matter what your paperwork says. If you don’t believe me, try it. You’ll be homeless quicker than you can say “Uncle Sam”.

  • valeroe

    You are absolutley right. Took me until I became a senior citizen to figure this out. Investment? Ohhh realllly? What those who want to sell you a house and make money off you (quite a few) dont remind you of is what you pay in property taxes, maintenance (Oh, must maintain to protect your investment, Right?), utility bills, and Im sure some other things I havent thought of)…Oh and of course the interest on your loan which is most all of your mortgage payment until the very end of the loan. Oh yes and insuring the property.. quite costly these days. Then there is the help you will need to pay to mow lawns, maintain gardens, and remove snow if you dont have time or are not in condition to do it. I wish some one like you had told me. Get the message out loud and clear. (and try to get rid of a house these days if you want or need to relocate) OOOOweeeee. Yes you can sell if you give it away.. Dont expect to make money, you will be lucky to break even. Or kowtow to the banks to allow you to do a short sale, for which you still might be liable for the shortfall. You dont just own the house, folks.. the house owns you… and so does the gas, electric, water . tax, gardener, etc etc etc,,,, Thanks again for educating people, bless you.

  • John

    As a landlord of 6 properties, I wish more people would rent, I would add up all the costs of owning a home, plus the higher costs of maintence of a rental until, add 20% and be very happy. Following this same thought I would not even have to have kitchens in my homes, tenate could simply go out to eat, much easier! Sorta like a hotel at 100 bucks a night, all you need in 500 sq feet. I could rent you a 500sf unit for 2000/month, all bills paid!

    Really nice thing about owning a subdivison of rental homes, I could refuse to renew lease of a bad neighbor! Wow, send them dowm the road.

    Apartments are a good example of this! Not for me!

    As a builder and real estate agent, their are two sides. Owning is security, knowing it’s hard to be forced to move, The other side if you are going to in one place for less than 2 or 3 years best the rent.

    Problem in past and still now, it is too easy to buy, lots of problems could be solved with smaller homes and bigger down payments.

    Same with cars, trucks, and boats! LESS is MORE!

  • Velaruben89

    youre F***ing retarded and crazy. the reasons you gave were disgusting.

  • Paul

    Certainly a variety of reactions here. It really comes down to the fact that you should do what is right for YOU, what fits your desires, your lifestyle, your wants, emotions and needs. (and of course your financial situation). Renting is better for some, owning for others. The thing to keep in mind is that society holds renting as unacceptable. If you rent something is wrong with you. You need to ignore that and do what is right for you, not what others expect. Not always easy, which is why some many of us feel we “have” to own.

    For me renting saves me hundreds of dollars a month, and gives me the time to do things I really enjoy, which does NOT include painting the walls and cutting grass. You can have it. As for “equity”, I can’t pay the bills with equity. Better for me to invest the money elsewhere for retirement. That’s what works for me!

  • samsister29

    After looking forever at houses with perfect floorplans, and huge prices, I bought a 2K’s sq ft 5 bd rm, 2 bath, with walkins, jacuzzi, fireplace, on two lots at the lake, was a HUD fixer newly marked down to $29K’s, total, was newer looking, 9 yrs old modular that had that exact floorplan, and cosmetically trashed enough to make regular buyers balk, but to me, I saw a diamond in the rough, an easy fix, steam carpet, replace fixtures, shades, wiring outside, etc. The first owner had money, skirted it with native white stone, then I added a barn and new carport, so it’s now fairly lovely, with all new appliances, all for $400 a month, including insurance, still a fixer in areas, but shows and lives well. I put appx$10-15k’s repairs, so far. Not bad, but is taking a little longer to sell, since money’s tight, and fewer people buying, but I’m patient. The positive… it’s prime land in a highly sought-after area, close to Austin. It’s for sale so I can get money for either a real house or nice apt. I hate pouring money into rent, paying off someone elses place, but at 63, I’m done flipping, and pray for a finished one, just tired of trying to keep a place up, maybe will buy into a condo, only you’re stuck with whatever neighbors, or assoc. you draw. A little confused, since I’m programed to feel pride at saying “I own”, instead of “I rent” but am working on it, and am sure the Lord will provide the ‘tude and right place for me, as usual. Headed back to slower paced W Tx where my HS girfriends who are widows need me to teach them how to fish, hunt arrow heads, skeet shoot, etc. (I’m a straight girlie tomboy, smiles) I’m excited to start over back at my roots, plus my kid is out there waiting. No more airports and motels, hopefully. Taste and see, the goodness of the Lord.

  • Meltojam

    I agree totally, I have been retired for three years this month and many years past I learned that some wealthy people don’t want to own anything, the use material possession as long as needed on a lease/rent basis and keep their wealth in vehicles which create gain

  • rerunjas

    Renting does give you more flexibility and less worry and responsibility since the landlord must keep things in repair and pay taxes and insurance. Ownership can mean lots of headaches, always something needs to be done or taken care of with your time and money.

  • Anonymous

    Lots of good reasons not to own a house and I don’t think ownership suits everyone. We’d still like, too, though because we like to garden and for a host of other reasons. Planning to put as little down (and pay as little) as possible to keep our cash cushion in possible.

    I agree it’s a lousy investment – it’s something that should be bought only if a)someone wants to and b) can actually afford it under traditional measures – that is 3x annual salary. People “investing” money in their personal residence are fooling themselves.

  • OneoftheSheep

    I waited all my life, renting, not being able to afford a house. Now, I have an inheritance, but after looking and looking, it is not as easy as one is told to purchase a house. I waited months on a short sale until I finally gave up on the place. Many people now tell me: “Don’t buy a house.” The same people have told me, “Don’t get married.” And yet, I see they don’t follow their own advice. Actually, I am the only one in my circle of friends without a house. I have cash to go to Europe. I have cash to go out to eat or buy a book. The homeowners are strapped and stressed. One friend owns a condo in Hawaii, and two or three houses in the neighborhood. But she never has a penny to spend. A slice of pizza at Sam’s Club is beyond her. After her home was burglarized and her laptop was taken,she could not afford to replace the laptop. That seems to bear out the author’s assertion. Me? I have moved numerous times. This last time I moved out of a deteriorating and unsafe neighborhood. I now reside in condos that boomed and busted. I have all the amenities, a great view, security patrol, maintenance man, gated community without the upside down mortgage. I am close to the bike trail, live in a woodsy, natural setting and am glad I did not purchase a condo in this community. Yes, I rent and my options are open because of it.

  • Jcellis

    The comments here indicate to me why it is not worthwhile for someone to invest their hard-earned money in rental properties. Let the buyer beware.

  • Will

    Their are definitely interesting points to this article that I think most people should understand before purchasing a home, but the main flaw is that the concept of leverage is somehow an ugly aspect of real estate. The mortgage (especially 30 year) is probably the best hedge against inflation that has ever been invented. You would have made the payment anyway in rent, and the rent will always increase with inflation, while your home payment never will. Equity accumulates, adding part of your payment to net worth instead of cash outflow, and you still get any growth that occurs on the entire value of the home, not the relatively small percentage you own. If you do the math, a leveraged home owner wins the net worth equation in the long run every time without question. While you are enjoying moving from home to home, and hiring the moving trucks, and breaking your back moving your couches – enjoying your flexiibilty, I’ll be bathing in the bathtub of extra money that I have in retirement without home payment.

  • All great points James. Your recommendation against home ownership makes a lot of sense for a lot of people. However it sounds like you live in Manhattan where most people rent anyway. Sure, some people may own condos, but owning a condo just means having an apartment with a mortgage; it doesn’t include owning the bricks. Very few New Yorkers are actual homeowners. It sounds to me like your making a lifestyle choice more than anything else.

  • Yep…we are a world out of balance! In many ways, but the only thing out of balance with buying a home is buying outside of your own means. As a REALTOR with integrity, it’s important/imperative to help buyers stay within their means.

    I had one buyer that as a renter….never got a carpet replacement in the 25 years when they rented and when they moved out…. the landlord wanted to charge them to replace the carpets. Note: The carpet was not new when the renter moved into the place even! Now, owning their home …in 8 more years paying the exact same dollar as she did for rent.. …they will owe only their maintenance, taxes & insurance. They bought smarter so they don’t have to work harder to continue paying rent for life!

    Buying isn’t for everyone, but for many that DO remain in the same community for multiple years, it can be by far the wisest choice! Many people own homes and still travel too!

    Home buyers are each as unique as their situations….To say any one thing is right/wrong is not remaining open minded.

    Lisa Piche, a Minnesota Realtor, ABR , Counselor Realty of DL, llc

  • RegularJoe

    Let’s say you buy a home in 2010 for $120K @ 5% interest on a 30 year note, with 20K down. That’s about $150K in interest over the life of the loan – most of which you pay in the first 14 years. Your monthly payments are roughly $700/mo. You pay perhaps $1500-$2000/yr in taxes=an additional $45K over 30 years assuming the tax rates don’t change. So, you’re up to $300K over 30 years for a home, not including maintenance, repairs, insurance, etc. Let’s say that at the end of the 30 years, your home is worth $500K. You think at that time you have made a wise investment. However, average maintenance on a home is roughly 2% its value annually – 2K/yr in this example (which will increase each year according to inflation, the value of the home, etc.) So that’s another 100K or so in maintenance over 30 yrs. Most homeowner’s will update their homes every 20 years or so. The average cost of a new kitchen is 25K. The average cost of a new bathroom is 10K. But, let’s say you skip that during your home ownership years. So far, after 30 years of owning a home you bought for 120K, you have spent 150K in interest, 45K in taxes, over 100K in maintenance. That’s $415K total so far. And now your home is worth 500K. Let’s say all you did was rent for 30 years and you started paying 700/mo and your rent increased 3% annualy. That would mean you pay 400K over 30 years. Here’s the kicker, at the end of 30 years if you owned a home, you at least COULD, in theory, sell and get your invested value in return plus a little bit more. If you rent, at the end of thirty years, you get to have lived anywhere, told your super where to shove it, and you can continue to rent for the rest of your life. Rent is great is for that reason. Home ownership may not be a great investment, but it pays forward after 30 years. I’ve got to live somewhere, so I live in a home I own. I don’t always like owning a home. It can be a real pain. But, at least it’s my pain. And, I can tear down a few walls over the years if I feel like it…..

    • RenterHere

      How can spending 250% over the sticker price of ANYTHING be considered a good investment?

      You’re saying “I want to buy this kettle. It costs $12, but I’ll go and spend $41.5 over the course of 30 years for having it (buying it and taking care of it and paying a lot of people just for owning it). At the end, this kettle can be sold for $50. Great deal!”

      I beg to differ. A great deal is
      a) buying it for $12 or less, spend $4.5 in taxes and $10 in maintenance, giving you a Total Cost of Ownership of $26.5 (if you MUST have this kettle) or

      b) use someone else’s kettle for $0.07 per month and do something productive with your paycheck, like making more money in a business or simply saving for great vacations in the Bahamas or Paris.

      Isn’t it obvious?

      • in a) you could use your $12 spread over 30 years to cover a 50% better kettle or 2-3 equivalent properties in addition to the home to rent out for profit
        for b) great plan if you’re planning on dying in exactly 360 months and have no income from which to deduct mortgage interest

  • Dewdrop034

    I haven’t read every comment written, so I’m not sure if this subject was touched upon as of yet. I was wondering, would the landlord/ tenant relationship count in the buyer loss scenario? I own a duplex and I have tenants that pay the full mortgage every month and I pay the taxes. Sure, it’s true that tenants don’t take care of your property like you would and there have been repairs, but I have certainly made out better in the long run financially.
    I have gone on vacations and even saved enough to do lots of repairs without having to take out any equity, all on the tenants dime . So, for someone like me who has a middle of the road office job, home ownership has been a god send.

  • EPT

    I agree. I guess having a home is evolves around family, so children know where to go-to feel at home. As we get older, it don’t matter where we stay, we end up in a convalescent home anyway.

  • big brother

    i own a home,will be payed off in 5-6 yrs.the point of the article was well made but not entirely accurate or should i say full disclosure.i have lived here for over 20 yrs,yes i have replaced the roof,put on siding,done this and that.the roof is lifetime and its payed for,so is the siding.the point im making about owning over renting is this,im 48 and my house payment ins,trash and taxes is$425. i put down a healthy down payment made a few extra payments when i had it and bought the house below market 21 yrs ago in july.houses in my neighborhood now have rent or house payments from $900-$1200 even in this market.there is no way i could rent a nice house or apt. in a nice area for what i pay now,not even close.i know folks paying 7 or 8 hundred a month for a 1 bdrm +utilities+parking.plus in a few yrs i will only have ins and tax and maint.by then rent and mortgages will be even higher,thus is where the flaw in his theory lies.when i get it payed off,maybe i can fill my bathtub full of cash and have that pretty girl come over a help me drink some wine,count money and relax in all of my rent free living.

  • RenterHere

    For the “your-home-is-a-great-investment” crowd. I think you are quite wrong.

    I can live anywhere I like for a pittance. I don’t have my money buried under dirt and a bunch of bricks erected in a somewhat pleasant fashion.

    I can make a home anywhere, so don’t turn this into “a house is a home” fallacy. A house is to a home like a bed is to sex.

    Renting for me is a very simple proposition. It saves me from a myriad legal and financial transactions that I feel are there for the sole purpose of stiffing me. I can (and do) take the huge amount of cash I saved from never buying any of the houses I’ve lived on and use it in more productive endeavors. I still sleep with a roof over my head, change the scenery as often as I want and have cash on the bank.

    I just turned 40 and have no kids. I might change my mind and swallow this words, but renting makes so much more sense than owning, I can’t believe people are so bent on buying.

  • big brotherVictor Bennett63

    buying now may not be as easy as one would like,but i own and you couldnt rent a bad apartment in the armpit of town for my mortgage.ive got a big backyard,a workshop,a 8by12 shed,garden and i dont have to move to change scenery,i just paint or get new wall decor and no landlord to ask(cept the wife).my house payment is less than a lot of folks car payment.

  • Where to start? I’ll make a simple point, hopefully enough to allow people to see that you’re clearly smoking crack. There’s a lot more wrong with this too.

    You claim that it’s not true that housing is a good investment and cite a number for the increase in “just housing prices” (you fail to inform that your number is inflation adjusted). Then you cite that housing is highly leveraged. You forget to inform that the leverage means that you need to multiply the increase number by how much you are leveraged.

    If I put 20% down, that’s my investment, NOT the cost of the home in total. If the house value then goes up by 5%, I make 25% on my investment due to the leveraging. Hardly a bad thing.

  • Pawmatched

    I hope this is sarcasm and not what this person actually thinks. Buy a home and rent it to people for profit. Eventually you will have enough to buy more houses and rent them out… over a period of time you don’t have to work! 4 houses at 850 a month equals 3400 a month! No job equals less stress and you can hire a company to do the maintenance for you. over more time you can have maybe 10 houses, that’s 8,500 a month! Yes I know that it is a long time but money in the bank every month sounds good to me. I like residual income. Make the money work for you! you might as well set on fire the rent money you have, your only paying someone else. 850 a month for 10 years is 102,000 that you just threw in the trash. I haven’t read the don’t send your kids to college yet, but WHAT?! People are retarded enough as it is and you don’t want them to learn anymore? Lets start making society just like the movie Idiocracy as soon as we can… “I like money” Effin Stupid

  • Also you left out Termites and those animals with big ears that make large holes in the backyard.Or getting caught without Flood insurance when the Town Drunk rams the fire hydrant in front of your house flooding the basement.Of course he does not have car insurance or any money.

  • Home ownership can be good or bad depending on how long the home is held for due to costs of selling. But bottom line is that if you hold for many years, there is no contest. The monthly outlays even out, roughly – most places at most times in history are relatively near rental parity. But at the end of 30 years the big difference with home ownership is YOU OWN A HOME outright. All those dollars you’re putting in in years 15-30 go right into your piggy bank, paying down the principal. By contrast, every dollar in rent (and that rent is rising each year) goes down the toilet.

  • Ari_trent

    Really…….. I’m confused, how did you become a financial guru….James Altucher? You are bat shit crazy and look like a smug asshole that smells his own farts, quit masturbating looking at your own asshole, and start giving people real financial advice… I mean really, way to be fair, oh the taxes, lets just forget about 1031, depreciation…….. you no what I’m done! You obviously don’t have a series 7, so you are not qualified to give advice on stocks let alone any other financial advice!

  • anna65

    When I paid to rent I had nothing to show for it. When I bought a house and paid it off very early, I had something to show for the money I spent. I don’t have to put up with noisy tenants next to me, above me or below me. I don’t have to wait months for repairs to be done or worry how much rent will increase every year I am living there.

  • Frank Zappa

    When this Guy speaks about “Houses” he is reflecting on ancient thinking: Not all housing purchases are that bad or as bad as he seems to indicate. I have options to pay off a home within 7 years “Guarenteed.” I will not get ripped off by banks for money they seem to print out of thin air “Thank You Very Much,” I will change the way banks do business with me I will make my own rules. Buy a Principle residence and pay it off. DO NOT RENT it to anyone, no one takes care of your property like you do, as far a “Liquid Investmert” a house on the surface is not a liquid investment unless you are me, and unless you know what I know then all that the article has posted to a degree is essentually true. One person indicated do not fall in love with the product ie the house but fall in love with the potential cash flow, he also speaks of “The Stock Market” (Legalized Gambeling) most people do not know a thing about the “Stock Market” so they are willing to gamble that their pick is correct so when they loose money it is considered an “Investment” and when they make money then they consider this as a “Gain” but at the end of the day MOST people loose a great deal of cash. So what IF I did want to move, and what IF I wanted to “Mobilize” and get a better paying Job, do you really think that I would have a problem? For me this is and will NEVER be an issue. At Least when you own a home you need not worry about signing a new lease every 6 months to a year, so you can live in some crappy 700 sq. ft. appartment, did someone say Shoe Box? When you do sign on the bottom line for a mortgage you at least know that you have a fixed expense, so IF you are wondering if I am a “Mortgage Broker” the answer is NO, I don’t even have an RE License, but I do know Real Estate.


