Buying Versus Renting a Home: Is One Better Than the Other?

Imagine living anywhere: the thrills of the city, the tranquility of the countryside, or the allure of a seaside town. The world is your oyster, moving effortlessly from city to city, province to province.

No headaches from a 30-year mortgage, no property taxes, no maintenance nightmares. Sound good? That’s one side of the buying versus renting a home debate.

Well, that’s It’s also the life Sporty and I stumbled upon when we entered the rental market. Yet, as much as we reveled in the freedom, we couldn’t help but question: Was thumbing our nose at homeownership a financially savvy move?

If you’ve ever found yourself torn between buying a home and continuing to rent, you’re not alone. Choosing where to hang your hat isn’t as simple as tossing a coin. There are countless factors, financial and lifestyle-oriented, that can tip the scale towards either side.

Let’s delve into the conundrum together. We’ll compare the pros and cons, and explore ways to make the best decision that suits not only your pocket but your lifestyle and life goals too.

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The Appeal of Renting: Freedom and Flexibility

Ang and Sporty hiking up Table Mountain, enjoying the freedom that comes with a no-strings-attached rental apartment

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.

Update August 2023: We ended up buying an apartment in a small town called Gordon’s Bay and adopting a cat named Miles. The three of us are incredibly happy right now, but who knows what the future holds in store for us?

Is Buying a House Better Than Renting? 

Model house with a set of house keys next to it - depicting the buying versus renting a home argument
Photo by Tierra Mallorca on Unsplash

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 best 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.

Of course, if the housing market crashes, your retirement plans will crash along with it. A large portion of America’s older population is 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.

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 me, 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

Whether you’re looking to buy a house or rent an apartment, 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 know-how. 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 it 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 with your minimalist family, 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.