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It’s been awhile since I yelled at the Home Boners, mostly because I’ve just been so happy travelling around the world lately that I just have better things to do than argue with Internet trolls. But today I thought I’d take a trip down memory lane and talk about something that has always irked me: So-called “Pride of Ownership.”
Here’s how an argument about housing usually goes: I call them an idiot, they call me a cunt. I break down their “real estate math” showing how the real estate industry tricks them into thinking their house is a good investment when it’s actually not, then they say something about “It’s all about PRIDE OF OWNERSHIP!” Then they say something racist and the conversation is over. Good times are had by all.
ANYHOO, the concept of Pride of Ownership always puzzled me, since it’s something that every homeowner innately feels, yet few of them can explain what it is. So I thought I’d dive into this in a bit more detail today.
So what is Pride of Ownership?
While there’s no formal definition of Pride of Ownership, from what I can tell Pride of Ownership is a combination of the following 3 factors:
Factor #1: Control
Owning a home gives you control. Renting makes you your landlord’s bitch.
This actually does have some basis in reality. When you’re renting, a landlord can do shady things like threaten to evict you for no reason, but if you own your own place nobody can tell you to get out. You’re the landlord now, so you’re nobody’s bitch!
And anecdotally, I have seen this happen in practice. I have friends who’ve had the misfortune of trying to rent one of those glossy condos in downtown Toronto, and they’ve spent the last few years being evicted from one place after another whenever the landlord decides to sell their unit. This particular friend has been evicted 4 times in 8 years through no fault of their own! So I definitely understand their frustration with renting and the lack of control it brings.
Factor #2: Class Status
There seems to be this weird undertone of class warfare when it comes to housing. The unspoken belief is that owning a home is the ticket to upper-middle class status, while renting is what poor lower class people do. In the US, there even seems to be a racial component to this, where access to mortgages was restricted by the Federal Housing Agency based on race and ethnicity in a practice known as redlining. I’ll let you hazard a guess which races had access and which ones were excluded.
But even without the racial stuff, you hear over and over again how owning a home is something “grown-ups” do while renting is something that “losers” do. And to prove it they’ll point to studies that show homeowners often have far greater net worth built up than their loser renter counterparts. A 2013 housing survey showed that homeowners have an average net worth 36X higher than renters! Clearly owning a home is better for your bottom line than renting.
Factor #3: Pathway to Wealth
And finally, the “forced savings plan” argument. The idea is that if you’re renting you’re throwing money away, while if you own you’re building your own net worth and making yourself richer. Housing always goes up, FOMO, all that crap. You get the picture.
So now here’s why these are all bullshit.
BS #1: Owning Gives You the Illusion of Control
While it’s true that you no longer have to deal with a landlord, that’s a long ways off from being nobody’s bitch. As every homeowner I know has eventually discovered, just because you own your own home doesn’t mean you can do whatever you want with it.
If a pipe breaks or the roof starts leaking, you have to pay to fix it and there’s nothing you can do about it. No whining to the landlord anymore.
You’re still the city’s bitch when it comes to property taxes, and if they choose to raise it based on your city’s soaring property values, there’s very little you can do about it.
If your bank decides to raise interest rates (which they’ve already started doing), you’ve just gotta bend over and take it come renewal time.
If some douchnozzle moves in next to you and starts making your life a living Hell, too bad! You can’t even pack up and move because your property value just took a hit through no fault of your own!
And if you were dumb enough to buy one of those concrete-and-glass condos, then congrats! You will now have to deal with the additional seventh circle of Hell known as the condo board, who will spend all their time telling you what you can and can’t do with your own property, while hitting you with special assessments because they don’t know how to properly maintain buildings, all while charging you a monthly fee that can be as much as rent for the privilege.
So yes, when you own you no longer have to deal with a landlord, but you’ve essentially replaced one person bossing you around with the bank, your neighbours, your contractors, your condo board, etc. In theory, owning should give you more control but I have yet to meet a person who’s overall stress level has gone down because they chose to buy a home.
BS #2: Your Job Determines Your Class, Not Your House
That study showing homeowners’ net worth being so much higher than renters gets thrown around all over the place, mainly by people in the real estate industry. The implication is that homeowners are richer, therefore you need to become a homeowner if you want to become richer! But this is a classic case of confusing correlation with causation.
First of all, the author of that article admits that there’s also an age bias when counting home ownership. Homeownership rates among 65+ year olds is 80%, while homeownership rates of people under 25 is just 23%, so if most homeowners are older than renters, then OF COURSE their net worth would be higher.
Also, that same study shows the higher your income, the more likely you are to be a homeowner. Because if you make more, you’re likely to qualify for a bigger mortgage, therefore the more likely you are to buy a home.
So in other words, rather than concluding that homeowners are richer because homes are great, it’s more accurate to conclude that higher income and being older makes you more likely to have more money, to which we would respond WELL DUH.
BS #3: Your Home is a Wealth Trap
And finally, the idea that your home will make you wealthy relies on the fact that the equity of your home is usually counted as part of your net worth. However, just because it’s part of your net worth doesn’t mean it’s USEFUL.
Your ability to retire is determined by your INVESTABLE net worth, meaning stocks, bonds, preferred shares, etc. It has to be able to produce an income and be liquid to be considered Investable, and unfortunately your primary residence is neither of those things.
In order to actually use that wealth to retire, you have to sell it. But if you sell it, where will you live? You’d have to buy another house, in which case…hmmm…uh-oh…
Pride of Ownership Is How Scammers Trick You
See the problem of using Pride of Ownership to justify a housing purchase now? Factor #1 makes you feel better about seizing back control, and Factor #2 convinces you that renting is for losers. Then add in Factor #3, the promise of future wealth, and it causes people to jump with both feet into a purchase no matter how much debt they have to take on.
Then when Factor #1 turns out to not be true, people find ways of justifying their decision or just silently complaining, but they’re not going to admit they’re wrong because what other option is there? Renting? That’s for losers!
And finally, in the best case scenario, 25-30 years down the road your mortgage is all paid off and you’re sitting on a big capital gain, you can’t sell and go back to renting. You’d have to give up your Pride of Ownership! And that’s the whole reason you bought this house to begin with!
So if you want to buy a house, buy a house. But run the numbers, understand the costs, and math shit up first.
But if you bought a house purely for Pride of Ownership?
You got scammed. Sorry.
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Another good article. Sorry to hear that such language is used by detractors. Not fun. While my life as a renter is wonderful and full of travel … as I near the age of ? (I’m Mr. Collins vintage) I do wonder about down the road in my last decades and home ownership/housing. But for now, it’s the way to go. My rent is around the same as yours and Wanderers was when you were just starting out together which allows me to boogie pretty much full time especially in the winter. I do remember my 25+ years as a homeowner when I replaced the full roof shingles and the furnace in a period of 18 months. Ouch! Thanks for a great pick-me-up on a Monday morning. Really appreciate it. … Kent PS: I was reading about your Europe app. are you guys off shortly?