    Lets take a look at renting, your rent (Normally Goes Up) an there is NO tax write-off, (Something is better than Nothing) it helps with your adjusted gross. With a fixed 30 year mortgage it stays the same, with a “Land Lord” they can kick your ass out within 60 days here in “California” they never need give you reason as to why they want you out they can just boot you out. You can’t piant the house whatever color you want, you simply have no authority. you usually have walls that adjoin to your “Neighbors Wall” (How Exciting) you ususally arre stuck next to some “A hole” like it or not. at least you can check with other people before you purchase the home of your choice because it is a wise thing to do.

    Ok with a house you have a yard, you have maintenence, but it won’t cost you as much as continual rent increases. Whaaaaaa so live with it. Atleast you have something you can call your own, one trick you need to know is what happens if you loose your job? Well you should be able to pay your Mortgage with the money you get from Unemployment or close to it, you can use other investments to keep you going while you look for another job.

    The bottom line is I don’t agree with the “Author” of this article. While I could go on about Owning a House I think my point should be clear.

  • Donnabee2004

    I find the comment that the price of the mortgage, maintenance, taxes, etc. is sometimes baked into the rent, but “usually not” just plain bewildering. I’m a landlord, and I’m telling you flat out, those costs ARE “baked into” the rent. They have to be. What else do you think pays for them? If I own the property free and clear, the cost of the mortgage isn’t in there, but when the mortgage is paid off, the insurance doesn’t go away, and neither do the property taxes, or the maintenance. A renter isn’t exactly free to come and go as he pleases, either, or have you never heard of a lease? You are quite correct about one thing: one’s own home is not an investment worthy of the name. But the fact of the matter is, one has to pay for the roof over one’s punkin’ haid no matter what. It just makes more sense to me to pay myself instead of somebody else. But actually, I love guys like you. You’re funding my retirement. You just go right on making the payments on my investment properties for me, and putting cash in my pocket besides; I don’t mind a bit.

  • landlord

    Readers of this blog! Keep in mind that Altucher’s life has no relations to yours and apply his advise carefully!
    He is a smart guy and he can pull some staff that you can’t! ( “get rich quick” methods will work if you see (and can re-constitute ) ALL the missing parts that are not mentioned in these books).

    I mean I didn’t miss the financial crisis because I could clearly feel a skin sensation of a second derivative of economic growth is going nowhere…
    Do buy a house if you daughter (like mine) likes riding her own horses after school in her own arena.
    Do send your kids to college because PhD in molecular genetics (like mine) is better than owning a shop in the middle of nowhere
    Do travel the world (if you can speak 4 languages like I do..) and the rent from your houses (or online jobs) will support your vacation

    Otherwise find something that really works for you
    good luck

  • Lordessofchaos

    What about buying a house to rent out?

  • Com Sense

    Geez… people are so emotional; especially about homes. That’s part of the reason we are in the mess we are in… natural human tendency for over exuberance.

    Does everything have to be so black and white in our world? I swear if something isn’t black or white, it’s not exciting I guess. There is a time and a place to be a renter or a home owner. I can go into the specifics that how on temporary basis, renting is better than buying in times of uncertainty with the individual and long term it is better to own a home. But that is not the root issue. There are a couple:

    1. In the early 1980s, buying a home turned into buying a property. We used to describe our home as the repairs we did, the neighbors we lived by, the schools, the memories of our children, etc…. We still do to some degree, but now more and more people describe their home in terms of value, property taxes (homestead for example), what others are selling their homes for, the interest rate they got on their mortgage, what mortgage rate their neighbor got… these are not descriptions of a home… these are descriptions of the marketability of a piece of real estate. This happened when the mortgage backed security companies like Fannie/Freddie turned your and my home into a piece of collateral that was analyzed by Ratings agencies for institutional investors to purchase groups of package mortgage loans these in the exchanges.

    2. Entitlement of the American worker: At one point in time, buying a home was probably the most important purchase in a family’s life. You buy the home, you pay OFF the home, you live there forever and ever, amen. NOW the evolution of the an American worker is to go to school, get the job, get married and buy a home. Then have a few children… and buy the NEXT home that’s more spacious for the whole family… now get the next raise, get promoted, and buy a 3RD home which is the dream home that you and your wife have planned for years and years for you and your family… live there, take a few mortgages out to pay for the kids to go to school etc… and THEN top it all off… you DOWNsize when the kids move out lol.

    I could go on and on… but hopefully people realize these two reasons are at the root of our issues… can anyone even have imagined 40-50 years ago that renting would be a more viable and reasonable option than purchasing a home? Seems crazy… but it’s really not… it’s just the way our society has evolved and devolved if you will over the last several decades.

  • mudita

    thank you ! I never felt so trapped spent 35 years on mortages and you just gave me the answer! Actually we slave for our properties especially so in asia.

  • Odj2james

    Owning a home is good but it drains the existing resources you have acquired early. My advise to people is not hurry to own a home because you want get peace and freedom from rent. Right now, am reluctant to own a home or build home in my country (Uganda) because the end of it, you have nothing instead it is serious poverty. People should learn to study before you jump in And do your research and get some experience by observing the current situation on the ground. You need to take precautionery measures when it comes to own a home and have a focussed minds while looking at costs involved not looking at soft life at the end but the results and the benefits of putting all monies in the home.

    James Odongo

  • dougk

    If you went through the basic numbers, you would see that owning a house is a very substantial advantage over renting as long as inflation is positive, the higher inflation, the greater the advantage. Try it.

  • Vegascarson

    I like his perspective and he really makes me think about conventional wisdom. This is refreshing insight into being a renter vs. homebuyer.

  • Bjsketti1

    We too, have struggled for the last twenty years to make the mortgage pymts every mo. Only to have the insurance (also a big chunk) cancel us when we made ONE claim…have the earth shift and no money to fix the foundation(it all goes to the mort. co.), get attacked by termites (again no $$ for that) and now the housing market is such that we couldn’t sell it even if we could fix all that stuff. I TOTALLY AGREE WITH YOU!!! If I could do it all over, I would buy us a little trailer down on the coast, pay it off and go fishing!!

  • Bigtbatman

    u must truly own your honme …no payments ..then its good;)

  • Trissfrish

    Right on the money! I will NEVER own again either!!! Forget that pride in ownership garbage which was “force fed” to us “baby boomeres” who grew up in the one and only decade that counted…the rock n’ roll 60’s! Sadly, those days are GONE but never forgotten!!!

    Since then,we hippies have all learned the “hard way” that it is certainly NOT cost feasible to continue on with that type of narrow-minded thinking! Bye-bye on that stupid way of thinking!! Hello to reality folks!!!

    I mean, WHY on earth would you want to become “stuck” for another 30 years in a new set of 4 walls??? D.U.H…Definitely NOT for me anymore…………………I love flexibility too! How about you???

    I got rid of my house in 2009. (my 5th and last house!) thank God!!!

    Because I now rent, I can pack up my stuff in a store all, live in Florida or where ever during the November – March cold crappy months here in the Midwest, and then move on to “greener acres” whenever my mood stikes….it is heavenly to fall asleep thinking of all of my options!!! (<:

    And, here is the biggest plus, folks…..I am not even 60 yet, but I am retired. And, I have learned, that if down the road I should need to become dependent on Medicaid to get by, that ALL of my property needs to be OUT OF MY NAME for a period of 5 friggin' years, OR, I will be denied Medicaid!! SO, I ask you oh wise ones….WHY wait to get rid of the house???? Do it now, and, decide as I have, to live care free and hassle free for the rest of my life!!


    Happy & Carefree Here in The Land of OZ (<: (Dorothy's 3rd cousin!!) (Toto too!!!!)

  • Thank you! So many of us were raised to believe that we had to own a home in order to be considered successful and especially if you have a family you must own a home. The pressure involved with that is not worth the cost and stress of it all. I agree with all your reasons why I will never buy a home again!

  • MissCyndie505

    When a person rents, if he doesn’t like his neighbors, he can always move. Own a house? Can’t do that. You’re stuck with the neighbors from hell. People have had to take drastic measures to get out from those situations. Well..if you own a house where you have no neighbors is better. The bad thing about renting is…the rents go up every few years. If your paycheck doesn’t match the increase in rent, you’re stuck. Inflation is inevitable, but if you can’t keep up with it…you have to move over and over and to rent in a nice neighborhood costs more than your mortage would be if you owned a house. So, what’s the advantage of either one? None, really. Depends on the situation. I can tell you ONE thing that is advantages to owning a house if you’re married. When you get a divorce, at least you have something to start over with. When my husband left me, we only rented. I had no money to start my life over with, no job, no job skills, no home to split the money with. I had nothing. HE moved in with his lover. So you see, that’s the only advantage for the soon to be ex-wife. It’s all relevant.

  • It appears to me that the author has a financial IQ of -100. He fails to understand the first thing is people need to do is get educated about cost of ownership. The things he addresses as financial down falls should have been factored in before they buy and budgeted for. Do you think the landlord does not charge for all of the items and you as a tenant pay for them? Duh. I’m glad he will be a tenant for life ….. the tenants pay me to live monthly and I have the freedom not to need to work, or go out and talk like a pro which he is not. He is a good laugh for the first thing in the morning.

    Think about this, most people will not do their own leg work and rely on others to tell them it is a good deal when the others main interest is for them to earn money, not your welfare! 

  • dougie De

    well I have to say this is a perspective I can relate to and support. Due to severe medical and financial heartship we lost our home of 10 years and claimed chapt. 7 . Since then we have traveled more enjoyed life more have not been doing chores himhim….. just our time now and we love it. So the American dream in 1945 after WWII is not the same dream of retiring baby boomers or at least not this one. Great article.
    Dougie De

  • Dan

    It is a forced savings plan. Not the best savings plan but something. Do most people have the commitment to invest or save the extra money they are not spending on a home when they rent? Or will they find something to spend that extra hundred or two?

  • friendless4ever

    One thing I’ve seen is that people over purchace.When you are spending more than 1/3 of your income, you are in over your heads.For years,banks have tried to get me to buy,that is until I give the ground rules. Banks are trying in every way to “sucker” people into buying beyond their means.Knowing the majority will fall onto forclosure. Especially in the way todays economy is.

    • Anna Banana

      You’re right. It was easy to buy a house, very small down payment and a lot of people bought homes they couldn’t afford, and that is their problem.

  • Tgroneck

    How is rent not money thrown away? You will never see your rent money again. Have fun paying rent the rest of your life while I retire and enjoy a house that is paid for in full. Say I retire at 70 and die at 90. That’s 20 years of rent: $1000/month rent X 20 years = $240,000.00. Sounds awesome to pay more in rent during your retirement years than my house cost twice over. And that’s just those years, I expect to pay off my house well before I retire. Don’t even try to pretend I will pay more than $240,000.00 in maintenance costs over those years either, not feasible, try again. I wouldn’t expect buying a house to be called a good investment, because you shouldn’t expect to make money. The best you can expect is, if you ever want to sell, that you will make back some of the money you threw into you mortgage. Rent money? I’m pretty sure they don’t pay you anything to move out….

  • Hui Yin

    I should have known you earlier!! Very good investment advice… …

  • Jackiet35

    i liked how candid you were in your views on home ownership.
    i share some of the same opinions as i can relate firsthand.
    i have been sooooo stressed owning this house that i have to go back to renting.
    i too wanted the perverbial “american dream of owning a home” not realizing all the responsibilities that went along with it. there is always something to be done in a home. as soon as you’ve addressed one problem, another one surfaces.
    what i ended up with is stress related illnesses. what i have realized thankfully before it is too late, is things are still salvagable. whatever time remains, i am going to release myself from this figurative “noose around my neck” and let someone else take on the worries that comes with owning a home.
    thank you ever so much for this article.

  • comeau

    Both a home and a house are good, and perhaps the best investments. Except in the most extreme economic conditions the economic news doesn’t affect the value. You buy a home with leverage, so if your home only increases an average of 4% a year, you are getting 4% on your money and borrowing the banks money nearly for free since you are also getting 4% on the portion you borrowed. Deducting the interest means you are actually making a profit on the money you borrowed from the bank. Soon you will be getting 4% on appreciated value as well, which increases geometrically. It is almost always wise to buy with a fixed interest rate so you also get a payment that is fixed in time. It never goes up (except for taxes which are tax deductible too). Most importantly you don’t have to be an expert to invest in real estate, unlike the stock market where on a stock purchase every winner produces an equal loser. Stocks require constant monitoring, or for most people the payment of high fees for advice. With real state you just “set ind forget it”! The value grows without expertise or the risks associated with the stock market. Real estate is simply the best investment in the entire world for the average person. Joe six pack is not going to build an investment portfolio over the years, but his real estate, whether home or house will most likely be the biggest portion of his assets at retirement.

  • Jlreed58

    You are so right. I want to move to a different state but I’m stuck with this stupid house. I might just go off and leave it.

  • mick

    home ownership is what it is but that depends on what is is , It’s up to the individual to decide at this point. I’d like to hear donald trump’s thoughts

  • Sean

    The one big thing here is the ability to just move whenever. The most I had to pay when renting was 1300 to buy my lease out and it was because I found a nicer job in Denver. I was able to just move instead of driving 80miles every day. Then I bought a house, all kinds of maintenance fees and repairs started, one time my garage door broke and I missed work for a day waiting for a repairman to get it working again and it cost me over 150. Anyways my job moved this time to a new building 30 miles north one way, I felt trapped in my house so I rented it and moved – I gained 3 hours of my day back and saved about 1200 per month. I had some financial difficulties after that – renting would have just dictated moving to a smaller place but the renters I had stiffed me for three months before I could finally evict them (costing me a ton of money in legal fees) and I couldn’t afford both house and apartment and I couldn’t afford to drive 60 miles a day anymore. I lost the house – settled with my mortgage company for 30k – NOW I will never own a house again and glad of it. I am back financially sound and live in a luxury townhome – something breaks I make a phone call and its fixed the next day at the latest. My garage door broke here and five maintenance workers came over and pushed the door up so I could get my car out, the next day it was fixed and didn’t cost me a dime. After this lease is up I’m gonna move again because I want to be closer to some hiking trails. With the way my plans are going I will be able to retire at about 55 and owning a house doesn’t fit into that plan. I got nothing against people who want to own a house but definitely listen to the author and ask yourself why you want to own. There is nothing wrong with either owning or renting just make sure you don’t base your happiness on either one.

  • Kats Mom

    This is a really interesting post. I’ve been trying to convince my husband of 14 years that we “absolutely needed to buy a house” because our friends and our family kept telling us that it was an “investment.”

    Funny thing is a lot of those same people are now struggling with the exact things you wrote about. My friend was offered a new job in a new city but she had to ask for a significant amount of money more than the company was offering her just so she could afford to fix her house, rent an apartment in the new city and pay her mortgage on her house which she would almost lose money from if it actually sold.

    I don’t like yard work. I don’t garden. I hate mowing. I LOVE that my rental community managers have hired a good team to take care of the landscaping in our community. We have a nice community! So I don’t have to do things I hate doing. I get to hang out in my flat and do things I enjoy doing on my days off instead of pulling out the hedge shears and mower.

    Our fridge died about a year and a half ago. We got a brand new one. Sure it’s not uber fancy but none of my friends who own homes have uber fancy fridges either. But it was an upgrade from the one we had and it was new. Nothing came out of our pocket.

    And our rent keeps getting lower and lower every year we resign our lease and stay in our apartment. Very cool!

    So I’m glad I found this article. So is my husband because now he knows I’ll quit asking him when we can buy a house.

  • Fritzj

    Would you say the same train of thought applies to building a retirement home?

  • mom1999

    Hallelujah!!! It’s about time someone publicly said this! It’s a myth, it’s a myth, it’s a myth! When I grew up, owning a house was the major goal of life, according to my parents. But the more I thought about it, the less it seemed to make sense for my life. It felt like getting trapped into a lifestyle that was not for me. “Own a home, and you have a solid investment.” I couldn’t understand that. If you sold it and made money because housing prices had gone up, wouldn’t you just have to put that money back into another house? Where was the profit? I love this explanation of the myth, corporations wanted you to stay put, stay stuck. I feel so much better with this confirmation of the myth. Not having purchased one, I thought that perhaps I’d short changed my children because I wouldn’t have a house to leave them when I’m gone. But then I thought, but I can buy life insurance and leave them that! I can start businesses and leave then those! And in the meantime, I can use my money to travel and enjoy life.

    • Joanls

      I understand your point, but to answer your question about “what profit do you get if you buy another house with the profit you made selling the previous one”. The answer is…..You pay less money each month for a mortgage because you have a bigger down payment from the profits you made on your first home.

