When To Rent vs. Buy a Home

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[The following is a partial transcript of this episode of The Scott Alan Turner Show. Listen to the full episode to hear this story, listener questions, money hacks, and inspiring stories of people that are changing their financial lives. Subscribe to the free podcast on iTunes or Google Play]

Buying a home is the American dream. Or for my awesome international listeners, your countries dream.

• It’s the feeling of being king or queen of the castle
• It’s that someone has made mom and dad proud
• It’s being able to paint the walls purple and not having to take the dog for a walk – go run around outside Fido!

Buying a home is expensive though. A lot of people who rent, you see I used to rent, think about renting as throwing money out the window.

You see, this rent check which could be going to the lender instead of the landlord, and people were told this is a waste of money, which is too bad because lots of times renting is the better option, and it’s not a waste of money. In fact you can be much better off with more money. We have to pay either the rent or a mortgage, right? That’s our housing costs. So we have to think about:

• Does renting give me more flexibility in life if I want to move quickly
• Is the added cost of owning a home worth the benefits
• Renting means I can call landlord to fix the toilet on the weekend instead of driving to Home Depot.

My wife Katie just wrote a check for $3,200 to a plumber to replace the sewage line in one of our rentals. Insurance doesn’t pay for that.

CBS News Business Analyst Jill Schlesinger says

You’re not ’throwing money out the window’ by renting. Rather, you’re buying flexibility.

And not having to fix toilets.

I remember the first time I heard the argument of renting vs. buying. I heard people should put at least 20% down. I think that’s a good thing but it’s not the only thing.

When I say owning a home is better than renting in the long run, I mean that. The person who’s saying renting is a waste of money, who’s not considering the housing market, who’s not in someone’s situation – they’re usually missing all of the details. They’re missing the income someone makes, the housing prices in the area. New York City eats up a bigger portion of income then Del Boca Vista, Florida, a person’s long and short term goals.

So much of our status and pride comes from owning a home, I get that. To feel were adults now and taken that next step in the ladder of life.

So we have to change our thinking about owning a home is the be-all-end-all, because that’s not what it is at all.

People have to rent to get ahead.

The costs of a home early on gets people behind in their long term savings
Trying to pay housing costs and student loans and consumer debt and a car loan, gets people behind. The stress of the long commutes to have the lower mortgage, gets people behind. Everything starts with renting, and if we don’t have patience about what it is we want and if we can afford it, we can’t afford it.

No margin, no money. No money, no peace of mind.

What is it you’re looking for in buying a house?

Not like granite counter tops, a stainless steel microwave a moat to keep out rival clans. But what is it you’re looking for in buying a house and are you asking the right questions to make sure the situation is right?

Are you sabotaging your present and your future, because of some money myth that renting for years is a waste of money. A lot of people do that.

• They put a minimum amount of money down, leaving them upside down on the loan. I did that.
• They don’t factor in the total cost, and have even less margin. I did that.
• They lack the patience to wait for when it will be a dream home, and not a financial nightmare. I kinda did that.

Without realizing they can have a better house, have a better situation, have more money, by getting the house they can afford at the time they can afford it. So never buy think renting is a waste based on if you’re paying rent, because you’re paying for opportunity and flexibility.

The main thing is to buy when you’re ready. And it’s when you’re ready, not when someone else says your wasting money, because that’s how people screw up their finances.

• we get the new house fever – the fever! – and overpay
• we think we’re going to miss out
• we overstretch our limited income expecting that we’ll make more next year and we’ll be ok then

Renting longer changes all that. Patience eliminates that. You build the most wealth the fastest when buying the right size home at the right time. It comes down to:

• your big downpayment
• your excited at the affordable payments and expenses
• your home is a dream home and not a nightmare

That dream of owning a home and paying it off faster. How about having low payments. What would you do with the extra free cash? What vacations would you go on because you aren’t working just to pay for a house? What’s the commute look like because you saved up for the better location?

And sleeping well in your new bedroom. I think this is what most people want in their dream home. To not have the stress that comes from using most of the paycheck go towards the house, with nothing left over.

You can’t have financial freedom unless you have housing freedom.

So today be ok with renting. You’re buying time for something better for yourself. What is it you want in a housing payment? What is it you want out of the next 3–5 years? Where do you want to live? What school districts? What city? Near what parks? Not limiting yourself or your options because of a money myth, but getting the freedoms and opportunities you’ll have.

I want to challenge renters to think about the savings and flexibility because you are smart for renting.

• Your smart for taking your time
• Your smart for knowing what you can and can’t afford
• Your smart for living a lifestyle based on your income and priorities

So keep renting until the time is right.

Consider the opportunities you’re gaining by renting for a while longer, even if it’s a little longer. You get to choose where to live based on your own rules, but you need to make those rules for yourself first.

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