It’s all good. Haters gonna hate 🙂
Very cool that your rent is so low–I’d be boogieng full time too!
We’ll be heading off to Europe in Feb to meet up with the Chautauqua UK attendees. Reunions are the best. Are you going to be in Europe sometime this year?
If you’re getting hated on, you must be doing something right!
Pride of ownership…it comes from the primal drive of having shelter. The Maslow hierarchy of needs comes to mind where the basic necessary need is to have shelter.
Plus, a man (and woman’s) home is their castle, right?!
very good post. MRS and I used to own Condos and houses here in Toronto and we were frustrated by property tax, nosy neighbours, stupid condo boards and wear and tear of the house. So after 5 years of ownership we finally sold everything and started to rent. 8 months into renting we decided to retire this year September and off to Hawaii we go.
If we still held on to our properties, we wouldn’t have had the courage to quit jobs (I haven’t quit yet but i will in 7 months), buy internet businesses and think of retirement. But the feeling of renting is nothing short of a slave breaking free of the bondage of debt and work.
Thank you for your blog, we have learned a lot from you guys.
You guys set us up in a right direction.
“the feeling of renting is nothing short of a slave breaking free of the bondage of debt and work.”
Couldn’t have said this better myself. Congrats on your upcoming retirement!
You go girl! It’s been a while since I read this kinda post from you so I was starting to wonder whether all that world travel had made you mushy. Good to see that it hadn’t! Obviously, you will hear no argument on this topic from me, as a long term renter despite being a ‘triple double comma club’ net worth member, as one commenter called me.
You may have seen my view on this topic from perspective of lost career opportunity cost: http://tenfactorialrocks.com/buy-or-rent-consider-career-cost/
Me mushy? HA! *kicks a puppy*
I remember that post and it’s awesome. And yes, career opportunity cost is yet another cost of ownership–great point!
Great post. Forgive me for even suggesting it, but given that your portfolio experienced a 100k up-tick this past year alone, if that continued it would only take a few years to earn the additional capital to purchase a house outright, NOT that you would, of course! 🙂 I think of that with how, even if I decide to purchase much later in my life, if I FI now, there’s a good chance I could pay cash for a house later and save myself all the interest and still be sitting on a huge cushion that allows me to actually enjoy life. Now THAT’s how to build wealth. But then if you can see gains like that every few years, why buy a house? 🙂
I think this is a great point. Let your wealth buy you stuff. But step 1 – get that portfolio.
“But then if you can see gains like that every few years, why buy a house?”
WORD!
“So if you want to buy a house, buy a house. But run the numbers, understand the costs, and math shit up first”
Thank you F&W yet another no BS article and I wanted to update my case after following your blog for the last 6 months.
Initially I was convinced to sell off my current house (Toronto) and get retired few months back with soaring home prices and your blog articles, but later on gave a second thought by listening to family/friends and did some numbers.
finally I gave up that idea due to following
1>500k home paid off will give shelter ($2000 if we rent) and $1500 income (basement)
2>Kids will have an asset and we will have permanent base in Canada while travelling back n forth
3>One of the partner is not interested to travel all year round but only occasional during winters.
Hence, decided to pay off the mortgage of 500k.
ex: 500k portfolio yields @6% around 30k/annum or 2500/month
500k paid of home will give shelter and income equaling to 42k/annum or $3500/month – property taxes & miscellaneous maintenance (12k/annum or 1000/month)
Net result is seems to be Same + have roof over head when you return back from travelling and an asset for kids after we are passed.
I don’t have any pride of ownership, but hassle free shelter as long as the numbers match.
Hope I did not miss any thing and continue to build the 500k index portfolio as specified in this blog to get fully/semi FIRED in few years.
PS: Wanted to hear your take on the latest Bitcoin turmoil as well Marijuana ETF’s in TSX.
Hey, if you’re not drowning in debt and you Mathed that Shit Up, I’m happy for you, mak!
Keep building that portfolio and working towards semi retirement! As I said before, you gotta do you 🙂
Regarding my thoughts on Bitcoin and Marijuana ETFs, they’re not investments, they’re speculative stocks. If you want to have some fun and do some gambling, just keep it under 5% of your portfolio and you should be fine.
Bam! I’m a real-estate investor guy so you’d think I’d be getting perturbed that your antagonizing my decisions to buy real-estate. But as you say, what’s most important in investing is that you make the BEST, RIGHT decision for YOU, and not the decision your emotions or “pride” tell you to do. I’ll tell you from experience, the “pride of ownership” will evaporate very quickly once you realize your real-estate “investment” is siphoning money and happiness out of your savings account to maintain ownership of this “investment.” However, on the flip side, if you’re disciplined enough to enjoy a little dirty handy-man work, and your disciplined enough to save real money to buy real-estate to keep you’re payments awesomely low compared to rent prices, and massive mortgages aren’t acting like giant vampire bats on your bank account, real-estate investing can be a very lucrative and fun experience. But only if the numbers are going to MAKE you money in CASH, and the best parts of your personality naturally boil to the surface when something breaks or goes wrong, as they 100% will at some point once you sign those mortgage papers.
Respect, WWD, respect. You clearly do the math and can separate feelings from the logistics of real-estate investing. That’s why you’re kicking ass at this whole thing, while other idiots who jump in with FOMO and no idea what they’re doing get creamed.
Thanks for keepin’ it real, WWD!
Hot take, as always.
I know you’re writing from the Canadian perspective, but fixed rate mortgages are the norm here in the US, so that’s one degree of control most home owners have over rising costs. In my county, property taxes can only rise 5% a year (but can decline as much as property values dictate via the county’s formula). And we can decide what to repair, and when. Which all goes to say, there objectively is more control on costs (including when…or if something gets repaired), compared to renting.
And when you have equity, you can tap it in other ways than selling. We did that at our last home when property values increased and we’d paid off the mortgage: we took out a fixed rate loan, and invested the funds while still living there.
More to your main point, emotions are part of financial decisions, for good and (mostly) bad. Still, when someone wants to buy a house, or spend money on travel, or a piece of expensive jewelry, there’s an emotional component that I think is valid: that doesn’t need to be seen as the enemy of the logical reasons for a purchase.
The rub is that people will often make purely emotional decisions on large purchases, which can be potentially catastrophic. So while I’m not 100% on board with the argument, I can agree with the conclusion.
Thanks for your 2 cents, DbF! That’s why I say, do the math. It’s impossible to never make an emotional decision, but like you said, don’t do it on large purchases–especially if it’s the BIGGEST purchase of your life. Some people make that snap decision like they’re buying a pair of shoes. Yeesh.
Great post as usual. We were just having a talk with some friends the other day about how they just bought their home.
We were talking about all the places we are traveling and things we are doing. Mrs wow asked what they were up to and they said they couldn’t go anywhere because the house was eating too much money. They’re redoing the kitchen and roof.
