Commenting on this earlier post, Jack Burns writes:
Renting is a service I gladly pay for. We spend about $40 a day for use of a nice three bedroom townhouse on a quiet street, with a private yard, a larger park for kids in the complex and a city park 5 houses away. The AGO is at the end of the street. Walk to work, got rid of the car and no equity buried in concrete, dirt and drywall. I like my equity earning interest and dividends and accessible when I need it. I also like having money set aside for a surprise like a weekend trip to Manhattan, or a night at the Opera instead of a blown water heater or a leaky roof. I know many homeowners and they like it. It enables you to be fixated on a world of a couple thousand square feet knowing you need not think beyond that world. It’s very comforting, like being a religious fundamentalist.
June 12th, 2010 at 10:28 pm
I would be intrigued to find out how you feel about renting in twenty years, when all you have for all the money spent on housing is a stack of receipts.
June 13th, 2010 at 4:25 am
If you do your math you would find that renting is a losing battle, and owning a home will give you financial freedom in the later years. Yes you would have more money to spend while renting, however, you also end up with nothing to show for in 10-15 years time. Renting only makes sense if you are really high income earners otherwise the average person will lose out. Case in point, sister bought a home 5 years ago for $225,000, she can now sell today for $425,000. How would you make this kind of money renting a home?
June 14th, 2010 at 11:11 am
Many of the homes on my street tripled in value over the past decade. The comparative advantage of renting compared to renting the money (mortgage)has become absurd. You can rent a place for 1/3 to 1/5 the cost of owning in many fine Toronto neighbourhoods. Renting in a desirable neighbourhood is real value for the money.
Without owning a house, you need to be creative where to spend money. Funding my pension matters (I don’t live in my retirement nest egg). I spent money on my son’s trip to Thailand and India, my daughter’s business setup in Hawaii or my wife’s Art Tour business. Getting an MBA from Edinburgh or studying for my LLM in London also takes money.
We make choices, we try to maximize utility and pursue happiness. I love going to dinner at friends who live in art filled mansions, but also enjoy a good scotch in my brother little apartment behind his cheese shop. I certainly am not against anyone owning a house, but I do have a problem with having restrictions and limits placed on my lifestyle, and at this point in time, home ownership in Toronto requires too many resources to be of benefit to me and most creatives.
June 14th, 2010 at 4:25 pm
Interesting debate. A lot depends on individual circumstances and temperment. If you’re stable and don’t expect to leave the region in a creative city, buying is good. If you’re young and mobile, renting makes sense. But there are also lots of variables and nothing is guaranteed.
One of my best friends sold his house four years ago and went into gold. He’s made a bundle and is now thinking of buying a condo while prices are down. But he’s got both more risk tolerance and willingness to spend a lot of time following markets than I do.
We bought our house in Portland 18 years ago. Its assessed value has tripled and I still think is low. But we’ve had the freedom to paint colors we want, remodel the kitchen, etc. which I think are the real reasons to own.
Then there’s timing. My father built my parents house in Modesto with his hands and it was my mother’s major asset. She took a fall in 2005 and we moved her to assisted living in Portland, sold the house for 2-3 times its real value and it helps fund her care costs. But if she’d stayed there and fallen today, the house would probably sell for half of its value if at all.
June 16th, 2010 at 6:52 pm
I can’t understand someone who would rather live in a little, rented apartment so he can drink “good scotch”….I bought my first place (a pair of flats) when I was twenty-three, and it was one of the best decisions I ever made. I followed up by buying a house. When it became time to move I simply rented the place out and bought someplace else. At one point I was able to live in my three bedroom flat in San Francisco (in a building I owned), with a view of the financial district, and Bay bridge for $14.00 a month, because of all of the cash flow in the other properties. Real estate ownership is a powerful tool, if you put a little thought into it. There is no need to compromise your creative urges, or ability to drink scotch, while buying property, in fact I think it increases your freedom.
June 19th, 2010 at 6:04 pm
I would like to share my story as it relates to renting/owning. I spent the first 10 years after college working in DC/PIT; rather than driving flashy cars and living in posh apartments I made double payments on my loans and avoided frivolous consumption. As such, I found myself in my early 30s with no financial obligations and complete freedom to follow my passions. I now live on Mt. Kilimanjaro in Africa training kids to use computers as part of a 2-year volunteer program. Everyone has different passions, but I will take this richness over the riches brought about by equity.
June 20th, 2010 at 12:18 am
Nathan, What you are doing is admirable, but how will this benefit you when you are fifty years old and ready to retire?.
June 20th, 2010 at 6:33 am
Hi Will, Thank you for the question and I certainly understand your points. I don’t think there is a right/wrong to this but rather that people should be more considerate of their options in today’s world.
In my case in addition to paying off debts I also put away plenty in retirement accounts so the cupboard are not bare. My hope is when I retire I will have a modest but sufficient fund but, more importantly to me, a life well lived behind me (and in front of me). Also, in my case, it’s not all about me and my equity/resume/personal finances. I’ll sacrifice a lavish retirement if it means I’ve helped many others live better lives.
June 20th, 2010 at 9:28 am
Hi Nathan,
My wife is interested in climbing Kilimanjaro and was wondering if she can speak with you. My email address is ppallotta@gmail.com, thanks.