      When I sold my first home, I made a nice profit. I took it and used it as my down payment on another home, it’s true. But I paid much less for my 2nd home because of that. Therefore, paying only as much or less than I would have been paying for rent.
      I think I made a good deal.
      Same goes for people who buy now, in this low pricing time. They will make a nice profit when they do sell and they will use it to lower their next payment on their new purchase.

      It’s a revolving circle in real estate. You just have to catch it at the right times.
      As long as your happy renting, it doesn’t really matter what happens in real estate, altho a landlord can change your rent any time he wants to…depending on what kind of building your renting in.

      Homeowners can buy life insurance or invest also. Owning a home doesn’t cut off your rights to do this. And it can be affordable too. Long as you play your cards right…anything can work.

      I’m a divorcee….yet I still bought my own home. Renting was easier, yes. But I still love owning.
      I hate rules !!

  • Shadowinq

    This article is pure hyperbole. What about all the principle you pay on your mortgage over a period of say, 10 years? If you rented that long and your house value stayed flat, bam you have all that cash when you sell. If mortgage and rent are anywhere near each other in price assuming equal value places… wtf?

  • Ben

    Great article. My favorite points were the pros of having money in the bank, less stress, and more time on my hands. I am a renter and can’t stress enough the benefits of not pouring all my savings into a down payment, being tied tied down by a mortgage, or spending all my weekends fixing/maintaining something on my house. Being able to do what you want to do when you want to do it is a priceless commodity.

    • Anna Banana

      Oh, American houses must be made very poorly if you need to fix them every weekend.

  • Anna Banana

    Il guess it depends where you buy your house. I live in California where houses and rent are expensive, but there are still places to buy where a house can be very affordable. For the time being me and my husband are payng over 2 000/month for a small apartment in Irvine near 405 and 5 freeways. We are buying a house putting half down in a nice area, not that far from we are now and will end up paying about 1 000/month. This will give us about 12 000/month for repairs each year, if needed. Wouldn’t buy a house in the San Fransisco Bay area where we lived for about 7.5 years most of it spent in Tiburon where we paid about 2 000/month for half a duplex overlooking the San Fransisco Bay including the Bridge. Houses on our street went for about 2 million. Rentals along the coast in California are expensive. Looked at a beach rental in Redondo Beach recently, one bedroom for 2 000/month. Would have to sell off most of the furniture to fit in there. Nowadays you hardly get any interest on savings so I dont’ see why a house that you can afford would be a bad investment.

  • LostHomeforPeaceOfMind

    I don’t trust buying a home ever again. I think alot of “closing Attorneys” are to blame because of the scams in homeownership and people fell victim to scams. Those “closing Attorneys” got their fat paychecks and commission. I also don’t trust buying a home again because I lost a home through foreclosure and was in a bitter, bitter, bitter horrifying marriage; I was a victim of domestic violence (yes, men become victims too!) with 2 restraining orders against her. The system (then) didn’t work in my favor and the law’s were so strict and attorney fees expensive; I couldn’t afford rent and mortgage notes at same time so I gave up and let it go in foreclosure. I think nowadays, owning a home is just bragging rights for majority of folks, but the real question is “are they happy”? The neighborhood looks quiet and peaceful, but “are the families happy or stressed out under tension”? I also don’t trust buying a home again, because there is toooooooooooooooo much paperwork! I like the previous comments on benefits of renting. Thank God for maintenance repairs through a landlord. You can literally kick back, watch TV and let them do the work. WOW!

  • Cookergirl28

    where we live homes are depreciating faster than realtors can get signs in yards and sell them. All I hear about is that we have not yet seen the full magnitude of the housing crash….we have not yet hit the bottom. Two years ago, our house was worth over $180k, now it can’t be touched for over $120k. The jobs here are scarce. I think because people are unemployed they are just dumping their homes, walking away, and it is further depreciating otherwise marketable homes. Even though the market value of the home has depreciated by $60k, the taxes have remained at nearly half what a new house payment would be. How is that appealing to a potential homebuyer? Where are all the political guru’s that get elected on the platforms of fixing this debacle? No one does anything to fix the banking crisis, our local government turns a blind eye to property tax overkill, and the jobless rate in some areas increases not decreases creating foreclosure pockets that trap people.

  • GD

    It’s all a vicious circle guys (gals). To rent someone has to own a property and pay the maintenance and taxes. I don’t see the point in renting unless you can throw your money away like that.

    I live in Canada and I sold my home when the market tanked (I probably lost maybe 3 or 4 percent) but I bought up where the higher priced homes took a killing of 10 percent below what they were. So since then my home has appreciated by 15% and I have a large line of credit that I can draw from any time if I want. Who says that the the money you put in is not liquid. Oh and the more I pay off my mortgage the more headroom I have on my line of credit.

    I like many others also have investments in stocks and mutual funds. Yes I am heavily leveraged in real estate but it is not a bad thing. In time it will change since I can sell off my real estate at a profit and have money to retire off. What will you have if you pay rent when you retire?

    Just my 2 cents.

  • jcs

    There is no peace of mind like a paid off home. Screw the return on your cash invested in the house. Make more cash to invest somewhere else. I’ve been a RE broker for 33 years. RE is cyclical like any other investment. I’ve seen it at least 6 times. If you want to buy and insure that you made a good investment, then save your money, wait for an economic downturn (like now), and pay cash for the house (that’s how you get the best deal in a downturn). You can then refinance and get your cash out if you want. All RE investment is usually a long term investment. If you bought high, which most people did in the mid 2000’s, just remember you can’t lose the money until you sell and get out. As long as you are still in the house you have not lost the money. The fact that you are upside down now is simply a result of a bad investment decision at the time you bought. Rent when the market has gotten too hot, and buy when the market has dropped. Simple, right?

  • Anonymous

    And some friends have been telling me, NOW is the time to buy!!! Don’t pass up the chance! This is rock bottom now! Grab it! SOB! Are they really my friends after reading this?

    • Joanls

      YES…They are. They are also correct !!

  • Renesorrentino

    I noticed no one commented on the value of the “neighborhood” and having a yard for children to play in and pets to roam. My teen plays the drums and he could never practice his talent in an apartment! I grew up in apartments, I know how constrictive they are in many ways. I love my home, my neighborhood and my neighbors….the drums??? …. not so much!!

  • Lbm7931

    So I have a question. My husband and I live in central NJ. I am a RN and my husband is a high schoolteacher. We make well over six figures, so how come we still can’t afford a house? We are not in debt. We do have a 2 year old son that goes to day care one day a week. We can afford a morgage but who the hell has 20% of a $350,000 house? We have great credit but no one will look at us without the 20% so what are we to do?

    • Joanls

      Sounds to me as if your living above your means if with those 2 salaries coming in, you can’t save the 20%. You may start thinking about cutting down on luxuries U spend on for a while.
      This may help.
      Don’t go out & get new cars every other year. Don’t get your coffee at Starbucks every morning. Learn to cook a little bit instead of eating out all the time. Cut down on clothing purchases that aren’t necessary, or spend less on what you do buy.
      Watch your grocery bills. Keep them under a certain amount each week.
      Keep yourself on a budget !!! This is number #1 !!!

      I bought my 1st house under the G.I. bill, so I only needed to come up with closing costs. Even getting that together was painful. I found a wonderful friend and neighbor who took a loan out for me, so I could pay it. She barely knew me, but did it for me anyway. How lucky was I ?
      I just paid the payments for it instead of her. I helped her credit line, but she helped me immensely more.
      Maybe you can find a family member to do something like this for you ?
      Or…if your lucky, maybe a friend or neighbor would be willing, like mine was.

      Good Luck & I hope you can get your home soon. That little boy will enjoy it.

    • Anonymous

      Look for the book, “100 Ways To Simplify Your Life”, read it, then try to live by it. Save every dime you will inevitably be able to save by abiding by the “simplify your life” plan. In 2 years you may have enough for a down payment on a house. When you do buy a house, never get a traditional 30 year mortgage with monthly payments. Find a bank that offers a bi-monthly 30 year mortgage plan, which will save you years off of a 30 year loan. Then try to make at least one additional principal payment per year, which will shave another few years off the loan. You can almost pay off a 30 year loan in about 20 years. So, live frugally, look at all frugal living websites, save, save, save, then buy the smallest home you can comfortably live in at a price that allows you to continue to save, save, save. Good luck! I know this can be done, because I have saved over $50,000 in 2 years for a down payment on a home, and my husband and I live on one income.

  • boredinreno

    I empathize with the pain James Altucher clearly harbors simply because as a former loan officer my analysis of thousands of client financials from the early 2000’s up to the market crash in 2008 eventually gave me a reflexive understanding of homeowners either enjoying homeownership or not due to adequate or inadequate personal financial planning and management. Investments and various types of financial products are tools- in the wrong hands they can result in financial ruin and misery and in the right hands they can lead to the desired results.

    Here in short are a few reasons why to OWN a home followed by a few reasons why NOT based on the years I worked with the qualified and non-qualified looking to refinance or buy a home.


    1) You have stable income and see no transience in your future for the next 10 years AND of that income you can comfortably afford to allocate no more than 1/3 towards a mortgage payment including principal, interest, taxes and insurance. If your finances are better, as with some prime credit borrowers, your monthly allocation may represent no more than 15% of your income!

    2) You have a comfortable reserve of savings, ROTH, IRA, 401K and other investments that assuming you are an employee vs. self employed your savings would actually allow you to live for 2 to 5 years if you are unexpectedly laid off giving you just enough to draw off of to obtain another job, retrain or start a business as necessary.

    3) You have few liabilities- the 2 or 3 credit cards you may have you only use no more than 10% to 20% of the credit limit available and pay off immediately and the credit cards are only used occasionally and most likely for emergency situations. Your car or cars, luxury RV or boat you will likely own outright and maintain on a consistent basis because you have the income and savings in balance to do so.

    4) Because you consistently save and maintain your reserve you are able to allocate a portion for the purposes of maintaining your home (gardener, painter, pressure washing etc.) and keeping it up to date on a 5, 10 and 20 year basis using professional contractors for important things such as Kitchen Update, Carpet/Flooring Update and vital things such as Plumbing, Water Heater and the Roof.

    5) You are truly ‘ready’ to own a home and if you don’t have one already, house your family with minimal to no hassles related to lack of money to do so.


    1) You KNOW that your main source of income is not always stable and you can easily envision the need to move quickly to find work within a very short time up to as little as 3 years. This is most common with salespeople who are paid on a commission only basis and with business owners who have only been in business for less than 5 years or whose businesses tend to be seasonal. Of your average income a mortgage could range anywhere from 30% to as much as 50% of your income-not a comfortable ‘fit’ if you are trying to support yourself let alone raise a family.

    2) You have ‘0’ to no more than 6 months of reserve in the assets box of your loan application, no ROTH, IRA, 401K or other retirement savings vehicle or investments and you tend to spend your income as quickly as you make it using those 2 to as many as 5 or more credit cards to the ‘max’ credit available and chances are you DO NOT pay them off the following month after you’ve used them which results in multiple late pays on your credit report and bumps up the ratio of your debt to income well beyond 45% in most cases. You might have valuables such as jewelry, numismatics or other collectibles but if faced with a lack of income for anything beyond 6 months you face a much greater chance of being in ‘trouble’ in terms of inability to make your mortgage payment whether or not I am able to find a portfolio lender who would extend the credit based on your tax returns and 3 years or more financial statements. Oh, and if you have a house with this type of financial pattern I know that when I come out to show you what programs are available to you if by chance you qualify with any of my investors that your home is likely in disrepair, the roof may need replacement since it is nearing the end of it’s useful life, the garden, walkway and driveway are likely cracked or very worn, the flooring and carpet show wear and tear and the plumbing fixtures along with your Kitchen very likely are over 20 years old and showing the wear and tear that they would not if you upgraded them every 5 to 10 years.

    3) You are NOT ‘ready’ to own a home. If you’re in one now, eliminate your misery, cut your losses and start over. I know it might be very difficult to part with your ‘stuff’ but you can always pack it away in storage, live in humbler surroundings that you rent and maybe plan a way to own a home more comfortably economically speaking.

    There’s much more I can elaborate here even suggesting watching the movie ‘Money Pit,’ but homeownership is clearly ‘not for everybody.’ Renting is fine and can be extremely useful for various lifestages and situations especially those who need a lot more simplicity in their lives and whom for whatever reason lack the discipline of money management despite good income profiles as in the example above used for ‘REASONS TO OWN.’

  • Dgb3209


  • Lkit

    Nobody knows for sure what`s going happened next tomorrow: another wave of the inflation and banking crisis or weather catastrophe… For example, like in the former USSR – my country Ukraine – real estate is traditionally one of the safest kinds of investment since after banking crisis of the early 1990s when people lost their savings they don’t trust banks. The investors who purchased real estate (apartments) in Ukrainian cities in the early 90s for a few thousand dollars and have seen their property rise in value an average of 20-40% a year ever since. Add to that revenue from apartment rental and you have a very profitable asset! But now the situation has changed again as the contagion from the global crisis spread, the number of bad loans rose sharply in Ukraine. Local banks found it difficult to access overseas loans, leading to a loss of consumer confidence in banks and mass withdrawals. Unnerved by mounting inflation and weakening currency, lines sprouted at banks, with depositors rushing to withdraw their savings. Because of this, a number of Ukrainian banks collapsed after 2008. Interest rates on US$-denominated housing loans had risen to 15.2%! Well, everything goes in circles. -:)

  • Mr.Not a liberal.

    This guy is not all there. Children need a home to love and cherish with their parents. We need a home to comfort ourselves in ,not an apartment with noisy renters next door. This guy is a liberal with idealistic ideas. He is lost in this life. Money is not everything in life, Money helps . He is a modern hippie,an idiot.

    • Mr. Not a liberal

      Maybe not an idiot cause he is educated but not agreeing with his comments. Children need a home and a school to go close to their homes. Low- lives even rent expersive apartments with our tax dollars. I do not like liberals , period. Too idealistic with ideas that make no-sense,

  • J.V.

    I just remembered another disadvantage of renting. The quality of fixtures, appliances, walls, floors, windows and carpets is minimal.

    People have mentioned “quality of life” in this discussion already, but I’m talking about the quality of the edifice itself.

    If you are just comparing costs, then okay. But be aware that you are comparing the cost of cheap low-quality rental goods against the quality that you would purchase if you had to buy it yourself.

    To paraphrase something Milton Friedman once said in a different context, a landlord is taking your money and spending it back on you. He’s going to give you the least possible quality he can get away with.

    This is not to say that everyone buys marble homes. This is only to say that if you’re spending your own money on yourself, you’re going to put something more into it that “the cheapest I can get.”

    Which is also why the grounds and gardens look so great at apartment complexes. Because those are “marketing” costs….

  • Ckanyuh1

    While this point may be valid in an economy where housing is very expensive. Owning a home in the midwest where things are more reasonably priced is still a very good investment.

  • Melinda

    There is a bigger idea here I have yet to see anyone discuss, something I posted somewhere that disappeared into cyberspace. In the big picture of things, the people who own homes are the people who are vested in their neighborhoods, in their schools, and in their communities. They are the ones who typically make your schools better, your neighborhoods safer and better maintained which, consequently, makes for better communities making better cities in which companies are more inclined to locate, bringing more business. To advocate that we should all rent is not only ignorant but very irresponsible.

  • Amy

    Wow James! I am interested in your current status of single or married, not that Im interested. I am a Realtor in Texas and I would love to email you later all the reasons to own a home going down your list. It is sad that people do not get the full picture and education of buying a home. I look forward to your response.

  • Stocks0223

    Lot’s of tetchy people here who are obviously feeling defensive for making a bad investment. I rent in a nice complex with manicured grounds and a water view. The maintenance people repairs anything that needs to be repaired in 24 hours. Last summer our air conditioner went out and the next day they installed new energy efficient heating and air units rather than fixing the older inefficient model. I didn’t even have to ask for that I just wanted it fixed and I got new units which greatly reduced my cooling bills. I don’t have to pay to heat the place nor do I pay water, sewage or garbage. The only bills I have associated with renting is the triple-play-cable and electricity bill and cable is an optional luxury. I only pay $264 a year for renters insurance. I also only have to pay the local county and state taxes and not all the expensive city taxes that property owners in my neighborhood have to pay. For instance I do not pay things like the sidewalk tax to maintain residential side walks or snow removal tax. Speaking of snow removal I don’t even have to dig my car out. The management contracts to have the community sidewalks, road and parking lots removed of snow and they dig out our cars. I only have to worry about snow if I try to leave the community and venture out on the still unplowed city roads. I also don’t pay home owners association fees. The money I don’t pay into all of these expenses home owners have to worry about I invest in IRAs, CDs, Bonds, Stocks, Funds, Gold & Silver, etc. I make sure my portfolio in is diverse and when the real estate market collapsed my portfolio suffered very little while many home owners found that they owed more than their property is worth.

    Contrast all this with a friend of mine who owns a condo the same size as my apartment, pays 4 times a month what I pay for rent on his mortgage and condo fees. Recently his water heater went and he had to pay to clean up the water damage, buy a new water heater and have it installed. He is totally liable for all the maintenance in the condo, has to pay all the taxes and other expenses and his view is not a water view but a view of a busy highway and metro stop. If he sells now he’ll get 150k less than he paid for it, if he sells in 10 years he may break even if the market consistently improves by 8 to 10% annually. Doubtful.