We just kind of snickered and told them about all the fun we were having. I also happened to mention that our dividends could basically pay our rent now. Their great “investment” doesn’t pay jack shit. Hahaha
We hear the same thing from our friends and family. “Oh my house is worth SO much”, but in the same breath, they’re complain bitterly about how they just had to cough up $5000 for a leaky pipe, or $6K for a leaky roof, or can’t stop fighting with their neighbours over a fench. It’s always something or other.
Cheers to dividends paying the rent! I do a happy dance every time that happens 🙂
You sound very bitter and envious of your friends who own a home while you aren’t mature enough to figure it out for yourself lol
Along the lines of “pride of ownership”, I was doing some thinking the other day (as I’m wont to do on occasion) on one of my walk home from dropping the kiddo off at school. I realized all the houses in my neighborhood have huge yards. And no one uses them ever. I mean I see people IN the yards, but they’re usually hauling shit to or from the house, or mowing the grass, or raking leaves. But I rarely see anyone actually USING their yard for anything beyond maintenance activities. Maybe they’re really good at hiding in the backyard (which makes me wonder about the utility of the front yard!). We like our house well enough and the yard is nice on the occasions we actually use it but I’m curious what our ratio of maintenance to leisure usage is. Or maybe I don’t want to know the truth 🙂
Great point Justin. At least yard work is good cardio (if you didn’t buy a ride around mower). But yeah, lets talk about this statistic – if you can get it. Most of the time when things like this are a bad deal you have the corresponding association block any study of the matter.
That’s what I tell myself in the middle of July when I’m cutting grass in 95F weather with super high humidity. “It’s a good forced workout”. 🙂 It’s not so bad and I don’t mind it much, but every year I have that internal debate about whether it makes sense to outsource the lawn care for $500-1000/yr and be done with it. After all, if I was renting I’d be effectively outsourcing lawncare through rent payments (or if I was in a condo, through HOA monthly dues).
You could do what my landlord in Toronto did, pave over most of it and carve out a small piece for a veggie garden. Then at least the backyard is producing rather than consuming 🙂
Very astute observation! My co-worker bought a house before we quit and she says she’s NEVER stepped foot in her own backyard. I wonder why that is? I know if I ever rented a house, I’d never use the backyard. Going to the park is way more fun–more equipment and other people to interact with. Plus a change of scenery every now and then is always good.
Amen sister! Preach 🙂 My favorite kind of article about why houses are good for you are the ones that have no numbers in them. It’s all touchy-feely but no substance.
Another favorite type is when some really rich person chastises millennials for not buying homes. You know the type. This is usually followed up with some helpful tidbit like paying bi-weekly instead of monthly saves you interest. Well yes, it really does, but wait – interest. Isn’t that kind of like throwing money away?
So in summary, if you want to buy a house go ahead. Just don’t confuse home with house and pretend like you are somehow making a rational decision.
I’m with you on that, HM. It’s fine to buy a house, just don’t brag about how much of a fabulous “investment” it is. Also quit whining about how much money it’s costing you to fix the leaky roof, build a fence, pay the rising property taxes, etc etc etc. Either sell it and trade it for a real investment or shut the hell up.
Interesting take FIRECracker. I always thought of “pride of ownership” was something else — not about class status, racism, or control factors.
From my understanding, “pride of ownership” was about how well you take care of your property. The idea being that owners will take better care of a house than a landlord will, and they’ll also invest in their local community — volunteering, forming community watches, running for local offices, etc.
Renters (according to this concept) would do none of that. This is the idea I was brought up to understand around “pride of ownership”.
However, as we’ve traveled the world in our financial independence, I’ve found that these ideas are very much North American cultural values. Not ever owner around the world keeps up their property with beautiful curb appeal. Some renters do invest in their community also.
So I’m with you on this idea being mostly BS.
One universal that I have seen around the world is that landlords do indeed take worse care of their rental property than they do their own homes.
Meaning..they will spend even more to take good care of the property ! FC is so right..
Exactly. Who doesn’t love forced spending? 😉
I only time I’ve ever heard people use “pride of ownership” is to justify their bad house purchases without doing the math. It’s always “can’t beat pride of ownership” or “how about pride of ownership? You’re the king of your own castle. Can’t put a price on that.” This article is speaking to that.
No worries FIRECracker, I completely get where you’re coming from!
As you said in the post, there’s no formal definition!
See item #5:
http://thepropertysource.ca/more-info-2/buying/9-reasons-to-buy/
Mr Tako That’s what I totally thought too!!! (That pride of ownership meant keeping or improving something you buy to look it’s best, basically a taking pride in oneself and respecting those around us type thing), but I never tied it to service in the community I’ll admit.
For any newer readers, there’s also a great article here on MR as well about how much you save by not owning stuff (including a car) that you need to maintain and how it helps to get you further ahead. And leasing isn’t the same as renting a car (you can rent cars inexpensively at certain times and using different programs) – b/c we choose to live downtown we actually rent a car almost every weekend for a day (or more) to coordinate with a kids activity / grocery shopping. Generally pay max $40/week which is way cheaper than owning a car – the gas we’d have spent either way!
Smart move, Michelle! Owning cars is another money sink. We saved TONS of money by using AutoShare instead of owning a car. Good thing too, because some asshole van driver crashed into us and we didn’t have to pay a damned thing for repairs. Our credit card also covered the insurance, so no increase in costs at all!
I love my cars, 74 Jensen Healey, 66 Ford Falcon Sport Coupe. #1 was an inheritance, #2 picked up for $2500.
I have a collector plate on #2, and it costs me $200/year to insure. I do all my own work on these, will not let a mechanic touch them, and have used them to teach kids or anyone else how to restore cars. Everything I do to improve them adds to the value, such as engine work, body repair and paint (I have my own painting equipment). Its almost impossible to make money with used cars, but by driving collectible cars, you can decrease your expenses a lot. Yes a north American car uses more gas, but its easy to cheap to fix, that makes up for the cost in gas mileage. The Jensen Healey, well not sure where that fits in, but its fun to drive, and gets lots of attention at the beach.
cheers
mrs. smidlap owned our enormous house for a couple of years before i met her. i was a happy renter but must admit i value living in this property (paid off 4-5 years now) that we bought at a dirt cheap price, but that has something to do with the market in buffalo in 1999. the neighborhood was still kind of a dump then. there is a huge studio space in the attic that would be very costly to rent (if you need a big space to be able to slop around making art). we like our fenced back yard in the city as dog owners with our vegetable garden with nobody in it that we didn’t invite (we invite lots of friends). the pet ownership is a big deal to us as we don’t ask permission for shit. if we wanted 8 more dogs we could just go get them (we’re good with the one). i smoke in the basement tv lounge and don’t need to explain myself or ask permission…and did i mention when we had a mortgage it was 520 USD/month?
that being said, we just replaced our roof and need an expensive paint job (i’m not going 40 feet up to repair and paint) in the spring. tax and insurance are something like 5-6k. we just try to keep the discretionary and cosmetic costs down like kitchen renovations. so there is still a pain in the ass aspect to consider. i can say i truly enjoy getting home each day and going into the place as it really is a beauty and life enhancer, like art.
