Buying Versus Renting a Home (A Minimalist’s Conundrum)

Buying Versus Renting a HomeBuying versus renting a home. It’s a tricky decision for sure.

With valid arguments for and against both options, the answer is far from clear cut.

Sporty and I went from being in favour of owning property to staunch proponents of renting.

The shift in attitude came (not surprisingly) when we adopted a minimalist lifestyle.

Seeing how much freedom owning less afforded us, bidding farewell to the property market was easy. Suddenly, all the admin that came with buying a house didn’t seem worth the effort. 

I wouldn’t say we’re regretting the decision to sell up and rent, but we are beginning to question whether renting long term is a financially savvy move. 

If you find yourself facing the buying versus renting a home conundrum, listing the pros and cons of both is an important first step. Sporty and I were a little impetuous. In our haste for an admin-free life, we skipped this step.

Don’t do that.

Nowadays, we’re fastidious about talking through the details. We drive ourselves a little nuts sometimes, but this approach has informed our decision making time and again.

If 2020 has shown us anything it’s that city life is overrated. Discussing the pros and cons of each idea has already resulted in numerous iterations of what our new lifestyle might look like.

Why Rent Rather Than Buy a House or Apartment?

buying versus renting a home

Like with anything, there are definite advantages and disadvantages when it comes to renting a home. Sporty and I have been firmly entrenched in the rental market since 2007 and to date it’s an approach that’s served us well.

Not owning property has given us the freedom to try different lifestyle experiments.  Without a mortgage hanging over our heads we had the financial wiggle room to untether ourselves from our current lifestyle,

We were able to do things like try our hand at permaculture farming and give small town life a try. It has also allowed us to consider new career opportunities without worrying about bringing home a big paycheck.

On a more practical note, renting an apartment alleviated the admin and stress of owning our own place. When something goes wrong we let the landlord know and it gets fixed. 

There’s also the benefit of a fixed monthly cost. All we have to factor in over and above our rent is electricity and wifi. Sometimes we’re lucky and they’re included, making our budget even easier to manage.

For people who like to move around (like we do), renting is perfect. When our lease is up (usually after a year) we’re free to take up residence in a different part of the city, or province, for that matter.

It keeps things interesting.

We’ve thoroughly enjoyed the freedom renting has offered us. But lockdown has caused us to question not only where we’d like to live next, but how. Working remotely is the norm now, which means we’re able to consider living outside of the City Bowl.

For the first time in more than a decade we’re thinking about buying something of our own to live in. We’re still deciding what that something is. It could be a van, but it could just as easily be a tiny house in a tiny village.

We’re also toying with the idea of becoming TEFL certified and moving abroad to teach English somewhere we’ve never been before.

Is Buying a House Better Than Renting? 

buying versus renting a home

Suddenly, we’re asking a question that prior to lockdown held no interest for us. Is buying a house better than renting? We’re not sure, but we’re starting to think it might be. 

That’s our perspective, though. Whether or not it’s the better choice for you is something only you can decide. Probably the most common argument for buying your own home is that it’s an investment.

Over time, the value of your property will appreciate, providing you with a secure nest egg later in life. This definitely held true for my parents, who bought their house for R19,000 and eventually sold it for R500,000.

My parents needed to move into a care facility, so it made sense for them to sell up and invest the money. However, if they’d been in better health they could have applied for a reverse mortgage.

If you’re not familiar with the concept, it’s a loan available to homeowners who are 62 and older and want (or need) extra money to supplement their income, cover healthcare expenses or pay off their existing mortgage.

It’s obviously more complicated than that and should be approached with caution. Talk through the details in detail. And then talk through them again.

If it does sound like a viable solution for you, a good starting point is to determine the value of your home. There are reverse mortgage calculators online that can help with this.

Of course, if the housing market crashes, your retirement plans will crash along with it. A large portion of America’s older population are currently dealing with the ramifications of just this.

Folks who thought their home would be their retirement ticket are living in RVs and working at Amazon to put food on the table.

The question is, will the real estate market crash again?

Naysayers say yes, while others (perhaps because they have skin in the game) claim everything is just fine. Taking a slightly different tack, CNBC has identified the cities most at risk of a housing bubble.

In other words, you just don’t know.

Side note: Whether you are renting or buying, your home heating system is crucial for keeping your family comfortable in cold weather, so maintaining it in good working order should be a top priority.

There’s a lot of good information available on how to care for your furnace, but there also are a number of myths. Avoiding misinformation can make the difference between operating an efficient heating system and spending too much on your utility bills.

Take a look at this myth-debunking infographic from Logan A/C & Heat Services to learn more about keeping your HVAC system running properly.

Renting vs. Buying a Home: The 5% Rule

According to financial advisor Ben Felix, comparing rent to a mortgage payment is extremely flawed. He says it’s more nuanced than a simple apples to apples comparison.

If your reasons for buying or renting property are specific, like they were for Sporty and I, then there’s no reason to give yourself a headache with the 5% rule. At least, not right now.

If you’re wavering between buying versus renting a home for purely financial reasons, listen up.

In order to properly assess the decision, you need to compare the total *unrecoverable costs* of renting to the total unrecoverable costs of owning. 

It sounds complicated, but Ben claims he’s boiled it down to a simple calculation. He explains it in layman’s terms in the video above and it’s also outlined in detail on his website PWL – Long Live Your Money.

This approach will take some time, but it paints a much clearer picture in terms of the financial ramifications of buying versus renting a home.

Put in the effort now and you’ll avoid landing yourself in financial hot water down the line. When you think about it like that, it’s worth spending the time even if it seems like a lot of hard work.

Dave Ramsey: Your Personal Finance Guru

If you do decide to buy your home (or even if you just need help getting your finances in a straight stripe), Dave Ramsey is your guy. His website is chockfull of super useful resources.

For the purposes of our current topic, take a look at his:

Dave has also written a number of best-selling books, ranging from   The Total Money Makeover and The Complete Guide to Money to The Legacy Journey and Smart Money Smart Kids.

Because, you can’t really weigh up the pros and cons of buying a home without at least some financial savvy. Well, you can, but chances are you won’t make an informed decision.

I know Sporty and I certainly didn’t on the few occasions we decided to enter the property market. Suffice to say, it was a little messy. Which, in retrospect is hardly surprising, given that we had yet to master the art of living below our means.

Buying Versus Renting a Home: Final Thoughts 

As I mentioned at the beginning of the post, there are plenty of solid arguments for and against both options. How you arrive at your decision will depend on your financial circumstances as well as your life goals.

However, pressure often comes from well-meaning family members and friends. In some circles, home ownership is important. It’s seen as a way to elevate your status. 

Conversely, there are people who firmly believe owning property is a huge mistake. For them, a mortgage is tantamount to a prison sentence. 

If you opt for a route different from theirs, you’ll likely take flack from those close to you. Stand firm in your decision regardless.

You do you.

Your family and friends have your best interests at heart, but they’re also basing their advice on their own experiences. 

I’m not saying you should disregard everything they say. A lot of advice is evergreen, after all. However, it’s important to make your decision for yourself. 

Weigh up the pros and cons of both options and go with the choice that’s right for you and where you are in your life right now.

Whether that’s living in an RV, building a tiny house, buying a condo or renting an apartment, it doesn’t matter. All that matters is that you’ve made an informed decision that you’re happy with.

Photos by Craig McLachlanNathan Dumlao and Roselyn Tirado on Unsplash 

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