    I am not saying that renting can’t be a nightmare if you move into a dump or have an absentee landlord but if you do your research and make sure the property is managed my a respectable property management firm you can be much better off than owning. And hey if things go sour your switching costs are a 1000 times lower than ownership because you can just move to a new rental. If things go sour with your house or condo your basically screwed.

  • Rmdun

    Most of this makes sense, and with humor, so OK. Leverage is your friend..in an up market and your worst enemy in a down market. If this article had been written in 2004, it would not have gotten noticed. Today speaks for itself.

    Given proper resources, which are guaranteed to very few, there is a level of personal security that might be associated with home ownership, though I do wish I had sold our S FL home in 2005!! On balance, I feel this article makes many good points, but opportunistic.

    • Joanls

      Yep…I wish also. I think any one of us who had to sell in recent years wishes we did it before the market went to pieces.
      When I first listed my home, it was at the beginning of the downfall. But it didn’t sell fast enough, so I got caught right in the middle. I still made a nice profit tho, cause I had purchased it in 97′ at a low price & sold in 2007.
      My problems came in when I re-purchased too soon. Oh well.

  • mushu

    the only reason why i want to own my own home outright, paid for in full with cash is so that no one can evict me. i hav my own place to call home. my plan was to buy a brand new house, then just pay for insurance & utilities every month. i didnt think there would be any other headaches or stress to it. being that ive never purchased a home before, i think this is a wise decision for my family. is there anything i need to know that is important before i purchase?

    • justabrat3111

      U can still be evicted if owning a home, if it isn’t paid for in full, or if U don’t pay your taxes on time….so be careful. Put away a nice amount for unexpected problems. Even new homes can develop a problem. You may have to worry about termites, carpenter ants, a flood. Lots of stuff.

      There will be other headaches if owning a home, even if it’s paid in full. You will always have some type of maintenance costs. Plus U may want to renovate or change something in it. Most of us do at some point. That’s the fun of owning your own place.

      As long as your diligent about keeping up your home in good condition and paying your bills on time, U should be very happy in your new, paid for home.
      Good Luck & I hope U find one that is your dream. Enjoy !!

  • How many rooms do you need? My wife and I need at least 6 or 7 (and we don’t have children yet). She runs art classes out of our house. I doubt she could do this in an apartment.

    Due to this, 15% of the mortgage is a business expense. I’m not sure if we could be “exclusively” using rooms for a business if we owned an apartment (a rather large one).

    I also live in the Midwest where you can get 2000 sq ft+ for less than $200K and thus get a 30 yr fixed for less than $1K/month. Yes, there are many additional expenses and most people don’t think about local taxes or saving for new furnaces unfortunately.

    I’m not very adventurous. I’ve had the same job since I graduated college in 2005.

    Yes, most people probably shouldn’t buy houses and it shouldn’t be pushed upon people or be considered part of the American [materialistic] Dream.

  • Pwproietti

    Very good and amusing musings about home ownership. I will be moving out of Illinois soon, to a western state with far better state government; and therefore, much better job prospects. (I found one of those jobs, after spending a year of mind-numbing searching for a job with a living wage here in Illinois.) The trap of home ownership works for poorly peforming state leaders, such as here in Illinois. It traps those who might otherwise take advantage of better governed states and move away from House Speaker Madigan, Governor Quinn, Mayor Daley, and all of their public TIF-district debt that must be paid back by the non-unionized and low-wage state taxpayers–already burdened by high taxes and low-paying jobs.

  • Jane Diggity

    As a San Francisco resident, I definitely agree with Mr. Altucher on not owning a home. In order to get a small, good-quality home in superb neighborhood, such as a 2-bedroom condo in Pacific Height, I would need $1M in both down payment and home acquisition loan, $12K yearly for San Francisco property tax, $7K -$10K yearly for home owner association (HOA) fee. There are also costs of maintenance and repairs. On the other hand, my current rent for a 1-bedroom apt is 16.5K/year, in the good neighborhood of USF (15min walk to Pacific Height). My yearly rent costs less than the property tax + HOA. Not owning a home allows me gym membership and European/Carribbean/spa vacations 4-6 times a year. Not owning a home allows me to develop an investment portfolio of my dream.
    Thank you Mr. Altucher for stating the hidden truth. You have reinforced my belief in the joy of not owning a home. Home ownership is not for everyone, from an investment and personal standpoint.

  • Steinway

    I recently went from renting to buying a house. And, I have to disagree with some of his points. First of all, he mentioned that as far as maintance goes in renting the landlord takes care of it. In my experience with renting, that was not always the case. I called the landlord to get a window fixed, and he never did fix it. Nor did he maintain his property. For example, the windows in the apartment I lived in, I had free air condition in winter and unwanted inscents during the summer time. And, the landlord raised my rent twice during the seven years I lived there due to increase in utilities. In my personal opinion and experience, owning a home is more better than renting. For example, you make the decisions about how you want the house and the landscape to look. And, yes, the responsibility is on you to do it. But, at least you know it will be done. I bought my first house two months ago, and six months ago, buying a house was not in my mind. And now all of a sudden I’m hearing all of this negativity about buying a house. Renting is not always the best route to go. It can be a nightmare on that end as well.

  • California guy

    One of the best financial wizards in the world said “Never think of your home as an investment, think of it as your home.” That is, do not expect it to make money for you. Time magazine had a great feature on this subject a few months ago. I believe the cover said “The myth of home ownership.” Let’s face it, the banks really own your home unless it is all paid off and you have the deed and title. And then the Government owns it it in the long run, it’s called “Eminent Domain.” If they want to bulldoze your neighborhood and put an Interstate Highway through it, they will, and have done so. Just look at Los Angeles. And then look at it from a perspective of 100 or 1,000 or 10,000 years. How can you actually really OWN a tiny postage stamp of land on this Earth? It’s just a legal construct to make people think they have a piece of this Green Earth.

    Mother Nature always wins. Look at earthquakes, tornadoes, hurricanes and tsunami’s. Did the insurance companies or the Federal government REALLY fix Louisiana? George Bush flew over it in a plane and waved. Termites and ants think your house is a big steak dinner. Why not eat the sticks? Sure, call the exterminator and dose your home with lots of poisonous gas. It does not go away. It’s in your carpet and walls.

    Like the stock market or the Internet bubble in the 1990’s — “wealth” is all really on paper, and actually just numbers stored in a huge computer at the bank. Japan went through a ten year real estate bust. Predictions are that there will be 1 million more foreclosures in the US in 2011.

    There is no one really to blame, except the Wall Street financiers who packaged up and sold all those sub-prime mortgages that got real people in trouble in the first place. Wall Street sold these financial instruments all over the world. Essentially, they took the money, and dumped a recession and/or depression on the US and also exported it to Europe. European people are not happy with the US. Ever talk to a Canadian? They think we are nuts down here. Like a government and economy gone haywire or a bull in a china shop. No direction and no control.

    In summary, I think the housing crisis is one piece of a huge jigsaw puzzle called the American Economy. And just when it was pretty well put together, someone unleashed a gorilla to stomp on it. What’s the good news? Most of us will survive and later thrive. Ever step on an anthill and crush 1,000 ants or so? No problem, there are probably 10 billion or so who will rebuild.

  • Anonymous

    Don’t forget many people don’t even get the mortgage deduction they think they’re getting because the standard deduction is so big now it effectively “takes away” much or all of the mortgage deduction.

  • I’m happy to see this post. We are in the process of selling our house and moving back into an apartment. We are seeking more freedom, more time, and more cash. I was laid off two years ago, and had to take a job much further from home. Now I have a daily two hour, 68 mile round trip commute. Had I been in an apartment already I could have easily just moved closer to work. Instead I’m filling my gas tank twice a week.

    There are also a bunch of expenses with home ownership that we never considered before buying one. Irrigation for the lawn is a ridiculous wasted expense, and is easily half of our water bill. Lawn maintenance is expensive. Cooling and heating a large space is expensive. In an average year, we spend $1000 at home improvement stores for upkeep of our house and yard. That alone is $1000 that could be invested, added to the college fund, or used for a vacation. Long term the expenses will add up further, with the air conditioner next on the list of things to break. That will be a $5000 fix.

    Then there is the time factor. I spend two hours each week maintaining the yard. Mowing, edging, trimming bushes, fertilizing, spraying for bugs, etc. That two hours would be more happily spent doing things with the family. Of course I could pay someone to take care of this, but then it becomes a money factor rather than a time factor. I already mentioned the time spent commuting, that’s two hours a day, when it could be just 10 minutes a day if I had the freedom to easily move as I would have in an apartment. The difference in commute time alone would equal 17 days of total time. That’s like giving myself an extra 3 weeks of vacation.

    We’ve calculated our potential saving each month to be $1100 when we move into an apartment. I can easily invest a small portion of that to offset the “investment” loss of not owning a home. Heck, out of my entire $1500 monthly mortgage, only $200 of that is actually going to principle anyway. The rest is interest and taxes.

    The extra cash that is freed up is something that we can use now. My daughter is still young, and we can put that money to a wonderful variety of family activities. I place much more value in that than I do in having a paid off house when I’m 70, at which time the best years of my life and the memories of my daughter’s childhood would have been wasted paying for and maintaining my house.

  • emurray

    From a possible future home owner, I see a few issues that people have missed or never thought of:

    1). Add a little more money on the payment all the time, even if it is like $25 towards the actual base loan amount. Paying 30 years of interest on that last dollar sucks. The more money, the better. A larger down payment should help get a better rate. Some people have to add mortgage insurance, which adds a lot of money a month under a certain %.

    2). This is a tough one, but I am looking at replacing the old expensive furnace with a Geothermal system, which is Expensive at the front end: 30% tax credit, low monthly cost of running the system in winter/summer, and free hot water. 50-70 bucks a month for heating/cooling/not being tied to gas/oil/wood is a breath of fresh air. It is an effective Green Technology as most other offerings are too effected by weather conditions and I camp a few weekends a year, but NEVER wish to live that way. It okay for a few days, but go a few months and technology is awesome: I would rather risk the so-called global warming, than live over 100 years ago. @#$@#$ That. Too bad western pa sucks for solar solutions and wind can be noisy (neat system at a local Eat’n Park at the Waterworks).

    3). It is not just an investment, but your house (unless you are doing it for a living and learned the potholes of flipping) is a place that you own and keep your stuff at. It should be a investment of last resort if you plan to live for many years in the area. Keep up with repairs and fix things before they break (JUST like a Car) can save you money and they are planned expenses not unexpected. Unless you save money for rainy day (at least 2-4 months of pay in the bank), than planning expenses could be your friend.

    4). Unless you are buying a Geothermal Heating/Air system or getting a quality roof replacement, don’t get mortgage with more than your house is worth. It might be worth getting a separate loan for the Geothermal system (research it). I would take a large portion of that tax credit right back in the mortgage as possible. I hear people were getting 20-30-40% more and wonder why they can’t pay back the mortgage.

    5). Unless you are just made of money and/or really want the place, get the price down far as possible. I been eying up areas that are lower in value and still a good position to work and friends/family.

  • Guest

    When you buy a home you sell your weekends.

    • that is the best quote.

      • Guest

        It just popped into my head, as I was pondering all the “stuff” I have to do to get out of this house and how many weekends it will take.

        I look forward to the freedom of renting, the ability to move when you want, and not to have to fix everything. Thank you for your post.

  • Happy Home Owner

    I have owned 6 homes over the years, I have rented them out and made money on them, So the renter was paying for my investment. I feel this guy is full of it! I have sold homes and always made money on them. Just like anything timing is the Key to a good investment.
    Presently living in the 7th home and loving it.

  • James,

    Great points! If we choose to rent below our income status and save the difference towards the purchase of a house, I too believe that we will save money, live better, and enjoy freedom away from debt.

    Keep up the good work,

  • David

    I’ve purchased two homes so far…my first in 1987 and my second in 1997 in San Francisco. Best investments I made to date. Someone is taking a short term perspective and forgetting what real estate is all about: Long term investing. There’s only so much land out there folks, and the population isn’t getting smaller. Think about it. ;-)

  • AbleAbe

    Orthodontics a bad investment too?

  • Thordeer

    Here in the east SF Bay area (Berkeley/Oakland), the prices for single-family homes are so inflated that investment returns are near zero, even with all cash down. Want to buy an investment house? A million $ house would rent for about $3500 a month, rent an average of 11 months a year (making $38.5k), minus $2.5k insurance (now $36k), minus $14k property tax (now $22k), minus a minimum of $5k upkeep and maintenance (now $17k). That’s a 1.7% return–with significant unpaid labor involved–on a million dollar, illiquid, high risk, concentrated investment.

    Great deal!!

    • Leothedog

      What you just described is a real estate investment that is NOT worth making. From this, do you think it is reasonable to extrapolate to all real estate purchases (as Altucher does)?

  • VM

    Great blog. I’m thankful for the sfgate link. Before all the analysis and justification, I have always felt the same way about owning a house. I just never heard of anyone who shared the same opinions before. In this country expressing that I never want to own a house feels like anathema. I can’t talk about it without being seen with suspicion. Having a house has never been my dream. I have had houses and they were nightmares. What I cherish the most is the freedom to move, have new views, new neighbors, make new friends. In the place where I live I have made life-long friends with people who have been my neighbors. I love seeing my town from a new perspective, it is refreshing and helps me being creative.
    The sense of security doesn’t come from owning some walls around me that the bank can take away anyways. My sense of security comes from the savings accumulated on those years of not owning. In a crisis—financial, natural— what is best, a house and lot or my cold hard cash? So far I’m going with the cash. And a dog.

  • Leothedog

    Oh, James. This article is so full of flaws that it is hard to know where to start. But let’s try.

    1. Cash gone. A down payment is immediate equity in your home. While the home may not be as liquid as a pile (of bathtub full) of cash, you are far more likely to recover your down payment (should you want it) than you are your rent payments, which are 100% guaranteed to be gone forever.

    2. Closing costs. If you are paying 2-3% in closing costs then you are not a terribly sophisticated buyer. Closing costs, at most, should run you 1% of the purchase price, and if you are buying in anything other than an overheated sellers’ market (which, by definition, is NOT a good time to buy…) you can negotiate a credit back from the seller to cover all of your closing costs. No such deal can be used to cover your deposit or first & last month’s rent due when you sign your lease.

    3. Maintenance. It is true that as a homeowner you must cover the cost of maintenance. However, you have the ability to perform this maintenance yourself, or to postpone it, or to perform it in a way that works best for you (e.g., maybe your broken washing machine can be replaced with a new, water and energy efficient machine of your choosing rather than the used machine your landlord might install to keep his/her costs down).

    4. Taxes. Apparently, in addition to having terrible real estate advisors (who put you in deals with 2-3% closing costs) you don’t have a very good tax advisor. In fact, if you believe that the deductibility of mortgage interest (and property taxes) is a “myth” you might want to consider suing your tax guy…. My current mortgage is about $2500/month, and my property taxes are about $500/month. This results in an annual tax writeoff of over $30,000, which saves me about $12,000 a year on taxes. Subtract this figure (about $1000/month) from my monthly payment and my true payment is closer to $2000/month, which is about $500 to $800 a month less than what my place rents for. This is purely anecdotal, of course, but the FACT is that the deductibility of mortgage interest and property taxes is anything but a “microscopic dot” on my tax returns. It is, in fact, the single largest deduction that I, and most homeowners, have on our tax return.

    5. Trapped. You describe a homeowner as being unable to move to find a better job simply by virtue of owning a home. I would submit to you that this is true only for people who overpay for their homes. I don’t know anyone who bought a home for less than what they could rent a comparable property who has been “trapped” in the way you describe. Furthermore, a case can be made that under certain circumstances my (owned) home is easier for me to get out of than your (rented) one. For me to leave for a different town means I would have to either sell my home or rent it out. Neither of these options is hard to exercise if I bought wisely, and neither will have the negative effect on my credit that you breaking your lease will have on yours (which, given your proclivity for moving, sounds pretty high). I own a rental property, and my tenant is required to sign a new, one-year lease every year. That essentially gives him a once per year opportunity to move, which is more restrictive than what I have with my home.

    6. Ugly/illiquidity. I’ve already addressed the illiquidity issue, but you are (probably intentionally, but perhaps merely ignorantly) leaving out one of the greatest advantages of home ownership: free rent. Do you know any retirees who own their homes free and clear? If not, I guess that explains your position. By the time that I and most other homeowners get to “traditional” retirement age, under your plan I would be paying a minimum of the exact same amount (adjusted for inflation) in housing costs. I’d have this expense for the rest of my life. A homeowner, by contrast, will at some point be mortgage-free, leaving only taxes, insurance and maintenance costs (combined, FAR less than rent). To me, that is “freedom” and “security” that cannot be bought (or at least guaranteed) by “investing the difference” in the stock market.

    7. Your time. I don’t know who you are talking to, but I have owned my home for over 8 years, and I have probably spent the equivalent of 2 total days of “work” on the home during that time. Moreover, my home is not a brand new home that is benefitting from its “newness.” My home was built in the mid-1970’s. Again, do your due diligence and buy right, and you can minimize the amount of “work” you have to put into your home.

    8. Choices. I dare say that I have more choices than you, and this will only increase over time. Today, I can sell my home (even in this depressed market) and bank enough money to finance a long period of unemployment while traveling the globe. Alternatively, I could rent my home while I globetrot and have the added security of knowing that I have a place to come home to. Not only this, but I can actually exchange my home with a family in virtually any other part of the world in what is known as a “home exchange” program, allowing me to live (free) in their home while they live (free) in mind. Finally, as described in #6, my choices will only increase over time as I own a home with no mortgage, giving me even more options than you could ever hope to have while paying rent into your 70’s, 80’s and 90’s should you live that long.