Hey if you bought it at a cheap price and are happy with it because the math works out (can’t blow yourself up too badly if your mortgage is only $520USD a month), I’m happy for you! 🙂
Great article Firecracker, I needed that as I was starting to second guess myself on the Rent v. Buy calculation. Yes you do get to leverage money wise and benefit from the increase in value on the entire purchase price– and not just the amount you invested (down payment, etc). However I almost forgot the increase in the monthly payment (mortgage, mgmt fees, ground rent, repairs) eats into that– not to mention decreasing the amount you have left each month from that point forward to invest. You are essentially being forced to keep investing each month in this non-liquid “asset”.
You also mentioned the biggest reason I haven’t succumbed and bought a flat yet: “If some douchnozzle moves in next to you and starts making your life a living Hell..” In three of the four flats I’ve lived in here in London I eventually had to move simply because the neighbours were simply unbearable (in the last one the neighbors above used to come home from the clubs at 3am and keep the party going, what time did the Council’s noise unit hotline close? 2:30am). If I owned those properties I would have been stuck!
“You are essentially being forced to keep investing each month in this non-liquid “asset”.”
Yup. FORCED being the operative word. And bad neighbours are no fun either. Glad you dodged that bullet!
There’s more to life than numbers. There’s the reality of the math and then there’s the reality of everything else. Many people put more value on the reality of everything else, so they buy a house.
And if they’re okay with having no money and being stressed out all the time because they make decisions emotionally rather than rationally, then by all means, that’s their prerogative.
Oh firecracker how I love this subject. I know you would be disappointed if everyone completely agreed with you on this one, so here goes….
Pride of ownership is a psychological concept. Psychologically some feel better owning rather than renting. Usually it’s demonstrated with good upkeep of the home but not always. So saying they got scammed is like saying you got scammed by painting your room red because nothing has changed but the color and painting costs you money. The benefit is psychological.
Of course for me purchasing was always about the math……until that is, I could afford my dream home. My dream….all the math I needed was money in the bank to pay for it outright.
Interesting I have met many people streaming from the GTA to purchase homes where it is cheaper than rent because of the insane rental costs, and having to move every year because owners selling, renovating, or moving in to their rental. So in terms of control….whether u rent or buy, it’s more of a decision of which areas u would prefer not controlling.
Your class is determined by your wealth, influence and status not your job. Maybe that’s just my opinion, because our jobs would have put us in the low end of things…..but I’ve always felt It’s not what you earn it’s how much you hang on to and what you do with what you got, and this puts us in a much higher class.
Your home is a wealth asset or a trap. Of course you can sell. The same as renters move, sellers can move too. I’ve sold 7 homes and also moved from rentals….you r not trapped either way. You can sell and downsize, you can sell and rent if you feel it’s worth it. You can sell and move where homes are cheaper. I love selling houses. Tax free income (cept my rental prop I sold, capital gains on that)
Those are good points, Suzq400, but you’re assuming you CAN sell. If you’ve never lived through a housing crash, you won’t really know what it feels like to have a illiquid asset. That assumption that houses always go up and I’ll never lose money when I sell is an illusion. I expect crashes in the stock market, just as I expect crashes in the housing market.
Absolutely. But that is where home buyers make mistakes. If you buy a house you can afford (not what the bank wants to give you), housing crashes don’t matter unless you have to sell. Similar with stock market crashes, you don’t sell low. Instead you buy more if you can. If not you ride it out. They don’t last forever. Even in housing crashes, selling isn’t off the table…..selling for lower price, if you plan on upsizing. For example our friends sold their semi at a loss (no equity at all)in a housing crash, they ported their mortgage to a much larger home. Mortgage stayed the same, but when housing rebounded they more then made up for their losses. My point is and always is, housing can be an investment if you are not an idiot. Your message of doing the math on not getting caught up in thinking like the masses can be applied to purchasing a house…..
The assumption that houses always go up and you’ll never lose money if you sell is the same as stock market. The stock market always goes up and you’ll never lose money if you sell is an illusion. In both cases you manage the lows….you don’t sell in fact you buy….and then you don’t lose money. In either scenario selling at a low always results in losing money.
Plus I really strongly feel, that if you buy you should buy a fixer upper if u r handy, or house with rental suite until u are retired and can afford your dream house in cash. Those two things protect you from market drops. No not everyone is handy and not everyone is smart enough to manage rental…and some would just rather travel the world, so those people should rent.?
I see your point. However, the difference is that your portfolio will continue paying you dividends and fixed income as stocks fall. Anti-correlated assets (like bonds) rise, buffering the loss. A house that is falling, not only doesn’t pay you, it continuously COSTS you in maintenance, property taxes, insurance, etc as it falls.
Because a portfolio is liquid, you can be out of the market in a day, or sell some of the assets to raise capital. Whereas for a house, everything is in one asset. You can’t sell a window or a brick. It’s all or nothing.
Valid point. I absolutely agree with what you said, that’s why home buyers…. dare I say the majority…are not thinking of the what if’s. What if values plummet, what if I lose my job, what if I have to move, what if interest rates rise! and though we have approached FIRE in different vehicles, I absolutely agree that buying a house based on feelings (until u can afford feelings)and the nonsense that banks and realtors may be selling….is dumb and short sighted.
I live in BC in the Okanagan. Rent is around $1500-$2000 a month for an ugly old 2 bedroom condo or town home and rising all of the time. It’s also hard to find a nice place these days. My wife and I are in our mid 30’s have a million dollar net worth and have been renting a $950 a month 1 bedroom condo for 2 years near downtown Kelowna with all the homeless crackheads. traffic and sirens around (we’ve seen some pretty gross shit in the past 2 years, that’s what you get for cheap rent). We want to have a kid soon so we needed more space and a safer, quieter place.
We finally found a brand new 1200 square foot town home to buy in a smaller city for $360,000. We have a ten year warranty and got to pick everything we wanted for the place. We paid cash, no mortgage. All brand new appliances. We have $500,000 left in stocks and $100,000 in cash. Finally we will have a home gym with a heavy bag to train on, a BBQ, a small yard, a beautiful mountain and lake view, a gas range, a pantry, blackout shades in the bedroom for a good sleep, a good-sized new fridge with a water filter in it, hardwood and tile floors, a garage and the home will cost around $5000 a year to maintain, including utilities and the $110 a month strata fee. No more rent increases, no more crackheads, no more knocks on the door at 8pm on a Friday telling us our music is too loud.
I agree with you that houses are a stupid investment but at least in a town home if the roof goes everyone chips in and it isn’t so much money. I also don’t want to spend my time shoveling snow or raking leaves and all the rest of that. If a pipe breaks, I’m insured for that. That could happen in a rental too and be a huge headache as well.
