Latest posts by FIRECracker (see all)
- Guest Interview with Craig, Author and House Hacker Extraordinaire - October 7, 2019
- Book Review: Choose FI, Your Blueprint to Financial Independence - October 1, 2019
- Are You a Good Fit for FIRE? - September 9, 2019
“Renting is throwing your money away.”
“You’d be stupid NOT to buy a house.”
“Buying a house is the ONLY way to secure your future.”
These are all phrases I’m sure we’ve heard over and over again. From our parents, from our friends, from our co-workers.
When I told my mother I’m a Financially Independent and don’t ever need to work again, her response was “So what? You don’t even have a house.”
Boomers just can’t stop selling the idea that buying a house is the ONLY worthy life goal and anyone who rents is a loser.
So who created this illusion?
Real estate agents?
After all, THEY’RE the ones who stand to make a KILLING from all this. With interest rates laughably low, and housing prices absurdly high, how can they possibly not win?
But houses are NOT the cash-cows that they’ve lead us to believe, and here’s why I refuse to buy one:
Renting Lets Me Have a Better Career
Do you know what happens when you buy a house?
You get stuck in the same place for 5-15 years.
Why? Because you incur real-estate agent costs, staging/maintenance costs, and lawyer fees every time you sell. Additionally, for the first few years your money is going towards interest and not towards building house equity.
House owners are more likely to stay put, even if there are better jobs elsewhere. This is exactly what happened during the 2008 financial crisis. Job vacancies existed at the SAME time as rampant unemployment. Why? Because the people who had the skills to fill those positions were stuck on the other side of the country. They settled for lower paying jobs in their area, tied down by their houses.
In contrast, renting lets you chase your dream job, as well as turbo-charge your career.
At my last job, I could take on high reward/ high risk projects because I didn’t have a mortgage. If I failed and got fired, I wouldn’t sweat the finances. And as a result, I took on projects that were too risky for my house-owning peers and got two promotions in four years, while they had to slave away on safe projects without a raise in six years.
That job eventually got so bad, I had to be on anxiety meds, but once again, my decision to rent instead of buy, saved me. Since I invested the money that would’ve gone to a giant mortgage, insurance, and maintenance, I generated enough passive income to cover my expenses forever so I never had to work again.
And when I left, I got to do work I love with less pay (author/entrepreneur) because I didn’t have to worry about housing costs.
If I had dumped all my cash into a house like my mother wanted, I would still be stuck at the same hateful job, stressing out about getting laid off while being my boss’s bitch.
Now I wake up at 7am without an alarm because I’m too excited to start my day.
Renting Gives Me Maximum Flexibility
Okay, by a show of hands, who loves shovelling mountains of snow, cleaning leaves out of the eavestrough, and fixing leaky drainage pipes?
I thought so. I mean, who wants to do all these things when you can travel, build your dreams, or spend time with your friends and family instead?
When you own a house, that’s what you’ll be doing ALL the time.
And with all the extra costs like property taxes, lawyer fees, house maintenance, house insurance, land transfer taxes, etc, etc etc, forget about impromptu vacations or fun outings with friends. All your money goes towards feeding your insatiable house.
And if you can’t afford to buy a house close to work, you’ll be forced to spend most of your time stuck in traffic. And because you had to buy a car, that means even MORE unexpected costs (car payments, car maintenance, gas, and insurance), causing your bank balance to shrinking and your health to decline.
Because I rented, I found a place within walking to distance to work for a steal. It was easier than finding a house because there were a lot more affordable rental units than properties for sale.
My rent was also fixed so I knew exactly what to expect every month. Even with rents rising due to inflation, it couldn’t go up more than 2% per year. I never had to worry about unexpected $15,000 water damage bills or $5000 window replacements.
And as a result of the extra time and flexibility, I could travel whenever I wanted, work on my own projects, and stay fit.
Renting Lets Me Diversify My Investments
If I asked you to bet all your money on ONE stock, would you do it? Knowing that a certain company called “Nortel” once existed?
So why would you put your life savings into 1 asset, like a house?
Now before you freak out and tell me that you can at least LIVE in that investment, and you can’t LIVE inside stocks, consider this:
Once you become FI, your balanced portfolio generates dividends—free money that corporations pay you as a shareholder of that company. Without having to sell any assets, you get paid FREE MONEY that you can use to pay rent. You can even access this money right away, unlike the house equity that you can’t touch until DECADES down the road. And that’s only IF you sell. And lots of people don’t. And of those who do, most just end up buying even MORE expensive houses.
You are renting a place for free. Let me repeat that. You are renting FOR FREE.
Your stocks are generating FREE RENT while growing in value. So not only are you not throwing money away on rent, you can flexibility move whenever you want, without incurring extra costs like lawyer fees, real-estate agent, fees, etc. And you don’t have to lift a finger to do any maintenance.
And because your investments are well diversified (via bonds, stocks, REITS, preferred shares, etc), you don’t fall into the trap of having all your money locked in ONE asset, whose price you CAN’T control.
So what have we learned from all this?
Renting is NOT throwing your money away, and buying a house comes with WAY more hidden costs than you think. Costs like a fulfilling career, time and flexibility to do what you love, and wealth diversification.
So before you sign up to be your boss’s bitch, lock up your savings in 1 asset where you won’t see the payoff for YEARS, and give up your time with your loved ones to fix leaky roofs, read this.
Our parents made out like bandits on housing. But they never stopped to consider the lucky factors that contributed to their success: reasonable housing prices, falling interest rates, a low cost-to-earnings ratio.
Factors that are no longer realities in our world today.
So let’s stop blindly following our parents’ advice and start making our OWN choices.
Let’s ditch the house, build our wealth, invest it, and live the life we’ve always dreamed of.
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