    9. Stress. Well, again, this would seem to be the product of “when” you buy, rather than “whether” you buy. We’ve just seen the greatest collapse in the history of the real estate market, and I can truthfully say to you that I have not suffered through ANY additional stress by being a homeowner. Now, as for being a stockholder, I can tell you that I have had enough stress to last multiple lifetimes….

    10. Cash is king. I’m sort of with you on this one, but it totally undercuts the financial viability of your thesis. The ONLY way that renting could possibly make more sense than buying over the long run is if you INVEST the savings (which really is just the down payment you didn’t make, since your monthly costs may well be higher than the home owner’s…). You’d better invest that money wisely to more than account for: (i) the ravages of inflation over the next 30 to 40 years; and (ii) the fact that decades after I have stopped paying a mortgage you will be paying market rents in future dollars. To achieve that kind of return you will most assuredly NOT have the kind of liquidity that you advocate here, and in fact, you are likely to suffer far greater short term losses with your investment than I will suffer with mine.

    11. It’s a great time to buy. James, it doesn’t just SOUND like a contradiction, it IS a contradiction–as is your suggestion that you can play the long-term real estate appreciation from today’s levels with a leveraged stock investment. Talk about stress….

    So, James, while I respect your writing skills, I have to say that this article is substantively one of the weakest critiques of home ownership that I have ever seen.


    • Com Sense

      If this article is one of the weakest critiques of home ownership you’ve seen, then your assessment has got to be one of the weakest comments on the article in this thread.

      1. You are missing the point. People who need to be mobile in this ever changing world do not have options IF they are stuck with a mortgage payment… if foreclosures continue growing at the pace it is, values are not going to recover for another 5-10 years. You think everyone should just buy a home, and then make sure their lives are planned out for the next 5-10 years? You’re in a dreamworld.

      2. 2% or 3% costs are unreasonable? If you purchase a home for 100K, and you put you want the seller to pay 3% (or even 6% with some loan programs) of their closing costs… what do you think the seller AND the seller’s agent is going to say to that? How very one sided of you. Typical of your entire critique. I’ll let you figure out how asinine your comments are in this regard.

      3. You’re kidding, right? I guess for the mechanically inclined people like yourself this is a no-brainer right? Once again, your views are close minded and very one dimensional.

      4. $500 a month is $6000 a year of taxes you can write off… you state that your total write-off is $30,000 which I assume is not just property taxes, but mortgage interest and other deductions you take. I will admit that the tax benefit is a positive feature of homeownership… but what you save in taxes at tax time, you have more than paid for in monthly expenditures with your home and escrow.

      5. Do your research. Why don’t you check out property values in the following states: FL, MI, NV, GA, AZ, MN, OH, WI. Ask MILLIONS of people who bought in those areas what kind of due diligence they did before purchasing a home and their circumstances surrounding their purchase. You have not a clue what you are talking about.

      6. Dream on. Come back down to earth. Talk to me when your kids are going to college and you have to put another mortgage on your home. But maybe your kids will get student loans on their own so they can learn things the “hard way”.

      7. So you bought in 2003? What a coincidence that home prices appreciated the MOST between the years of 2003 and the end of 2004, until Greenspan and Fed raised interest rates… it has been a steady decline since them. I guess everyone between 2005 and 2011 should not have purchase a home because of the steady decline? The only way you can make money in this market by buying now is to buy a distressed property and work and improve it.

      8. You only have a choice because you bought the home in 2003… if you were born 3 years later and purchased your home in 2006, you would be underwater with the down payment you put down, and you would have the make a tough decision to walk away from money you put into the house. No pun intended, but you are playing with house money right now. People that purchased after that have so much skin in the game, and that is a tough decision to take that loss. You don’t have more choices because you did your due diligence. You have more choices because you were lucky. Don’t kid yourself.

      9. How very selfish and self-absorbed this statement is. “Well I haven’t had any stress with my home, so I’ll dismiss anyone else that has stress.” You really can’t see things from other people’s point of view, can you?

      10. I disagree with the author on this point… there is always a time and place to purchase and/or rent. To say that you will NEVER buy a home again is too black and white.

      11. See my counter argument to your point #7. People who can pay cash for homes or at least put a lot of down payment to have a low LTV on their home AND buy a distressed property will make a TON of money in this market. Example: someone I spoke with bought a condo in Las Vegas in 2006 for $280,000; today that condo is worth $60,000. The street is a ghost town, and investors are scooping up these properties for dirt cheap. Lender will not drop their price until they can write it down, but the one’s that want the real estate off the books sell them for basically nothing. These people doing this will make a fortune.

      FYI… I am loan officer doing residential mortgage loans for a bank… NOT subprime. I have been in the business 10 years… and I speak to between 3000-5000 homeowners a year. I have some very good perspective on real estate and homeownership…. and frankly, you do not.

  • Dude

    I was stressing about buying a house and getting married.
    Thanks to this article now I think I’m going to buy a hot car and drive across the country.

  • Mx1917

    this is the silliest thing I’ve ever read!

  • The Man with the Plan

    I read your entire post and couldn’t disagree more – Chubb Rock’s best song is “Treat Em’ Right”

  • Utopiachick2004

    Letter E above for reasons why home owning became “religion” is completely false.

    Home ownership didn’t become the ideal started by companies wanting to make people less mobile. Owning your own land and home was the original reason people immigrated to America from European and other countries because they were not allowed to own land. It was already “owned” by the upper classes and nobility. The masses were then left with no choice but to live as tenants and had to pay a large share of their crops and money to the landlord. People immigrated to America for the abundant land and to fulfill their dreams of owning their own land and home. They were tired of living at the whims of their tyrant landlords who could do whatever they wanted.

    Shame on you for not knowing your history…

  • Utopiachick2004

    Letter E above for reasons why home owning became “religion” is completely false.

    Home ownership didn’t become the ideal started by companies wanting to make people less mobile. Owning your own land and home was the original reason people immigrated to America from European and other countries because they were not allowed to own land. It was already “owned” by the upper classes and nobility. The masses were then left with no choice but to live as tenants and had to pay a large share of their crops and money to the landlord. People immigrated to America for the abundant land and to fulfill their dreams of owning their own land and home. They were tired of living at the whims of their tyrant landlords who could do whatever they wanted.

    Shame on you for not knowing your history…

  • OnNotice

    I think, buying a house is ok, based on the fact that “cash is king”… the only time you should own a home is when you can pay cash for it. period, of if you own a home now…listen to Dave ramsey…

  • California guy

    Even Suze Orman the financial wiz/celebrity was on national news today and during the week saying that we are in a “new america” and the “dream” of real property is defunct. It will not make you money. Go to http://www.suzeorman.com/ Years ago she said she advised differently, but you may as well buy boat anchors and put your money in that, and toss it overboard. Being sarcastic here, but she said it is a renter’s market.

    She is widely recognized for advice to women on PBS, etc. for financial foresight. You probably all know her. The only people promoting real estate are the people that sell it, e.g. brokers and agents.

    But, if the home is for your family and children and you want total control of it, it does make sense. But do not think of it as an investment.

    The posters on this site may have to come to the conclusion, that times and economies do change. What was true 10 years ago, may not be true now, or 20 years from now. Sure colonists came to this country to “own” land. They did not buy it, they took it from native americans and gave them blankets with small pox on them. They could care less about owning it.

    Who actually owns the earth or your 1/billionth postage stamp 1/4 or 1/8 acre? History is just not about European history to America… history is everything before us. And the future is history in reverse. Look forward, not backwards to the 90’s or 80’s. Think of the Great Depression. What got the US out of that was our manufacturing power (General Motors and Ford) to assemble tanks, jeeps and warships FOR European countries, during World War II. We were just lucky that the German U-Boats off our coast never made it ashore. Ask anyone who lived during the Great Depression or WWII. They have been through more than the average Joe under 40 today, by far. All this discussion will be moot soon. It’s not about YOUR personal home and wealth, it’s about preserving our country and our economy.

    When all the GI’s came home, that’s when they started building sub-divisions in Long Island and wherever. Look at the 13 original colonies and cities like Boston and NY. Those are more like European cities. America was a vast area of quote under-populated land. It does not matter whether you own or rent. Only if you can live and survive and feed your family.

    The times are a changing. Just really look at what S.O. said, she is not a rookie armchair economist.

  • Patconolly

    My house is not primarily an investment. It’s primarily where I want to live and keep my stuff. If I lived someone else’s lifestyle I might have a lot less stuff – e.g. many people find reading books to be a chore to avoid and have no reason to have library space.

    My mortgage payment was less than rent would be on an apartment smaller than the house. After I paid off the house, then it was just property tax and maintenance – my disposable income was greater than it would have been had I been a renter. This allows me to do a lot of things I’d like to do now instead of deferring until I reach age 70. Who knows if I’ll even be around that long?

  • Guest

    My grandfather rented in Chicago for many years after the great depression. In the end, (meaning his lengthy retirement) he bought three companies one for each son, two houses with land, stables and a valley, a cottage on a lake with land, and a small apartment in town next to his favorite restaurant.

    All along he was planning ahead. The cottage and the stables were for is children and grandchildren. The second house was rental income. He said he needed the place downtown so when he was too old to drive he could walk to dinner. He never made it to the apartment, he married his second wife when he was 85. They were married 12 years.

    The Great Depression is what drove his decision. It was a financial choice. (at least that is what I am told.)

  • MarkYoung

    Wow. After reading this thought-provoking article, and all the comments below (minus the political ones), I do have a new perspective on owning vs renting a home. I’m still on the fence a bit, so will continuing to rent for the time being. But one thing that did occur to me after reading these comments is that a lot of the comments from home owners seem reactionary and even hateful. I’m always suspicious when people react this way to such a non-threatening article. I tend to suspect that the overreactions are due to the article creating a bit of doubt in the mind of such readers. To me this gives a bit more credibility to the author’s point of view.

    • Aboutjoshua

      Mark, I was mostly done replying about this article, but your objective view point was refreshing, so I figured I’d speak to it for a minute. I think a lot of homeowners are very disillusioned and are obviously lashing out, something you’ve hit on the head. That’s really unfortunate, because those are the people you could learn the most from if they were objective. I don’t know if you read any of my other comments, but I was suggesting living cheaply in one way or another (probably not owning a home), and putting the money toward investments rather than rushing into buying a house. I like traditional paper investments because they don’t cost money to maintain and are liquid – you can cash out when you want and buy a house later.

      I actually bought a house in 2007 at about the height of the bubble, but I was lucky/savvy enough to buy a pre-foreclosure for 33% less than I was approved for and then moved a roommate in to help with costs until I met and moved my Futurewife in a year later. If people buy a cheap enough house and/or move a roommate in, I can’t say too much bad about it except for the maintenance. My parents warned me about the “extra costs and responsibility” of becoming a homeowner, which I of course shrugged off because I was buying cheap enough and wasn’t worried about it.

      Then I got a crash course in the Lowe’s and Home Depot style of weekend. I’ve painted almost every room, redone the kitchen and bathroom, and resided the house among many, many other smaller projects. And I’m not going for the gusto with the house – it was just outdated – and the master still needs carpet and floorboard repairs. I’ve also basically quit my gym each summer because mowing, trimming, pulling weeds, mulching, raking leaves, trimming hedges, planting flowers, etc. provides a good enough work out. Not to mention the expense of buying the mower, the trimmer, the blower, flowers, mulch, etc. and all the other equipment there. It’s much, much more expensive than you can find in any statistic. Much more. It’s not all bad, you get a lot of obvious benefits not the least of which is the flat out experience of doing it all. I also get a sense of accomplishment from how my house and yard look and I appreciate that. I’m just saying you PAY for that experience and accomplishment.

      Having said that, if I had it to do over, I’d have held off on buying, watched some extra HGTV for the experience and saved my money. The housing market “crash” isn’t to blame on “home ownership” itself, so I will leave out the fact that I bought for $6000 less than it sold for 5 years before that and expected to have built in equity to reap later. I had planned to “eventually flip” it after a few years of living in it, but will probably break even or lose now. I would just save the time, effort and expense of owning the place and keep saving and boning up on my investing in the next life. This one has turned out ok for me, because I convinced my beautiful wife to sell her twice-as-expensive house, move in with me and because it was “relatively” inexpensive under two incomes, saved enough to pay cash for the next one if we want to, but I think that’s beside the point for me. We could have done even better living in a similarly priced apartment for a few years and saving all the time and money from maintenance. What could I have done with all those weekends and extra money? Investment seminars, Ebay business, buy a brick and mortar business or rental property? Sure, I’d be “wasting” money on rent, but it’s still less (to me) than wasting time and even more money on keeping up a house while my down payment gathers dust and my equity crawls along.

      Sorry, maybe that’s dramatic, I was trying to be objective here! The bottom line for me is, owning a house has a lot of obvious benefits. You get a lot of pride, experience, privacy and a work out and it should appreciate in value over time. What you do not get in most cases is a good investment, mainly because you’re investing with someone else’s money and the “investment” will have a hard time just keeping up with what you have to pay them back and have to pay to maintain it. And keep in mind, I actually used mine as a half-rental, bought as cheaply as I could and looked to sell it relatively quickly, all things that are against the norm and I still don’t feel that I’m coming out ahead. Obviously, if I hadn’t bought at the top of the bubble, I may be singing a different tune, but I don’t think so. I feel like I’d have mostly eaten into any profit with the maintenance costs especially vs owning stocks or mutual funds which are comparatively cheap to own. As some others have brought up, rental properties are actually a great investment, but that’s factoring in tenants paying down your mortgage and putting money in your pocket every month. That’s akin to starting a business, not home ownership.

      You need a place to live, so buying a home to live in is fine, but my motto is still “live cheaply and invest” and I’ve found that it’s hard to live cheaply while owning a home. Also, think about how people get rich – do they buy a home, fix it up and wait for it to appreciate or do they start a company and/or invest wisely? We may not be smart enough to start companies, but we’re damn hell smart enough to own some! You’re on the right track, my friend, stay on it for awhile. Later.

  • Jimmysands

    Not all Real Estate is a good investment, not all stocks are a good investment. I think you should do what’s best for you and yours, what makes you comfortable and happy. If you want to rent and it makes you happy, then do so and vice versa. My mortgage payment is the same as rent in our area, oh and i bought a duplex and my tenant pays for all but $20 of my mortgage payment. I don’t think all home buying is a bad investment, mine sure wasn’t :)

  • Sassy

    So true so many things that you wrote. I personally don’t understand the desperation that people go through to own a house. The most interesting thing is the fact about employment. I know exactly what you mean about having to be tied down to a job because you live in a certain area. Good if you work in low paying jobs and you don’t want a career. Bad if you want to develop a career. Say, for example, you wanted to move up in the world, you might think, ‘Hey, I could find a better job in Sydney and work there for three years, then move back to Brisbane, get a better job using the skills I picked up in a bigger company’. But, if you own a house, what a nightmare! I don’t even want to know the costs of trying to sell a house here in Aus. But if its like everything else here, you will probably come off a little bit worse. Also – who wants to be stuck in the same boring routine all the time! Argh! My husband wants to move up in the world and we are planning on applying for jobs for him that aren’t where we live. Good to know that we won’t have to sell a house! Besides, here in Brisbane, young people can’t even afford to buy a house, so the decision was easy to make. I even joined a campaign here to strike against buying an overpriced house, called the First Home Buyers Strike: First Home Buyers – Property Buyers Strike (http://uservoice.com/a/n6tFk) I wonder what all the employers will be thinking when their young employees are continually moving around, because they can’t even find a house to buy! I’m looking forward to our move near the beach!

  • Wood_survey

    What a great contrarian indicator. Your pain is someone else’s gain.

  • Chris M

    Your conclusion seems to be based mostly on fear/stress and fudged numbers. If buying a home causes you stress, then you shouldn’t buy. If the risk is too high, you shouldn’t buy. That’s fine. But, the figures you use to back up your case are misleading at best.

    The 0.4% annual increase in housing since 1890, which I assume is from Robert Shiller’s data, is an inflation adjusted rate. It’s OK to use that figure if someone plans on using inflation adjusted figures for all other calculations, but it seems to me that you used the number to be intentionally misleading. While I couldn’t find housing costs too far back, I did find that the median house price increased by 5.4% per year since 1963. The Dow increased 6.1% per year over that same time. So, if you just look at your down payment, the market would appear to be the better place to put it, but that neglects the fact that your mortgage eventually turns into equity whereas your rent turns into nothing.
    Your example of a down payment assumes 25% down. Who does that? 20% down isn’t even an expectation any more.
    The “myth” you call out about deducting mortgage interest and taxes from your tax return is a fact not a myth. If getting 20-30% of interest and taxes back at tax time is an insignificant dot, then you make too much money. Also, for most people that’s the difference between being able to deduct other non-housing related expenses vs. not being able to deduct anything at all.