One thing I’ve thought about the lifestyle of living in hotels and traveling all of the time is you can’t really eat healthy that way. I like to have a kitchen to prepare healthy meals and a juicer to juice vegetables. When we’ve gone on a vacation to poorer countries I get very sick. Can’t really trust what you are eating. Can’t really trust what has been in your bed before you either.
Things could change drastically in the next few decades with robots taking over half of the jobs. How will this affect the stock market? I don’t feel comfortable with all of our money in stocks. At least if that falls apart we have our paid off home that we won’t be paying $2000 a month or more for. It’s easy in this tremendous bull market we are in to feel so sure of stocks but it’s going down eventually, and I think having a paid off home will feel pretty good at that time. I don’t look at the home as an investment but it is saving us big money on rent and you get to live your life with your family in a lot more comfort, health and safety. Some things you can’t just put a price on.
robots taking over half of jobs in 10yrs? I’ve been hearing that since the 80’s and so far almost nothing….forget about it man!! don’t fool yourself. Keep your money in cash if you’re afraid of stocks but do not put in a house!!
“One thing I’ve thought about the lifestyle of living in hotels and traveling all of the time is you can’t really eat healthy that way”
Okay, this assumption is just completely wrong. Staying in Airbnbs gives you a kitchen and laundry. I don’t know any long term travellers that stay in hotels all the time–only business travellers do that.
Having travelled for the past 2 years, I’ve actually eaten WAY healthier than when I was super stressed from work. Not eating healthy while travelling is a choice, not a result of travelling.
So you make a shit load of money, what do you want to spend it on? Its your money, spend it how ever you want. By a boat, buy a Ferrari, buy a house. Travel the world. Everybody is different, and has different desires. Its ok to buy a house, its ok to rent period, done.
I rented from 1990 until 2012 and then bought a house five years ago because I was raising a family, got sick of being evicted, and rent in this city got stupid, but we waited until we could afford it. But it is not an investment, just a place to live. Both served me well for a variety of reasons, your situation will be different, so do the math, do your homework, don’t believe the bullshit, and do what is right for you.
Aaron your choice was the right one for you, enjoy your home.
Invest in the robots!!!
FC, another hit. Love your blog.
Home ownership is a big trap and pride ownership is not something quantifiable therefore it’s not mathematically logical so I’m out! Everyone knows feelings must not be part of any investment principle. I guess this already says it all! Let those fools buy houses so we can rent from them and make them repair and be our servants forever!!!
I know right? I love going to the beach while my landlord has to stay behind, fixing the sink. I also love how he pays his mortgage, giving the bank profits that will come back to me in capital gains and dividends. Landlords rock!
I love going to the beach when my renters are working 9-5 to finance my retirement. I love having no mortgage on any of my properties because my renters paid for it. I don’t even mind working on the properties 1-2 hours a month. The first of every month is such a happy day. ?
You found rental properties with good PR ratios in your area with normal, non-insane renters, so I’m happy for you, Suzq400 🙂
I lived in some real crap holes, one was so full of mildue, it almost killed me, I learned so much about house’s before I ever bought one. We moved out, to the home we have now, and I was told the landlord spent thousands to repair the roof, and rebuild the bathroom floor that was neglected for years. Flexibility and lack of responsibility are 2 great reasons for renting.
“all while charging you a monthly fee that can be as much as rent for the privilege.”
The fees at our townhouse weren’t that bad but they did almost double over the 6 years we lived there and the reason the strata council gave for it was that the shrubs that bordered the street side of the property kept dying and they had to replace them.
Also when you live in a townhouse you get to deal with “limited common property” or just “common property” where your yard not really being your own yard and anyone is allowed to just walk through it whenever they please. Our yard faced the street and we once had people putting their junk furniture in our yard with a free sign on it and it sat there for 3 days (the shrubs in our yard had died and were removed but hadn’t been replaced so the furniture was visible). People would use the gate to our yard and cut through to get to their place and then just leave it wide open like an invitation for anyone off the street to come in. Plus you don’t own the spot in front of your house either and we had a ton of issues with people blocking us from leaving our garage from people parking in front of it, setting up kiddie pools, contractors leaving piles of branches or new shrubs in front of it without any prior communications so we could move our car to the visitors parking in case we had to go somewhere.
Did not know about the “limited common property” or just “common property” rule for townhouses. That sounds terrible, thanks for sharing.
yeah the back yard was classified as “limited common property” and the driveway in front of our place was “common property” for our strata but no one on the strata could really define what “limited common property” even meant. When we were looking at places our realtor told us that it’s a common thing in most townhouse stratas that anyone can just walk through your yard or event have a picnic in your yard if they wanted to but he’d never heard of that actually happening it’s just people passing through usually.
a house is an asset. Ownership provides wonderful things; raise a family in a place where your children will know as ‘home’. Choose the community you want to raise your family in.Raising a family as a renter has its drawbacks, including the family settling in the community then have to move as the owner has had a change of heart (he wants to live there).
with that said, there are times where the math makes ownership unrealistic, candidly a stupid decision. Places like Toronto (and surrounding GTA) have become sad ownership situations.
intrinsically, there is nothing wrong with wanting to ‘own your home’. And the pride of ownership is deserving.As is the pride on owning a 6 figure portfolio. At the root of it, the math has to make sense
BS
There is no such thing as “pride of ownership” on a portfolio. That’s why it’s the logical choice. I could swap assets in a heartbeat without shedding a tear. I don’t think of it as “but but but I’m so attached to the backyard and the kitchen countertops. “Pride of ownership” is BS and fraught with “the feels”.
If you want to buy a house as an emotional decision, then that’s perfectly fine. Nothing wrong with wanting to raise a family in it, as long as the math works out.
I raised my family in 5 different houses, in 5 different neighbourhoods, it was just like Justin, moving around all the time. It was always “Our Home”. We have great memories in each location, and friends all over the city because of it. I learned a lot about houses, yards, furnaces, roofs, all at the expense of my landlord, then used that knowledge to purchase the home we have now. Home is where the heart is.
cheers
I am not normal, I mean I’ve had one house, one spouse and one job for thirty plus years. Well I ditched the job a couple of years ago but so far neither the spouse nor house has tossed me out yet. But in spite of being a house owner I agree with you. In my rural setting houses are dirt cheap and there are almost no nice rentals so home ownership is kind of a form of self defense or maybe a choice of the lesser evil. I certainly don’t consider it an investment. It is cheap though and our property taxes for a 2900 sq foot four bed four bath two story on two acres are less than $1,500 per year. But in pricey places like yours I don’t think it makes much sense to buy a house, and I have thought you were brilliant from the first time I read your blog.
Thanks, Steveark! I appreciate your honesty about it not being an investment. And as I said, if it’s cheap, the math works out for you, and it works as a lifestyle decision, then great! I’m perfect happy for anyone who goes down this route.
So there are many reasons I want a house. I want to paint murals on walls and I just plain want one. But I am grateful my husband and I found you. Our mind set has changed significantly. We thought we were responsibly shopping over the years. And we were in you consider how uninformed we were.
