Questions From My Kids: Renting Vs. Owning
Updated: Aug 23, 2022
There is no bigger dilemma than trying to decide if you should own a house or rent one instead. This is a difficult question to answer because it comes down to ultimately what you want your lifestyle to look like.
Why Renting Might Be A Better Fit
Do you want to rent because you don’t want to deal with certain aspects of homeownership?
You may not want to own a big backyard and maintain it and gardening is not the most exciting thing for you, or you’re not much of a maintenance person. That’s ok!
You also may not want to be obligated to make monthly payments for a long period of time. With renting, you have the flexibility to not renew your lease whereas with a house you have to pay your mortgage.
Travelling and having the extra cash to do so, or even or move anywhere in the world at a moment's notice is a hard thing to give up if that is what you want in your lifestyle.
Renting Vs. Owning
I believe that deciding to rent versus owning comes down to an investment decision. Renters do not have ownership of the property they are renting—they simply pay for the right to live in that space.
More importantly, renters technically are only paying rent to use the inside of the place. The amount that you pay in rent covers the inside of the rental only, and any rental property that allows outside use of the property is typically a bonus (unless specified in your agreement).
Buying a home allows you full ownership over every part of the property. Every part of your mortgage payment purchases principal that becomes the growing portion of the equity that you own in the property. So, you are investing in the property itself with the ability to use this investment later in life.
Ownership Adds To Your Investment Portfolio
My philosophy is to invest in a house as part of your investment portfolio. One of the advantages of owning a house is it’s an offset against inflation. As inflation goes up, the value of your house generally goes up too.
Another consideration is that as you continue to pay off your mortgage, your equity position appreciates, so you increase your net worth position. With renting, you don’t get to take advantage of the benefits of growing your investment portfolio and your net worth.
Note: Of course, there are some ways to still rent and grow your investment portfolio. Owning property is just one aspect of it.
What Did I Tell the Kids?
If I am spending money, personally I would like to have something to show for it. I’d love to see them own property one day. But, it’s a decision they’ll need to make based on what kind of lifestyle they see themselves living for the next 10+ years.
And that is something that everyone should consider when thinking about renting versus owning! Are you ready to settle down in one spot for at least the next 10 years?