    I do agree with your points on home ownership being an “ugly” investment. I can’t deny that your money is tied up and can be high leverage. However, historically it has also been a very low risk investment. The 2000s have not been kind to a lot of people, but even with all the tumult median housing prices are up about 30% since 2000. The Dow over that time period is up 6%. Of course, you could look back at the 90s and pretty easily say that home owners lost money vs. investors with housing up 30% and the Dow up 300%. That’s where the risk of not being liquid can get you, but better people than I have lost a lot of money trying to time the markets. Your point about tying up too much of your net worth in a house is something everyone should look out for. I was in my 20s in the 90s and bought a house because I thought it’s what I was supposed to do. In retrospect, it was one of the worst investment decisions I ever made. It left me with little additional capital to invest. Now I am in my early 40s and my home equity is only 20% of my overall net worth. For me, owning a home is a very sound strategy.

    My calculations show that I will be $500K-$1M on the plus side after 30 years of having a mortgage vs. renting. That figure assumes conservative returns, accounts for repairs and closing costs, bakes in tax increases, and looks at the opportunity cost of the additional $s that I’m putting toward the house vs. rent. If I get past the 30 year mark, it’s all windfall (minus taxes). Boy do I feel foolish for owning a home. Is there risk? Of course. Is it risk I can handle? Yes! That’s what it comes down to.

    I will say that your article did make me rethink my strategy and wound up affirming it. The key takeaway from your article should be that anyone thinking about buying a home needs to do the math for themselves.
    What is the cost of buying vs. renting in your area?
    What home appreciation rate can you expect in your area?
    Can I afford the down payment? A lot of people got killed by interest only loans.
    What kind of interest rate can you get?
    How long do you plan to live in the home?

    Ask yourself these questions and many more before making the leap.

  • Jeff M

    Even the worst asset (cigar butt company, gold coins, and yes, even a house) is an investment if you pay the right price. I personally don’t like the illiquidity of residential real estate but if I could find a good deal or potential for good cash flow from rents in my area, I’d be buying the hell out of a house. Unfortunately I’m not finding these deals—yet anyway.

  • Bo

    I’m with this guy. Unless you are a real estate investor, buying a home with the intention of living there indefinitely with no life interference is far-fetched. With tax laws in flux, corruption in government and financial institutions, and the fact that human beings will do the right things and also do the wrong thing, over and over and over, renting gives one control of their environment. If there are foreclosures abounding, baddies moving in the ‘hood, amenities disappearing, you can move in 60 days or less with no penalty other than the cost to relocate your stuff. It is liberating. At my age of 61, to buy the property to which I am accustomed versus rent is at least twice the cost to my estate. I’d rather my kids have cash and flexibility when I take my dirt nap than a house they may or may not like, have to pay taxes on and keep up until it sells, and add yet another burden to their overloaded days. I’m renting, period, not in apartment housing, but in single family homes. The investor can deal with the hassles and costs. I’m done.

  • Ymhazard

    We owned a house with “character” when our kids were growing up. We spent so much time and money on that house over the 20 years we lived there-we could have retired on it. Plus the amount of time we spent remodeling it was precious time we could have spent doing things with our kids. I am advising all my kids to rent…

    • Guest

      You just told my story, only difference is the number of years. Same story, tons of money and time wasted … wasted.

      So, I completely agree.

  • Anonymous

    Yeah, cash in the bank.
    Until your bank goes insolvent and you lose it all.

  • J.

    Very interesting article and you do make some great points; however, from what I have experienced the question of rent vs. buy is different for everyone. Two major components factoring into this decision I believe are market they are in, financial status and how much you can put down – this last can greatlyy affect your monthly occupacy costs. The main argument against renting I always felt is permanence (or I guess some would argue that is why you rent and not own, flexibility). I can only share wtih you my experience and context; in my case and situation it was better to own. First, my prespective is NYC, Manhattan actually. One of the downfalls with renting in this market is it can fluctuare so much, that the nice big one-bedroom you had in a neighborhood you loved, is now a small studio in a less-desirable neighborhood, in a walk-up. (And apartments in NYC tend to be small to begin with)

    My first apartment in NYC was rent stablized, why would I leave you ask? Well, yes, my rent was dirt cheap, but I was in a walk-up and the apartment was a 400 sf one-bedroom at best. I was about to get married, I did have a lot of cash at the time; I also was smart enough to go in on some good real estate investments which I collect monthly rent distributions from, and, because I was cash rich, I was able to put down close to 50%. I now live in a big junior four (i.e. is an apartment in Manhattan that can be converted into a small two-bedroom, layout now is of a quite large one bedroom), full service, doorman, elevator, buildings with a maitenance that is quite low consideing the area (UES)-always do your homewoerk with regards to this, and size- approx. 1,000 sf; so my wife and I quite comfortable. I was also able to refinance not to long ago, bringing down my monthly occupacy costs by another $800; that, with the real estate investment income, makes the whole situation quite affordable and livable, plus, we will never have to move or be “priced” out because the rent gets jacked up. An apartment of the same size, location and amenities on a rental basis would be at least double what I pay in maintence and mortgage, and actually probably a lot more.

    My point, everyone’s situation is different; is owning for everyone, no, then again, neither is renting – I know so many people in NYC that move every 2-3 years, or even anually, simply because they have to; most common reason being priced out of their neighborhood. We will never have to worry about that.

    I hope I added some insight.



  • I couldn’t help but respond to your posting – http://sudbury.patch.com/articles/why-im-always-going-to-own-a-home

  • Blaze

    What I am finding out as I read more and more of the entries (OP’s) in this blog, is this, that there is no black & white to these proposals – they are just one angle of perception from one voice in the crowd. And I don’t mean that in any disparaging context what-so-ever. Anyone that falls onto a mind opening site, such as this one, seeking to find ALL the answers will eventually come away greatly dissapointed. What James is expounding on is what James sees as truth, narrowed and relevant to his scope of existence – and that’s OK. Understand that fact and his advice becomes MORE relevant to the objects of this intentions; those that agree with his core values and preferences for certain “freedoms” over others, such as those folks that are reeling from the economic collapse of the last, say, 5 years but also to those that are doing well and need to understand the grievances of the less fortunate, unlucky and/or ill informed. Again, that’s OK. That’s what makes the world such a wonder place. Diversity. Black and white statements about why owning a home is not advisable involves way too many fundamental dynamics that can be thoughtfully and CAREFULLY outlined on a freaking blog-o-sphere website.

    It’s all about the discourse folks. It’s all about speaking ones mind. James expresses those needs well and incites ongoing conversations – almost in direct contradiction – the anti-thesis if you will – to the “media hype” syndrome he so condemns. I’m enjoying peeling this onion…but I diverge.

    Owning a home can be and will continue to be, an important opportunity to many Americans who aspire to own homes – and the more informed home owners will no doubt make it an economically sound (ad)venture for generations to come.

    Life is about choices and outcomes…and if the outlined reasons listed about appear to be a “one size fit all” approach, then you’re probably in either of two extreme opposing camps – those that empathize with James and agree with him or those that think he’s a leftist, liberal whatever-you-call-it and feel threated by his current sense of freedom “liquidity”. Again, life isn’t about simple black & white propositions. It’s WAY more complicated than that…

  • I like your article. One of my readers turned me onto it. While I am not sure I would say “never buy a home”, I do agree with most of your points – that a home is not a “great investment” and particularly nowadays.

    And if owning a home is a potential nightmare, don’t get me started on Condos – all the negatives of owning with all the negatives of renting, with none of the positives of either!

    I recently cranked some numbers on home ownership, and saw that the prognosticators are indeed right – you spend, over 30 years, maybe close to $800,000 buying, maintaining, insuring, and paying taxes on a $200,000 house. And when you sell it 30 years later, you get back, well, $800,000.

    This is not to say that buying a house is ALWAYS a bad idea – you can buy strategically, and sometimes there are bargains out there.

    And of course, if you are clever, owning investment property can be a money-maker and a good way to convert ordinary income into capital gains. I owned a number of such properties and made a lot of money, but sold out when I saw the market going beserk.

    Here is a link to my sample home calculations:


    Home ownership makes sense if you plan on staying in one place for like 10 years or so. Otherwise, the transaction costs will negate any real gains. Usually, you need at least 5 years to break even. At least.



  • Deborah_dej

    I am a homeowner,nothing fancy but its my home.I have something of value after 33years of service at my work. I truely enjoy doing remodeling, restoring and redesigning my little home projects. It gets the entire family involved and a joint set goal to achieve in site and mind. The benefits of emotional success by achieveing this goals in a family effort is super rewarding also eye appealing. We have change the entire interior sturcture to acommidate and support our lifestyle interest.. I love that I can start a project and my 2 boys will fire off suggestions to mold the progress of the project. I am divorced of many years and I am as much of a handyman as the next guy from my learning experience of repairs,replacements and remodeling. My parents will always have a place in my home which has 2 steps for their only challanges at entry. I have my main bathroom with handicap bars installed by toliet and in tub.I have keyless locks projecting in home health care visits when my folks are home alone and the nurse can access entry.I have security recorded cameras survillence enabling me to view anyone approaching the house or briefly visits a resident. I have sensor lighting all the around the parameters of the house enalbing good viewing of the cameras and make anyone approaching at night to have a second thought to continue for a possible welcome.I have audio for listening to outdoor activity and speakers enabling 2 way conversation at entry.I love electronics which is my job field.My 2 boys and I have been homeowners of 3 older homes. I have learned as they have during their growing years some remarkable applications for variable issues that have occured while being an resident in a older home. We live in a area that prevents on street parking and they will not even try permit parking by ownership in the area. It’s the only draw back we have since the boys are drivers now + me and their visitors because no parking after 2am or an expensive ticket is generated for such a restriction.I am a 3rd shift employee of many years by choice and the boys have a similar clock as mine with visiting friends and their gaming world.But parking is an issue while their doing their thing at parking restricted hours.

  • Abc123

    Very one sided, emotionally written article. After the recent bailouts, cash is one of the worst things to be in because it is getting rapidly devalued.

  • Myarticles2read

    I lean more toward what you are saying about not owning a home for multiple reasons which I will not go into here. Just like politics and religion this will likely be a never ending debate. I currently live in a 4,000 square foot house overlooking the 8th hole of the golf course that my RENT is less than what it would be if I bought the house plus the homeowner pays the taxes, repairs and the homeowners dues. So if you find a sweet deal like I found, it’s worth serious consideration on not buying. Finally, I don’t want to be tied or trapped to a house. My wife and I love to travel and I can work from anywhere in the world that I can get internet access.

  • Mrdelurk

    Band of America CEO: owners should not look at a home as an asset


  • Homewood Al Us

    when im 47 my house will be paid for and you renters better have a lot of cash because you are going to be paying rent till the day you die. I on the other hand will have an extra $2000 a month to go have a good time on. Oh and when I sell my house at 55 and move to the beach i will downsize and have some of my cash back…so live for free at the beach or pay rent till i die…

  • Holy cow. This blog is amazing and the comments are golden.
    Keep up the great work, James


    I would like to add demographics. When the baby boomers die off a lot of excess inventory will flood the market.

  • Battleofalma

    I’m with JA to an extent on this one. As recently demonstrated, you don’t own the property anyway, the bank does, you just have the illusion of ownership as you live there.
    You borrow a ridiculously large amount of money, you get something highly illiquid in return, you lose opportunities because your biggest, most important relationship is now with the roof over your head.

    But there are a lot of intangible benefits to homeownership and the subsequent pride in maintaining those homes. You get nicer neighbourhoods, stronger senses of community through collective investment in a street/town/building (ok, and a few domestics over who’s been trimming whose hedges).

    On an individual level, buying a house is overrated and oversold as a must-do, especially here in the UK where property ownership has been considered man’s highest achievement since the 1700s. But there are collective benefits to be had.

  • Also, in a lot of localities, you are on the hook for any code restrictions and building regulations. Lake Worth, Florida made me rebuild my house from bottom to top after the hurricanes at 3X the cost of the house ON MY OWN DIME under threat of penalty if I didn’t. Otherwise they put a lien on your house and take it away.

  • eagle1

    Whose going to own all those places that we rent if we all become renters?

    Don’t strap / slave yourself to a mortgage, but if you have extra cash in the bank, why not have a place to call your own. Buy outright if you can and leave the mortgage behind. If you do have a mortgage, have one that will not stress you out. Buy what you can afford.

    Some people enjoy working on their home and take pride in customizing it. Homes are usually much more attractive than rental properties.

    Don’t fall for the investment line. It can be, but only if your timing is right. But homes are tangible, not pieces of paper that stand for stand for a lot of money, but they’re still just cheap pieces of paper and numbers in a portfolio. Investments can go poof, money in the bank can disappear, and housing prices can dump. There are no guarantees. Unfortunately.

    Pros and cons for both sides. It depends on the individual.

    By the way…I own and rent and travel back and forth. I will probably let go of the home sometime in the future, but it is nice to have a place you call your own, that feels like “home”. And it becomes my decision for when my lease is up!

  • Pictheace

    it sure beats the alternative, unless you live in a tent. No one tells you when to move, or your cost to live there has gone up, or you must mow the grass, no you can’t paint, smoke, or have a guest longer than 7 days. And to thankyou for paying my mortgage, contributing to my profit, imporving my tax status, I will now terminate your lease. Have a great day renting

  • Holzy17

    What a stupid article…. The first argument told me there was no reason to read on but I did.

    “So if you buy a $400,000 home, just say goodbye to $100,000 that you worked hard for. You can put a little sign on the front lawn: “$100,000 R.I.P.””

    Who the hell is going out and buying a $400,000 home as their first home? There lies your issue. How about you go for the $120,000 home, (unless you are in CA of course). RIP 100K say you rent an apartment for $650/month. If you rent for 30 years ( the normal mortgage time) You would pay over $200,000. Bad argument right of the bat, poor research.

    • Ack

       “What a stupid article”

      I stopped reading right there. If you want to be heard, don’t act like a spassy child.

  • Almurattyc

    Yet another example of good points mixed up in absurd statements..

    Cash in the bank = Loss.. If you have a savings account with 1.5% interest per year you are loosing money….Ever heard of inflation WOW

  • Shizzlebrizzle

    obviously youre an idiot giving bad advice.

    • Ack

       x2 for that quip.

  • Is there really no return on buying a nice, foreclosed house and holding onto it until the market rises, maybe making a few good repairs, and then flipping it?

  • Chrismx_treme

    I’m the type who has to plant her roots. I want freedom to explore, but a place to call home when I’m done exploring. So when I buy, I want to buy outright – no mortgage, no mortgage insurance. So I want to either rent first, or lock in a long-term lease-purchase option to save the money to buy outright.

  • Chrismx_treme

    I’m the type who has to plant her roots. I want freedom to explore, but a place to call home when I’m done exploring. So when I buy, I want to buy outright – no mortgage, no mortgage insurance. So I want to either rent first, or lock in a long-term lease-purchase option to save the money to buy outright.

  • Chrismx_treme

    I’m the type who has to plant her roots. I want freedom to explore, but a place to call home when I’m done exploring. So when I buy, I want to buy outright – no mortgage, no mortgage insurance. So I want to either rent first, or lock in a long-term lease-purchase option to save the money to buy outright.

  • Chrismx_treme

    By the way, in California, it costs twice as much to rent. Buying here is cheaper. I’ll give you the real numbers: a nice 1 bedroom apartment in Thousand Oaks costs about $1,475/month to rent. A nice 2 bedroom condo in Thousand Oaks costs $1,050/month, and that cost includes mortgage, mortgage insurance, property taxes, interest and HOA fees. My fiance and I make a combined $36,000 a year, and WE can buy a condo in California. Nice. And in a nice, safe, suburban neighborhood. Sweet. This argument is only valid depending where you live. In California, now is the time to buy, because prices are ridiculously low, and once the prices go up, selling will be 3 times more profitable because it’s California.

  • Chrismx_treme

    By the way, in California, it costs twice as much to rent. Buying here is cheaper. I’ll give you the real numbers: a nice 1 bedroom apartment in Thousand Oaks costs about $1,475/month to rent. A nice 2 bedroom condo in Thousand Oaks costs $1,050/month, and that cost includes mortgage, mortgage insurance, property taxes, interest and HOA fees. My fiance and I make a combined $36,000 a year, and WE can buy a condo in California. Nice. And in a nice, safe, suburban neighborhood. Sweet. This argument is only valid depending where you live. In California, now is the time to buy, because prices are ridiculously low, and once the prices go up, selling will be 3 times more profitable because it’s California.

  • Chrismx_treme

    By the way, in California, it costs twice as much to rent. Buying here is cheaper. I’ll give you the real numbers: a nice 1 bedroom apartment in Thousand Oaks costs about $1,475/month to rent. A nice 2 bedroom condo in Thousand Oaks costs $1,050/month, and that cost includes mortgage, mortgage insurance, property taxes, interest and HOA fees. My fiance and I make a combined $36,000 a year, and WE can buy a condo in California. Nice. And in a nice, safe, suburban neighborhood. Sweet. This argument is only valid depending where you live. In California, now is the time to buy, because prices are ridiculously low, and once the prices go up, selling will be 3 times more profitable because it’s California.

  • Mid20Some10

    My husband and I just bought our first home. This article holds no weight for us! We bought a 10 year old home and we pay less a month on our house than we did in rent, and our taxes are similar because many places impose a residence tax if you don’t own a home. Just don’t buy more than you can afford! We still save money in the bank, and are now building equity too. You may lose a couple thousand on closing, but people who rent throw that much away in a year. We bought in a location where property values are increasing (suburb, up and coming).

    The real problem is that everyone thinks they need to live in a mansion. In that case, buying probably isn’t optimal. If you buy a home with a smaller sq ft (still bigger than most apartments), maintenance is less and so is heating it in the winter. Think smart people!