Grateful when 12-13 years ago we had standards. We were apartment and house hunting at the same time. Newly engaged both still living with family. People thought we were crazy. The housing market was horrible. They were selling shoe boxes for hundreds of thousands. It was insane. His family kept pushing us towards these tiny and insanely priced houses. It’s near their home. We have to own if we want to matter was implied. We ended up in an apartment. And the bubble burst. Housing prices crashed. We are in NJ so taxes soared as well.
Still every few years or so we house hunt. Because I want a yard. And I want what I want. But we never put ourselves in a situation where we’d buy anything just to say we had a house.
Fast forward, we bumped into you online. Just as my husband decided from leaving his monthly excel spreadsheet monitoring our spending to some budget app we have to pay $5/ month to access. I thought he was insane. Just stop being frivolous and we can save that $5. Two months in, I was sold. We no longer had to run and hide, or plead with him to pay bills after we went to bed. He’d be so angry and surprised to see the monthly totals back in the day. Just a month on that app, we saved money. By the second month, I was trying to be supportive and I saw a news outlet run an article on you. And I sent it to him. To show, yes I gave you a hard time about spending money to save it. But you win. We won. It’s working. We’ve been smartly budgeting for a full year now. We have actual savings! Our lifestyle has not changed one bit. We just got smarter about it.
Fast forward, last month we found a house we enjoyed. In an awesome neighborhood, in a good school district (we have one and one on the way), in a town with low property taxes because they have some deal with the businesses, and those business being in town keeps the taxes low. We made an offer on this house. Poor condition with fixable potential we could do ourselves. We decided even though we were approved for some insanely high amount. We had the mortgage guy approve us for a much lower amount. We decided how much we would offer for the house, how much we were willing to pay and not a penny more.
We made the offer. And a week later found out someone gave them more than asking. It’s sooo not worth it. We were disappointed, went on our merry way.
My husbands family didn’t see things our way. -you’ll never own a house of you don’t offer a realistic amount for it. -sometimes you have to bite the bullet and just raise your offer.
He endured a long conversation alone with four members of his family lecturing him about how we don’t know what we are doing.
His sister bought a house. Two bedroom. In a town with insane taxes. Offer more than the asking. The house had nothing but problems. Including mold and the second story addition falling off the house. But daddy took care of it. When her bf split and the yard work was now her responsibility, she panicked. Daddy didn’t always have time to help. So she decided she had to sell. All on impulse. Threw out, not donate (oh god I hate unnecessary trash) almost everything she owned. Put the house on the market at a huge loss because she over paid for an overpriced house.
Yea. Not interested in her how to buy a house advice.
His parents bought a house at a great rate back in the day. But they keep building these ridiculous and frivolous additions. They put soooo much money into this house on silly huge/expensive projects that they will never make it back.
Again, advise I’m not interested in.
I have hopes of one day, buying a house. Because I want one. Because of you and logic, I see that it’s a purchase. When I make purchases, I want a deal. I’ll do my homework. I’ll shop around. I’ll stop and ponder, is it worth it? How badly do I want this?
I no longer have a disillusion about making money on a house. It is sooo not an investment. It’s a hole you have to pour money into.
So we will continue to browse the market occasionally. As our standards get higher and higher. And the amount we are willing to spend gets lower and lower. And we will either find a house or we won’t. (I have faith we will eventually… because I live a charmed life like that)
My husband did his homework. Knows our numbers. (You approved his numbers back in the day, I don’t remember what handle he gave you).
Anyway, end rambling.
Thank you!!!!
Wow, awesome story! I’m so glad you’ve realized it’s a purchase and not an investment. Thanks for sharing!
I can’t wait until people start considering houses as what they actually are: liabilities.
The emergence of alternative living options (tiny houses, RV/van life, perpetual travel, etc.) is an awesome movement to witness. Maybe it’s because I read blogs like this regularly, but I am really starting to believe we are in the middle of a major social turning point. Especially in the wake of the 2008 housing crash, the increasing prevalence of debt, increased isolation due to technological advances, and the sustainability/green movement.
Makes you wonder what communities will look like in the next decade or two.
People are finding all sorts of creative solutions to solve these problems–or at least the smart ones that don’t fall for the “pride of ownership” BS. I’m also curious to see what communities will look like in a decade or two. The tide is changing…
We have $500k in index funds at Vanguard. Our house is $200k. We’re selling our little starter home in the Spring and renting. We agree that owning a house is a pain in the ass. Looking forward to putting the $200k into our Vanguard index funds. Our friends with massive houses, shit piled up in their 3 car garages, living paycheck to paycheck think we’re idiots for selling. It feels good that we don’t care what other people think. While we’re out having fun they’re slaves to their bills, employers, house and kids.
When people living paycheck to paycheck think someone worth more than half-a-mill are idiots, they clearly need a reality check. Facts matter, feelings don’t. Not giving a shit what other people think is what separates you from the sheep. Good for you, Dave!
love this … great article
i am trying to convince my Mum who is 78 to sell her house in UK
its all she has . paid off and on a very small pension … .
she is house poor …. i say sell the house .. zero tax to pay
and rent and spend the money you now have ..
but she is so used to owning a house its so hard to change …
Yeah, that’s another thing that sucks you in with home-bonership–loss aversion. Once you own something you get attached and convince yourself you can’t let it go. It’s the way our brains work. So no matter how much the house appreciates, you never get any of the benefits. Being house poor is no fun.
My favorite comment:
“If some douchnozzle moves in next to you and starts making your life a living Hell,”
I have such a person next door to me…60+ year old owner with roommates that run prostitution and drugs through the house. There was a police bust a few months ago where they found crystal meth. Of course those caught weren’t in jail for long.
They leave us alone, but it definitely is annoying.
Yikes! And I thought the frat boys in that “neighbours” movie was bad. Hopefully the police will keep those douchnozzles from coming back.
Wow people can be such cunties!
Love this post (well I love them all) even though I own a house I agree with the sentiments.
Thanks, Sher Zaman. Yeah, people can be such assholes online, but it’s the internet. #hatersGonnaHate
BS indeed FC. The only pro argument of home ownership is non financial. There is absolutely no other. End of story.
My Wife and I have been renting for a while but we live in a suburbs of Montreal.
Wife works from home and has been going stir crazy as there is nothing around.
We are looking to rent in another part of town but I find it difficult to find a consolidated place to find apartments for rent.
Do you have any recommendations on good websites to find apartments for rent?
I look at Kijiji, Craigslist and Centris.
We used Viewit.ca to find our apartment in Toronto back when we used to live there. I haven’t lived in Montreal yet, but looking at Airbnbs online, there are a lot of cheap places where I could get an entire place for $1000 a month. For long term rentals, I expect that’ll be lots of good deals. Give those 3 sites you mentioned a try.
Fiery!! Love the passion in this one!