    • Kissmygrits

      Your post was right on. Agree 100%

    • Ack

       translation:  if you buy a small enough box, it’s the same as renting.

  • Mid20Some10

    My husband and I just bought our first home. This article holds no weight for us! We bought a 10 year old home and we pay less a month on our house than we did in rent, and our taxes are similar because many places impose a residence tax if you don’t own a home. Just don’t buy more than you can afford! We still save money in the bank, and are now building equity too. You may lose a couple thousand on closing, but people who rent throw that much away in a year. We bought in a location where property values are increasing (suburb, up and coming).

    The real problem is that everyone thinks they need to live in a mansion. In that case, buying probably isn’t optimal. If you buy a home with a smaller sq ft (still bigger than most apartments), maintenance is less and so is heating it in the winter. Think smart people!

  • Dleboeuf84

    I bought a new house about 15 months ago. I’m so damn stupid! I’m 28, single, and stuck in this house. The house itself is great, but WTH am I going to do with all this house, especially living somewhere that is not all that appealing to me to live. dammit.

  • Valjoux66

    I see his point. I thought buying a condo where my mortgage payment was about the same as my former rent would be a great move. But when you factor in taxes, condo fees, parking space rentals and maintenance it ends up being a LOT more. My 30-year fixed actually went up because my taxes were recalculated! And I always thought at least I’d have some equity to pay off my debtts and a little security, but none of the banks are lending. Plus my condo value went down. I wish I never did this. What a mistake. I am almost out of money, my business is struggling and the condo, taxes and fees are dragging me down. I can’t even afford to get married.

  • Your*mom*

    James, you are an idiot. Maybe you should take a business course or two to understand the principals of investing and returns on investment! Reading this article just made me dumber!!! WTF!!!!!

  • Your*mom*

    James, you are an idiot. Maybe you should take a business course or two to understand the principals of investing and returns on investment! Reading this article just made me dumber!!! WTF!!!!!

  • Your*mom*

    James, you are an idiot. Maybe you should take a business course or two to understand the principals of investing and returns on investment! Reading this article just made me dumber!!! WTF!!!!!

  • dk oday

    First of all, this is the best blog/site w/comments ever. I could read it for days. That said, one thing I noticed in the rent v buy conversation is that no one has included any dollar figures for updating the homes aesthetically. Sure, you have the averages on replacing systems, roofs, etc, but one must also take into consideration that before you sell the home you have owned for 30 years (with your paid off mortgage), you are going to need to evaluate how well your decor from 1981 is going to go over with potential buyers. If you haven’t updated your kitchen and baths, for example, you can count on losing money or buyers on a potential sale. So, when you calculate the final $$ from the inital investment (assuming that you are not renting out the property) make sure that you allot enough money for that Southen Living kitchen and baths, etc that people expect. Or for painting the exterior of your New England style clapboard siding (not everyone likes Key West colors) to the tune of $20K+. “First offering in 30 years” is not necessarily a plus in a real estate ad.

  • dk oday

    First of all, this is the best blog/site w/comments ever. I could read it for days. That said, one thing I noticed in the rent v buy conversation is that no one has included any dollar figures for updating the homes aesthetically. Sure, you have the averages on replacing systems, roofs, etc, but one must also take into consideration that before you sell the home you have owned for 30 years (with your paid off mortgage), you are going to need to evaluate how well your decor from 1981 is going to go over with potential buyers. If you haven’t updated your kitchen and baths, for example, you can count on losing money or buyers on a potential sale. So, when you calculate the final $$ from the inital investment (assuming that you are not renting out the property) make sure that you allot enough money for that Southen Living kitchen and baths, etc that people expect. Or for painting the exterior of your New England style clapboard siding (not everyone likes Key West colors) to the tune of $20K+. “First offering in 30 years” is not necessarily a plus in a real estate ad.

  • 100% Real

    you must have a nice landlord if he lets you deduct a broken dishwasher from your rent…. the knobs on our stove were missing when we moved in our apartment we asked our landlord to get us more he had his friend steal them from a goodwill store…. enough said our landlord is a “PoS”.. I’d rather have my own house so I don’t have to rely on other people cuz not everyone is as nice as your landlord…. that’s not how the world works….

  • 100% Real

    you must have a nice landlord if he lets you deduct a broken dishwasher from your rent…. the knobs on our stove were missing when we moved in our apartment we asked our landlord to get us more he had his friend steal them from a goodwill store…. enough said our landlord is a “PoS”.. I’d rather have my own house so I don’t have to rely on other people cuz not everyone is as nice as your landlord…. that’s not how the world works….

  • 100% Real

    you must have a nice landlord if he lets you deduct a broken dishwasher from your rent…. the knobs on our stove were missing when we moved in our apartment we asked our landlord to get us more he had his friend steal them from a goodwill store…. enough said our landlord is a “PoS”.. I’d rather have my own house so I don’t have to rely on other people cuz not everyone is as nice as your landlord…. that’s not how the world works….

  • 100% Real

    you must have a nice landlord if he lets you deduct a broken dishwasher from your rent…. the knobs on our stove were missing when we moved in our apartment we asked our landlord to get us more he had his friend steal them from a goodwill store…. enough said our landlord is a “PoS”.. I’d rather have my own house so I don’t have to rely on other people cuz not everyone is as nice as your landlord…. that’s not how the world works….

  • graelyn

    If you own, you don’t have to worry about your landlord not paying the mortgage. Many people have been evicted because of this. People have also had to move with little notice because their rental home was sold and the new owner wanted to live in the house. If you are renting with a low payment and you wind up with a new landlord, your payment will go up. I know people that this has happened to. Also, if you plan on staying in your home for many years and pay the home off, then your only monthly expenses will be taxes and insurance. I believe that you should look at where you want to be and then decide to either rent or own. Also, many people live in places where they can buy a home for less than $200,000.

  • My house owns me

    Haha. I think I am living through almost all of that right now. Repairs, down payment, stress, time, and effort…what a waste. I like the trapped part as well. Now considering leaving Charlotte NC to live in Boca Raton FL. Good bye ownership and hello freedom!

  • Margaret

    If you rent, you can be moved out if your landlord chooses…if you own, only you can decide when it is time to go. If you rent, the monthly payment can fluctuate upward, and often does. If you own, and you have a fixed rate mortgage, you know what you will pay for as long as you are there. In my area there was really no “bubble” in the housing market and houses are pretty close ratio to value, so when we bought, five years ago compared to now there is little change in the value. Thus, if we were to sell now, I figure we have lived here for five years rent-free (except whatever improvements and repairs we have done, which are minimal because the house is not old). It was ways a goal of mine to live in my own home, and I am happy to have achieved it with my husband.

  • Serenity245

    Many rental places do not allow pets or they allow only certain types of pets and/or they charge extra to have a pet. I like sharing my life with my pets and with the amount and type of pets I have it is hard to find a rental so I would rather buy. Btw I have 2 cats (one declawed both front and back and the other only in the front) and old (12 yr old) Akita, a rabbit, a few hermit crabs and a fish. A veritable zoo. Yeah not many (if any) rental places would allow me to have all these pets, esp the Akita even though he’s old and a big baby.

    • Joe

      You’re lacking in human friends, apparently.

    • Ack


  • Grapenut

    I suddenly feel a little bit better about all the sushi I have eaten over the last several years; maybe I really am livin the life. lol :) I really appeciate all the contributions people have made; really great perspective from all sides. One thing which has been discussed, but I don’t think Josh really factored in to his scenario was the likely increase in rent he will have to pay everytime he excercises his freedom to move; of course in some places it is often customary for a homeowner to allow a tenant to keep the original rent amount for many years as long as they are a low maintenance tenant (of course this has no guarantee, and there goes your coveted freedom and calling the LL everytime you burn out the motor on the wash machine if you want to play it that way). So assuming Josh likes to move around every couple years, then he will also pay the increases in rent, whereas the owner occupied homeowner will only pay the fixed 30 year rate. Now if Landon is taking all of the extra money he is not paying in “perspective rent increases” and leveraging that into Bejing index fund or the like, then I think he may even come out ahead of the Boblaw scenario (renting to a tenant).
    One thing I always like to bring up in these forums is the highway robbery that property taxes can and in most places have become. It was stated (quite rightly so) by an earlier contributor that we have to have a place to live, shelter, etc… Back in the mid 90’s I had a couple friends who owned on Long Island. One paid about $12,000 per year in property taxes, and the other paid about $24,000 in property taxes. Excuse me? This is in my opinion criminal, for a municipal government (or any other for that matter) to expect that kind of cash from someone who is only excercising their basic requirement for shelter. I don’t really care how expensive a Long Island home may or may not be, 12-24K over 10 years ago for a primary residence is criminal. Our current system of gov’t may require alot of tax dollars to keep the machine moving, but I believe the supreme court or someone should put a cap of $500 per year on what anyone has to pay to own a primary residence. I challenge you to find any blue collar American who has worked hard all their life to pay down a 30 year mortgage, who would see it any differently.
    By the people, for the people. It’s high time our elected leaders start thinking of things from this kind of persective.

    • I totally agree. propertu taxes and maintenance go up with inflation even more than rent does.

  • bonnie

    I don’t know why people like the author feel compelled to move all the time. When I was a kid, people of my parents’ generation bought a home with the notion of settling in it, not flipping it. Most of them still live in those same homes today. It was a commitment. If you don’t feel like staying put, then definitely rent. But some of us prefer some stability.

  • Joe Schmoe

    Prices of housing are NOT at a low. Real Interest rates are lower, unemployment is higher, the prices of food and energy are higher than in 2008 when the crash happened. How can people think that home prices are going up???

  • Anonymous

    That’s you. I personally want to buy my dream home and live in it. Living in an apartment is not my idea of living well.

  • Laurel

    We have rented our entire married life, as we have not once, ever had enough money for a house. Come July it will make 25 years.

  • I wonder if James Altucher has kids and has gone through the process of explaining to his kids why they can’t see their friends, because he has decided to rent to another part of town. Also I am not sure if he is aware how much a 2-3 bedroom apartment costs in NY and how significantly cheaper a mortgage is compared to a 3-bedroom apartment rent.

    • I have two daughters and they have playdates all the time.

  • I totally agree with you. Housing seems like a questionable investment when you consider how much cash it ties up. I would rather have capital at my disposal so I can make investments and grow it even more.

  • curt

    what a moron..yeah just keep throwing your money away on rent, fool. at the end of 30 years, you’ve got nothing to show for monthly paymts, I willl have a property worth six or seven figures that can be sold for cash! Yeah, CASH!! I will laugh all the way to bank while you continue sending your cash to another property owner like me who is laughing all the way to the bank. Fool.

    • Its ok. Your first statement here is an insult. I hope you treat the people you aren’t anonymous with a little better. Then your second line includes an insult as well.

      Let me ask you this: While i’m making money on the interest of what you used as a downpayment, you no longer have that cash AND you are paying property taxes and maintenance, two things that can rise in some years much faster than rent and often will rise faster than inflation and rent. I lock in my rent for five years at a time. What if your house needs all new plumbing. Then your money is literally flushed down the toilet while I’m making money on interest and not stressing about when the plumber is going to get there. I’m thinking, its your house – you deal with it.

      By the way, you may or may not end up with more cash. If you really look at the math you probably end up with less cash. But somehow, I seem to be less angry than you.

      • Grapenut

        I’m glad you are happy.  This is the first comment I have seen where you concede that owning a house MAY (or may not) be more profitable in the long run.  I own houses and it makes me happy.  I like knowing that out of all the houses that I & the bank own at least one of them will likely be mine when I am 80, so I won’t still be stuck renting.  If renting makes you happy then great.

        • Heck, I might not live til I’m 80. I love my cash now. 

          • Grapenut

            Classic case of the turtle and the hare.  Call JG Wentworth. 

        • Ack

           well no wonder you are defending it so rabidly, it’s everything you stand for and have worked for.  How could someone so vigorously disagree with your chosen path in life?  Let’s attack what we don’t understand K?

    • Its ok. Your first statement here is an insult. I hope you treat the people you aren’t anonymous with a little better. Then your second line includes an insult as well.

      Let me ask you this: While i’m making money on the interest of what you used as a downpayment, you no longer have that cash AND you are paying property taxes and maintenance, two things that can rise in some years much faster than rent and often will rise faster than inflation and rent. I lock in my rent for five years at a time. What if your house needs all new plumbing. Then your money is literally flushed down the toilet while I’m making money on interest and not stressing about when the plumber is going to get there. I’m thinking, its your house – you deal with it.

      By the way, you may or may not end up with more cash. If you really look at the math you probably end up with less cash. But somehow, I seem to be less angry than you.

  • Mister Panache

    I like how all the long winded comments are from homeowners. So thin skinned about their choice of owning. I rent, I took the money I was going to put as a down payment and started my own business which is now quite successful. You can’t put a pricetag on not having to be a white collar slave anymore. To each their own but Jame’s point about owning a house and being stuck in a job you hate is an irrefutable statement.

  • Anonymous

    Interesting article.  For one thing, I disagree with you on the housing prices going up from here. What we’re witnessing now (and will continue to) is unprecedented, even compared to the Great Depression when the average home lost 30% of it’s value.  There are many regions of the country today where that number is up to 60% and even more (ie: Florida, Nevada, Arizona), especially in the inner cities like Detroit where you can buy a “home” for $1.00!

    There is also a massive backlog of “shadow” foreclosures that the banks are sitting on for various reasons, one being the “hope springs eternal” scenario you give that the housing market has bottomed, etc.  It is going to take a LONG time to get rid of these distressed properties which will continue to depress the overall market.  This mess is also killing the banks, which are now very reluctant to lend money to ANYONE, even the credit worthy.

    And in spite of this, Communists like Obama and his Congressional comrades, are insisting (AGAIN) that the banks start issuing sub-prime mortgages, when THEY and THAT is what created this whole mess in the first place.

    The bottom line is that government, LIBERAL controlled government, is the problem and until the American “voters” wake up and throw them out, this will continue.  And the longer it does, the harder it will be to recover as individuals and eventually as a nation.

  • queenie

     My house is not an investment.  It is my nest.

  • James, first time reader, now a Twitter Fan. Great article.

    I believe it is impossible to determine a universal winner of renting vs buying. As the benefits of renting vs owning will generate different results in different metropolitan areas. When living in a city with an overpriced real estate market, renting might be the only choice. Currently, I rent in downtown Vancouver and I have created this case study of renting vs. buying in Vancouver (The world’s least affordable city for housing):


    I created a second case study with a sizable down payment to illustrate a proper down payment may not be enough:


    This article highlights the intangible benefits of renting over owning and I believe today’s youth should be introduced to all of their options available before they leap. I love knowing that I am not responsible for any home renovations or maintenance, that I can leave anytime with no obligations, that I don’t stress out about interest rates, and when I am ready to buy (if I ever buy) I will have enough wealth generated to finance a home with passive income.

  • I hear you. BUT… not too many people will rent a house to someone who has lots of children, horses, dogs, barn cats… and my fear would be that the landlord might sell out from under me, and where to put all these critters then?  But since I love outdoor yard work, that’s no big deal. It’s the maintenance on the house itself that makes me pull my hair out. Also the constant “updating the decor”.  1970’s fake paneling is functional and sturdy!  Wife disagrees. Goodbye, paneling. Hello sheetrocking, mudding, sanding, priming, and painting.

  • NuclearCannoli

    Couldn’t agree more.  Home ownership is a lifestyle choice, not an investment, and it having been sold as that is BS propped up by inflationary price increases.  Pump enough money into the economy so that prices rise fast enough across the boards and anything becomes ‘an investment’, because it’s worth more nominally.

  • Jaboogie

    You are brilliant! I love this article. I’m a renter and I love it.

  • Anonymous

    There was a time in my life when renting was appropriate, and there has been an extended many years now when owning has worked-out better for me.  In my 20s, renting was really the only way to go, as I changed jobs and even cities several times.  My first chance at owning my own home was in Cleveland in the mid to late 1980s beginning in my late 20s.  I bought my house for $33K with $6K down, and still the payment was only $325 on a 15-year mortgage.

    The house was an older little 2 BR/1 BA bungalow that had been remodeled just a few years before I bought it, and in the 5 years that I owned it, the only substantial maintenance items were replacing a water heater and staining my deck every couple of years.  Alas, all good things must come to an end, which they did in a big way when unemployment hit 20% in the Fall of 1990 and I got laid-off.  I managed to hang on the ragged edge for a while, before finally selling the place, for less than I thought that it was worth, after only 2 weeks on the market.  I got my money back, but not much more, then I packed-up my things and headed to Denver. 

    After that it was back to renting, even though I ended-up living in the same apartment for 5 years.  That was probably good, because 1995-97 was another period of relative instability in my life after three different employers went under.  However, starting in December of 1997, I began a job that lasted non-stop until October of 2009.  After renting for the first couple of years on this job, my dad passed-on, and I inherited enough money for a substantial down payment on a brand-new 3 BR/2.5 BA townhouse in an upscale suburban golf community.  Two years later I sold my townhouse for a substantial profit and bought a brand-new patio home on the 6th tee with a beautiful mountain view from the eat-in kitchen.