I don’t agree with everything you said here but in short we both view looking at housing with too much emotion and not enough common sense as to be a fool’s game.
To make things even more interesting, I own a condo, which I rent out and brings me cash flow every month, AND I myself am a renter. I just found that given what we were looking for, it made more sense to rent. But I still get some financial gains from the real estate market. Thanks for this post!
Glad it’s working out for you, LD!
Great Post! Can I also add “having kids” is also kind of in the same category. So many people wanted us to have kids when we did not have. Now that we have two and go through the joy and sadness of raising the kids, those people are gone. Yes, you get pride when your kids do great or happy but when they are terrible or getting illness or when they leave you, you are basically on your own. You sacrifice time, energy to raise another life knowing that they will leave you when they grow up. Not sure i see any point of going through the hassles, i would rather enjoy the time now and die happily.
Thanks for having the courage to be honest about this! It’s such taboo for parents to say anything anything other than having kids is the greatest joy of their lives. But in reality, there’s both upsides and downsides.
I have friends and family (like the people you encountered) who wouldn’t stop hounding us about having kids. Super weird and creepy. But after realizing they were doing that as a way to justify their own life choice, it started to make sense.
Thanks for sharing your story!
Yes, we are on the same page.
My honest and sincere request to anyone who does not have kids……..Please, please do not spoil your time and energy. Kids are great, they are the most beautiful thing on earth. BUT raising one is a whole different story. By the time your kid has grown up to be on his/ her own, they will leave you, they have to leave you because there is no point for them to live with you to share/ give you back the time you gave them. They are in their 20s, they do not want to hang out with people in their 50s or 60s. So they leave, they work, they party while you wonder what you could do with your life if you were not raising kids.
If you are passionate about raising kids, please go ahead and do it. I have full respect for you. BUT if you just want to have kids coz some friend or family members have been telling you, think again…..would you be able to stand the test when time goes tough with the kid’s illness or exam or study or when their behavior is not up to your liking. Don’t just have kids coz it’s the norm of life……Please think…….bringing someone to this world is great BUT it also bring LOTS and LOTS of responsibilities and demands LOTS and LOTS of time. Are you prepared/ ready to do that??
This is brilliant, insightful, and honest. Having kids is wonderful for many people but definitely not for everyone. That’s why it’s a decisions that’s not to be taken lightly and DEFINITELY shouldn’t be made based on pressure from others.
Yup yup yup.
Not so, I love my boys, we camp, canoe, ride bikes, work out and play music together. They are 17 and 19 and have no desire to move out. They are my best friends, and always will be.
You have made a lot of assumptions, not sure why your so negative on kids, its the best thing to ever happen to you, its why we are here.
Indulging in your self, doesn’t even compare to raising a child and watching them prosper, I have friends that only spend money on themselves, lots of toys, oh so much fun. But in 40 years, who will take care of you, give you grand kids, show up for christmas dinner, be your friend when eveyone else is busy with their families… or dead.
its not that difficult… or expensive…
You have my full respect for raising kids and for always enjoying this. I think I said enough. I did mention in my post that “Kids are great, they are the most beautiful thing on earth”. However, not everyone has same tolerance like you have. Not everyone can indulge in this the same way you have done.
Very happy for you spaceman, looks like having kids worked out great for you.
However, your assumption that “But in 40 years, who will take care of you, give you grand kids, show up for christmas dinner, be your friend” is simply not true in all cases. It’s great if it happens, but if I ever decide to have kids, I will have no expectation that this will happen. It’s not something you have control over. Whether your kids decide to have kids is not up to you–and whether they are even physically able to, is also not up to you or them. Anyone deciding to have kids needs to be aware that none of these things are within your control.
I’ll all for close family relationships, but not everyone is lucky enough to have this.
FC, you would make a great mom…
Awww. That’s sweet. Thanks, spaceman.
I got “scammed” when I was younger and we bought a house when we shouldn’t have. And it was all for the wrong reasons (“Pride of Ownership” I guess). I am hoping my kids won’t make the same mistake!
Thanks for sharing your story, Caroline! Learning from your mistakes is always a useful lesson–especially when shared with future generations.
I think home ownership is one of those things that works for some people and doesn’t make sense for others. We’ve had our home for about a year and a half and it’s been expensive! For us we’ve preferred the privacy and the ability to customize our house, but I’m sure the math works out in favor of renting, if I’m honest.
Thanks for being so honest, Mrs. Picky Pincher! The costs definitely add up but it seems like in your case, it’s a lifestyle decision that works for you. Happy for you! 🙂
Interesting article
I’d be curious to have your opinion on your fellow blogger Financial Samurai. He too wrote an article recently on the same subject. His perspective is that those who invest their savings but choose not to buy their own house and rent instead are missing out. Just like stocks, real estate prices tend to constantly go up in time.
https://www.financialsamurai.com/percentage-wealth-outside-primary-residence/
Ahh, good ol’ FS. We’ve had a few fun spars about housing on his site and mine. I enjoy reading Sam’s point of view, even though it’s the opposite of mine. That being said, Sam’s in-depth knowledge about real-estate investment makes it a good fit for him. If you’re interested, he wrote a Guest Post here: https://www.millennial-revolution.com/rent/financial-samurai-guest-post-owning-million-dollar-property-isnt-made-rich/
Wow! Great article! 😛
One way to get around homeownership paralysis is to think about your kids or young relatives 30 years from now. It’s HIGHLY likely property prices will be much higher and more scarce than today. They will ask us 30 years from now why we didn’t buy or buy as much today. They will say they WISH they could go back in time and bought when we could.
Once I thought about this perspective since I now have a son, I became more comfortable to invest in risk assets for the long term.
Sam
Hi Sam!
Thanks for dropping by! 🙂 As for property prices being higher and more scarce, that could be true, but in 30 years a portfolio will also generate WAY more than enough passive income to rent those properties. Plus, when I’m that old, I definitely do NOT want to be dealing with fixing shit around the house. But hey, to each his own.
Very impressed that you’ve been keeping up with the posting schedule and everything else, along with being a Dad! Will need to take a page from your books if we ever decide to have kids.
I’m gonna share with you a secret. If you guys ever have kids, your desire for homeownership will skyrocket! That desire will probably start around the 2nd trimester and steadily go up from there. It’s very hard to escape human nature.
Bookmark this comment so you can write that interesting post in the future!
Sam
Ah, one of my favorite subjects that you write about (and its totally been a hot minute since you have, not that I’ve been waiting or anything). The whole control thing is one I hear left and right about from home-owning people. If I had a nickel for every time I heard “aren’t your afraid that your landlord will kick you out and you will have no place to go? I couldn’t live with that”. But the thing is, if that happens, being that we are not financially invested into the place we live, we’ll just find another place. Hell, we might even come to like the new place better. It will be a change, but it’s all in how you perceive it.