    In the 8 years that I owned that 2nd place, the only maintenance item was a minor furnace repair after the ignitor went out.  Then two years ago, as the worst of the recession was in full swing, a builder up the street was having a terrible time selling houses and offered a huge discount that I felt was a good investment.  So, after my new place was built, and I sold my old place again for more than I bought it for, and moved into my new semi-custom 3200-sq ft single-family patio 3 BR/Den with 3.5 baths and three fireplaces, broken into a larger and a smaller duplex with two kitchens and two laundry rooms, all on the 18th tee, with another beautiful mountain view, last November.  In all three of these most-recent places, the HOA does all of my outside maintenance, so that when I come home everything is already done.

    After putting down half of the purchase price, I have the remaining balance on a 3.875% 15-year mortgage, which comes to only about 2/3rds of my $20K annual annuity.  I have a tenant renting my basement apartment for $700 per month, which means that if worst comes to worst, that I can still bring home $28K and.make ends meet without working.  Then in just 5 years my whole life annuity will mature, which will yield another $900 per month in income for life, and 2 & 1/2 years after that I could get half of my Social Security for another $1200/month, with Medicare at age 65 and another whole life annuity set to mature at age 71.  Think that you could make ends meet at age 62 (in only 8 years) on an annual income of $53K, plus whatever I have in my retirement IRA by then, plus my other investments, plus, if absolutely necessary, I could get a reverse mortgage on my house too, which in 11 years I will only owe about 1/8th of the value on.

    Famous last words, as our economy could completely collapse and leave almost every homeowner with virtually no potential buyers, so perhaps the economic world that young people face today is so markedly different from my own experience that being able to flee on a moment’s notice with just your hard assets already packed and waiting will make much more sense.  For me, in my experience, it is always good not to put all of your eggs in one basket, and if you are at all uncertain about your employment future, or planning to tour with the Grateful Dead for a while, owning a home may not be a good thing.  But, once you get to a point where the economy is growing and your employment and marital picture looks stable, owning is a pretty good way to build equity that you can continue to use to buy any number of things with, often at a lot lower interest rate than through other sources, and once you have equity, you can live off of it later in life too.  You renters might be working until you are 90 too.      

  • Jason


  • This is the great blog, I’m reading them for a while, thanks for the new posts!

  • For me there is the ultimate reason for buying a house – because eventually you can sell that sucker and move to another part of the world (or even the same country) with a sizeable lump of money, buying a new property outright for cash.

    For example where I live now my wife and I are looking at buying some riverside land right in the city center for just $17K. That wouldn’t get you a garden shed where I used to live (UK)

    Yes, one could invest the money instead or whatever but the way I look at it, you’d be paying rent anyway, so you can deduct that cost, the remainder is mostly a great way of forcing yourself to save up. ;o)  After all, a major reason for a lot of people renting is because they’re pants at saving (like me) and struggle to raise the deposit!

    Ask me to save 20,000 or 40,000 and it aint gonna happen. Tell me to “pay the mortgage” for a decade or so and viola, like magic – equity! :o)  In short, for most people living paycheck to paycheck, a mortgage is the only “savings” vehicle they have.

    • Anonymous

      …and there you present the problem, living paycheck to paycheck and having your savings tied up in your house spells disaster. This is why the US is in the trouble it is in – a house is not an investment or a piggy bank if you live in it, it’s your home!

  • Guess you have never lived in Vancouver British Columbia, and if you have never owned, renting is all you will ever do, ha.

    • Anonymous

      How are the prices sustainable then?

  • Love it.
    I started to realize how absurd it is to own a home. This was the last nail in the coffin. 

  • A good question to answer for any home owner who is considering selling their home is, “What’s my house worth?” Finding the answer to this can be a simple process if just a few easy steps are followed. There are several options available for homeowners to choose from when determining their home valuation: appraisals, searching the internet, and consulting a real estate professional are just a few.

  • My wife works at a call center. Her company services mortgage loans. Every day people complain to her about the contracts they signed: balloon payments, variable interest rates, their husband is sick and they can’t afford the payment this month and it’s not fair that they should lose their house.

    There is no way around all of this headache and B.S. other than not signing the contract; not buying a home.

    The best three reasons to own a home are that:
    1. the US government subsidizes home ownership,
    2. in some places it’s hard to find as nice of a rental as you can buy. For example you can’t rent in Hyde Park in Austin, TX.
    3. and if you need credit, you can use the home as collateral. I know several people who have taken out business loans but lied and said they were for home improvement. Of course it’s difficult to get a business loan, but The System assumes that every responsible person owns and should own at least one home. Home improvement loans are another assumption built into The System, and you can take advantage of that.

    I would draw an analogy to college loans as well. The System is set up to incentivise people to attend college. (How else can you get someone to hand you $80k when you’re 19 years old?) But James, you probably know more than the rest of us about living outside those assumptions, since you don’t drive. Do you have a driver’s licence?

  • “New adults are always competing with you”

    And old adults are dying & retiring….

  • I want to fill a bathtub with all the dollar bills I would’ve used as a downpayment on a house. I want to bathe in that bathtub.

    Euw! Germy.

  • Angel Wedge

    I rent my home right now. My landlord is trying to sell it.
    If my bank would give me a mortgage at the rates advertised by their online calculator, I could make repayments equal to my current rent, and buy the house in 8 years. So 8 years down the line, if I got a mortgage I’d own my house and not have to pay out any more. Or I could keep on renting, spend the same amount of money, and not have a house at the end of it.

    No, owning a house might not be a good investment compared to any other investment. But its a hell of a lot more profitable than paying the same money and having nothing at the end of it.

    As far as freedom goes, I can’t move. My landlord won’t return my deposit until 3 months after I leave, and you can’t get a loan to pay the deposit on a new rental property.

    Maintenance … our current house has more than a few problems. If I were to buy it, the first thing I’d have to do is find a few hundred to pay for tools and materials, and replace the rotten ceiling joists. Or as a tenant, I can just call the landlord and then 6 months later, the landlord’s brother comes round to paint over them. His attitude about repairs is “You can’t afford to take me to court, so I don’t have to do anything”

    I know that’s a pretty rare situation … but I’d much rather choose the freedom of being able to do what I want with my house, than paying someone else to do what they want.

  • NFLX17

    I get the psychological (and some of the financial) reasons for renting, but this article fails to take a lot of factors into account (I realize this was m ore about the personal than the financial, but it seems like they should be pointed out”

    1.) The taxes and interest are in total a small part on a persons tax return, but they also put most owners over the standard deduction point and allow for several other itemized deductions. Factoring in the tax savings (be careful, the standard deduction is pretty high, so the only savings is what your mort. interest and RE taxes + Other itemized deductions equal in excess of the standard deduction x your marginal tax rate). This is still a huge deal for many people since they are able to deduct their state tax expense (I’d use 3-4% x your tax rate) as well as other deductions such as charity.

    2.) The living quarters themself. For what I pay in my mortgage (even if you disregard the tax savings), I could get a 500 Sqft studio apartment in my area. That’s great, except for the fact that my house includes 3 bedrooms, 2 bathrooms, ample parking (which in my area would cost an addtional 25-50 a month for ONE space), and a renovated kitchen/bath. If you factor in my actual “expense” (what I pay in interest, RE taxes, maint., etc.) after tax savings, I could move 15 miles further from work into a much less desirable area.

    3.) RE taxes, Maint, etc ARE ALWAYS priced into rent. If i’m a landord and i’m renting apartments at rates LESS than my monthly expense, I need to get out of the business because any person who rents at less than a break even should foreclose immediately (unless thier crystal ball forecasts some major swing in real esate).

    4.) Opportunity costs and flexibility are priced into rents. The economy crumbled in the past couple years and guess what happened to rents? THEY INCREASED 9% on average. How can landords raise rents when the unemployment was rising and the real estate market was crumbling? Easy, the option to move after your lease is up is worth something and landords know that. What else is worth a premium? People’s credit being terrible making it harder for them to purchase a home.

    5.) People could own a home for 15-20% less per month than they are paying in rent.

    6.) Many states offer tax credits / incentives for home ownership. It’s easy to focus on the federal tax savings, but one also has to look at the state tax savings. There are several credits / deductions that could earn upwards of $1,200 a year for the real estate taxes you pay.

    7.) The “trapped” feeling for most people shouldn’t exist. If I were to take another job, I could rent my house for a 15-20% premium over what my monthly expenses are (taking into account having a management company take 1 months rent for their service). So I would be leveraged, but I’m not trapped. The best part, the 15-20% is a quick calculation using neighborhood comps. It doesn’t factor in the 20+% the renter is paying towards MY mortgage.

    • Eskercurve

       I like the points in 2, 4, and 7.  RE: point 2, ditto in my area. For what I rent in a highly desirable area I could own a home in a bedroom community with three more bedrooms, 1.5 more bathrooms, and a garage, etc.  RE: point 4, the author forgot that rents ALWAYS rise.  Good times, bad times, they ALWAYS rise at least at the rate of inflation.  And in 7, I was suspicious of the author’s mantra that home ownership was pushed as a method of trapping workers in factories in the industrial era.  That may have been true back then but now, but within a 10 mile radius of my house, there’s countless engineering firms that I could go to in case my employer downsized (which it won’t, they have more work in the next 10 years than we have the people to do it … and that’s a fact, we deal with large scale integration, it takes a long time to design and build, hence 10 years is a safe bet).

      So, I would think the author would be much better served to leave out such flotsam in his arguments.  Focus on the personal reasons. If the author felt trapped, so be it.  If the author felt like he wasn’t ready for the fixing stuff and responsibility, so be it.

      • Ack

         why is my exact same apartment in Vancouver LESS for rent now than it was 7 years ago when I lived there?  Ya.

        there are exceptions, not sure where this rule is coming from.  Weird.

        • No real estate article ever makes sense when you look at it from the point of view of Vancouver. The numbers here are so far out of whack with everywhere else in Canada and the USA.

          When I see people here talk about buying houses for $150,000 and / or renting for $500 – $1,500 it blows my mind!

  • Davet

    Umm, 2 words. Property Tax.  Tax = rent anyway.  You don’t pay that when you rent cheap.  

    • nullhogarth

       Yes, you do.  The landlord pays the property tax with the money he gets from you in rent.  Duh.

  • Capote85

    I like a lot of what you have to say, but, please man, when you say things like “housing returns were only .4%…” site your sources so I believe you. Now I have to look further for similar articles that are backed up with what are verifiable facts.

  • dan

    only a dumbass poor moron that cant affort a pot to pissin would yap about not owning a home……raise ur income and  buy a home to fit the cash flow…simple econ…..the rest is stoopid retoric

    • nullhogarth

      Genius.  I love this post.

  • Anonymous

    Making the purchase of a home make sense is tough during normal times.  Right now, with the ongoing decline, a broken political and financial system, it is impossible.  We haven’t fixed any of the problems that created the mess we are in, but yet we act as if we have.  People seem to expect a recovery, yet we only band-aided the problems leaving their root causes in place.

    Take a look at http://farseer.org/2011/12/04/why-buying-a-home-is-still-a-bad-idea/ for more ammunition (as if we need more).

    Sad, but we humans are slow learners.

  • I agree with the idea…when i got out of my property shackles in 2006 I became much more liquid (financially) and much more agile to operate where I was needed in the world and as I pleased.

  • Anonymous

    Thanks to Obama and his tax raises, i;ll never own a home. 

    • Cortney

       I’d love some sources for all of these contentions. Also, how did your taxes personally go up?

      Thanks in advance for your reply with facts.

    • nullhogarth

      Which taxes did Obama raise, cardifkill?  More to the point, which of YOUR taxes went up so high that you’ll “never own a home”?
      You go on to say “I guess he just lowered rates”.  So did he raise taxes or lower them?

      You confuse me.

    • Ack

       Spass fail.

  • Zeus DiGriz

    There’s many perfectly valid reasons to own your own home, but classifying it as an “investment” isn’t one of them. Stability, pride, neighborhood, space – there’s any number of benefits you get from owning that typically aren’t available by renting.

    However, it’s only value as an investment is simple. Home ownership represents forced savings over a number of years. The vast majority of people making the “renting gives me extra money to invest in more profitable areas” simply spend it on other nonsense. At least the money spent on the typical home is mostly returned after it’s sold – including allocating for maintenance, interest, mortgage insurance and transaction fees.

    p.s. James – your statistic about average ROI for homeowners might be true for that specific time period, but it simply isn’t true for all the interim ranges in between. It’s equivalent to publishing returns for a mutual fund. Technically accurate for the fund, but completely inapplicable for almost everyone who actually holds share in the fund.

    Hardly anyone bought a house in 1890 and sold it in 2004. And averages are hardly typical of a particular area much less a specific property. If you bought an undervalued house and improved it – forced appreciation – you’ll certainly see a decent return over almost any 5-10 year period and have a lovely place to live.

    I’m not arguing for primary residence as a great investment, but it’s at least a break-even deal.

  • Eskercurve

     I agree that home ownership isn’t for everyone.  For the author’s perspective, living in a high cost area like Manhattan, or in many cities like where I live in Seattle, it makes more sense to rent than to buy because rental rates are less than the cost of buying.  I also think its a scam whoever invented real estate taxes. 

    I agree that homes shouldn’t be seen as an investment, either.  They have terrible up-front costs and recurring costs as well, and is all predicated on inflation and population growth. 

    Thing is though, the population IS still growing, and the suburbs and many other areas around a city it makes loads of sense financially to buy.  For example, my wife and I are in the process of buying a house in the NE suburbs of Seattle in an area that has literally doubled in population in the past 15 years.  The housing bubble bursting was the perfect catalyst to bring housing prices back down to earth.  We got a great deal, will only have ~$1k in repairs if that, and we will pay only $50 more per month PITI versus our rent.  Oh yeah, we rent a 1 bed 1 bath place too.  So we’re getting 3x the house and three more bedrooms and 1.5 more bathrooms. 

    All this is great from a numbers perspective, but I do agree for some buying just isn’t worth the emotional stress.  Knowing that you have to maintain your home right, not let moisture build up, not let small things go over time, etc. 

    Thing is though in your own house, vast majority of your problems are MATERIAL versus PEOPLE related.

    For me, personally, I HATE sharing walls.  My upstairs neighbor doesn’t know how to walk properly, must’ve learned from elephants!  He also probably has a wood shop or some craziness up there too.  My neighbors across the “common area” frequently party till wee hours of the morning at odd days.  People constantly steal the weights or other equipment and also abuse the hot tub and sauna.  The people are also discourteous in the outside in general.  They always slam an outside gate instead of closing it properly, with 1st grade language skills they could read the sign that says “Close gate gently.”  But no.  Like ignoramuses, they just let it slam shut.

    And that’s my biggest problem with renting.  It’s the other renters. 
    They have almost as a general rule no respect for common property, no
    respect for other people, and no sense of ownership and thus no sense of
    obligation.  It’s a recipe for disaster 99% of the time.  In NYC, it
    may be different.  But for the rest of the nation, renting is fine only
    for those who don’t mind idiotic criminal neighbors in exchange for a not having to worry about a few minor inconveniences that general maintenance requires in a house.

    And don’t get me started on landlords.  Doesn’t matter if you live in a mega-corporate owned building or from a guy with a few properties, they ALWAYS as a golden rule GO THE CHEAP ROUTE.  And they don’t give a flip about the residents.  I even designed a cheap solution to the said slamming of gate and they said “they’ll think about it.”  A month later they decide to renovate the common room and try to milk the residents for more money by charging for storage space by converting what limited parking options we have to sheds. 

    So, this renter is personally ready to kick landlords, idiot criminal neighbors, and zero rate of return on overpriced rentals in exchange for my own bit of land, house, and all the wonderful MATERIAL problems that come with it.

  • Alexxf35

    This is one of the most important articles one could read about facing their decision to continue renting or buying a home.  It certainly got me thinking and realizing a lot of the social pressures and myths that often push people to buy a home before they are ready.

    With that said, I believe this article has to be taken with a grain of salt, as everyone’s particular situation is different and everyone’s housing market is different.  Let me counter some of the points James makes.

    1.)  Loss of money due to high down payment.  This is the big one for most people and I certainly agree with it.  Cash is king.  However, for certain people like myself who qualify for a VA loan (No down-payment necessary, no PMI), we can avoid much of the upfront cost all together.

    2.)  Closing Costs.  Yes a big pain in the ass, no way around this one….even for VA qualified borrowers.  The best that can be done, esp now considering its a buyers market in many parts of the country is request/demand the seller contribute to the closing costs as part of the deal.

    3.)  Maintenance/Walls/Time.  Yes a home will require upkeep, but I don’t think its as drastic as James makes it out to be….maybe it depends on the type of person you are.  I am very handy, and rather enjoy fixing things, doing yard work, etc.  That’s not to say I’d love to have to fix something broken every other day, but I find a certain pride and relaxation when it comes to home repair.  With a home of your own you can actually make it your own through a little hard work.  I am in the process of finishing my basement and turning it into a home gym….when I am done I will be able to ditch the gym membership completely and it will be something I built just about myself.  After that I plan on building a large stone fireplace outside adjacent to my deck.  These are things that happen to be deeply satisfying to me.  Not everyone enjoys it and would rather someone else take care of it so they can focus on other things.  I can see how owning a home would be more of a burden than anything to them, and certainly can understand the attractiveness of having a landlord worry about it then themselves.

    4.) Taxes.  Yep another one you can’t really get around, but It depends on your market if they wil break the bank.  The average rent in my area is 900-1050 a month, and I bought a beautiful 6-year old ranch home for $172,000 – 3.7% interest (With no down payment because of my VA).  With taxes/insurance rolled into my escrow my monthly payment is ~$1200.  So I pay $200-300 more a month for a place that