We totally get the “you must not being doing well enough since you don’t own a house” mentality, but as long as we know where we stand and are comfortable with that, then it doesn’t matter what other people think about us. I know the day we pull the plug on full-time work, they’ll be in amazement of how we made that happen. I cant wait to say, “Remember when we didn’t buy a house we couldn’t afford? That’s one of the big reasons”.
Prepare for a LOT of stunned reactions and possibly losing friends when you do that. The reason that people get so emotional when they talk about housing is that it gets so tied up with their identity that they can’t separate the house from themselves, so when you buck the trend and come up smelling like roses, people will interpret that as you spitting on everything they believe in.
Good times.
It’s interesting to me that so many people in the FI community believe so ardently in renting. YES, if you live in some crazy expensive place where all the real estate investors are investing on appreciation, rent away! That may very well come out in your favor.
But as someone pursuing FI at least partially through RE investing myself, I have to say that to me, renting is exactly equivalent to buying Cadillac-level health insurance. You’re paying all the expenses your landlord has, plus paying them in some cases a hefty profit margin. After mortgage and whatnot, the going rate to make it worth your while as an investor is $100 a door. If that place is paid off, you can easily make in excess of $500 per door, per month, in large swaths of the country (US).
As so in addition to the above consideration re: housing cost, the only other time it makes sense to me to rent is if you know you only need short term housing OR you are physically disabled and legitimately need someone else to be responsible for even small maintenance and repairs. Other situations, you’re just paying your landlord an extra $100/month in “roof insurance” 🙂
People in the FI community understand that housing appreciation is a bad driver of your net worth.
As we wrote about here (https://www.millennial-revolution.com/rent/bought-house-back-2012/) even when the house goes up a tiny fraction of that gain goes to you, while the rest of it goes to the bank, insurance companies, contractors, etc.
We’re trying to get richer, and houses just don’t help very much.
You are correct that appreciation is, in most scenarios. I’m talking about a cash-flowing machine though, a la Bigger Pockets style investing. And again, in most parts of the country, why let your landlord profit off you if you can save the difference between renting and owning? I rented for a year where I’m at now because I moved here sight unseen (the short-term housing need I mentioned). Then I bought. My rent was $928, my mortgage, even with a smaller down payment, is several hundred dollars less. I AirBnB it when I’m out of town, which is another thing I couldn’t do while renting. (Well, I did, until I got busted for it.) Anywho, I concur that when I lived in Toronto, buying there would have been terrible, but it just really depends so much on the scenario…I have many, many rental horror stories from my years of renting as well, so it really is on a case by case basis. I admire that you encourage people to not purchase for emotional reasons, but in many cases, the math does make sense and there are many people pursuing FI through real estate, of which I am one.
What you’re referring to is real-estate investing, which is a legit way to get to FI–though it is WAY more work than passive index investing. But hey if you did the math and are willing to put in the work to be a landlord good for you. As I mention in the article, I’m talking about “primary residence”.
I am 55, but my brain is still inhabited by a married guy in his 20’s, who just woke up one day with 4 beautiful daughters and an even more amazing wife. Since I’m “in my 20’s”, I want to shuck my responsibilities(or at least not be weighed down by them) and travel the world. The youngest is 10 and the oldest will get married this year at 26, for which I am on the hook for 25K. I have 1.2million in assets of which $700,000 is in a tax-deferred 401k, a rental condo valued at $200,000, that clears $~600/mo after costs, and a home valued at $475,000, that we still owe $175,000. My salary is $170k and my wife is a nurse and she works 3 days per week as a nurse making $35k. Our insurance comes from my job but could come from hers. We adopted our 3 younger daughters, so in one sense, it’s not like we weren’t careful. I think it’s more like we just thought we would be young forever.
So my question is, will we ever be able to travel the world like you, keep the house for the kids, as the way I live and think, they will always be mine and my responsibility. They can come with us on occasion.
Should I start a GoFundMe Page?
This is great! My fiancé and I were just talking about this! We would have the money to buy a house in cash by the end of the year, but I just told him last night that I just think we should say “to hell with homeownership!” We are in our mid and late twenties, we have no intentions of having kids, both of us are contractors and receive free room and board where we work, in addition to six figure salaries.
Originally, the idea of having a “home-base” seemed appealing, but now not so much. I’d rather throw our money into a “Lazy Portfolio” with Vanguard, and just continue traveling to different countries during our vacations. We are minimalists so everything we own fits into two carry-on bags! Why buy a whole house for a few items? Plus, his mom has an in-laws quarters in her basement that we are able to use if we need to, so we’re pretty set. I honestly don’t know if I would have made this decision had I not been a follower of this AMAZING blog. I am on track to retire in two years. My fiancé will probably never retire because he loves to work. The upside is he loves to work ABROAD so this works out perfectly for a gypsy gal like me. Thanks for the amazing post FIRECracker!
Minimalists, travellers, no plans to have kids, AND you receive free room and board where you work?! Wow. Definitely makes no sense to buy a house 🙂 We haven’t had a “home-base” for over 2 years and it’s been working out great. When we go back to Canada to visit family and friends, we just use Airbnb. You really find out how little “stuff” you need once you start travelling.
Congrats on your plan to retire in 2 years! You guys are winning at life!
Whenever someone says “Pride of Ownership” to me, they seem to be using it to imply (or flat out saying) “You need to own a home so that you learn to take care of it. You won’t ever treat a rented place nicely. You need to grow up and own something so that you learn responsibility.”
This irks me to no end. We take amazing care of the places we rent – we want 100% of that security deposit back! I think we take better care of something when it belongs to someone else, but that’s because we’re nice people with… uh… what are those called? Morals. That’s the thing. We treat other people’s stuff nicely because it’s *someone else’s stuff*. Our own stuff? *That* can go to pot. And that’s what I’ve seen with a lot of homeowners – not taking care of stuff because there’s no one forcing them to.
Not saying there aren’t terrible renters out there who don’t have that “morals” thing and end up trashing every place they rent – oh boy do they exist! But owning a home doesn’t magically fix that and isn’t necessarily the thing that teaches responsibility. Also, implying that grown-ass adults need to buy an enormous money pit to “learn responsibility” is, you know, patronizing. So I always roll my eyes at the phrase “Pride of Ownership” – no thanks. I’ll take “Pride of Taking Care of Things Because It’s the Right Thing to Do, No Matter Who Owns Them” instead.
Since we do not own a home, we like to travel. Inevitably we travel through an area where old friends reside. The conversation always goes something like this:
Me: Hi we are in town , want to get together?
Them: Sure why don’t you come by our house
Me: I’m sorry we don’t visit anybody’s house, I will tell you why if you want. How about meeting for Dinner or coffee at Starbucks?
Them: Long Pause, ok why don’t you visit people at their homes?
Me: Well, you will first give me a tour of your house, I’ve seen enough bedrooms, living rooms and bathrooms in my life, I don’t care or what your basement looked like 5 years ago. I don’t care how much it cost and what it’s worth now. Eventually after your done with this boring tour you will tell me your politics.
Believe or not most people, chuckle and say, “Let’s meet for dinner”