Budgets & Banking: Renting vs. Owning a Home

Being an adult does not mean that you need to own a home, and, as we've seen through this year's foreclosure frenzy and financial crisis, home owning is definitely not for everyone.

My husband and I learned these lessons the hard way. At the end of 2005, we decided to buy a house. We could afford to buy, and we had no plans to uproot ourselves in the near future. I was ready to commit to grad school, so we decided to stay put for at least the three years it would take me to get my degree.

"Three will turn into five," people said. "And five into ten. No one plans to stay anywhere very long, and it's smart to keep it in mind now."

"Renting is just throwing money away," others would always say. "Building equity is smart."

We found all kinds of support for our decision. We had friends buying houses. Even our landlord told us it was a smart move, and he had financial incentive to keep us where we were. Before we even started shopping, we were sold on the notion that to be "grown up" meant we needed to own a home. My husband and I trusted our intentions and felt we'd thought it through, but in truth, we got caught up in the excitement and emotional appeal of owning our own domestic dream.

The first thing we did when we moved in was jump up and down shouting, exhilarated because there were no neighbors below us to complain about the noise. We loved our little, sunny-yellow 19th century bungalow. Our home-owning high continued straight through the fall of 2006.

The intrinsic benefits of accruing equity did not come without a cost, however. We kept our growing wariness silent, but it did take its toll on us when our free time was eaten up by lawn maintenance and obligatory home improvement duties.

My initial pleasure in possessing every square inch of my dwelling was tinctured when it came to dropping over $100 dollars to change broken dimmer switches. My husband was downright resentful when the hot water heater exploded while I was out of town. After 100 buckets of wasted water up the stairs, and a check for $2000, we had hot showers two weeks later. As we watched our dog scratch up the hardwood floors, we dreaded the inevitable thousands we would have to shell out in repairs. I found myself worrying that our standoffish neighbors were judging our home ownership ability through their silent driveway glances.  Even the excitement I held for painting the walls—our walls!—whatever color we wanted crashed and burned when we considered the repercussions in reselling (but which didn't stop us from painting the bathroom a glowing shade of electric orange, much to the chagrin of our future Realtor…)

By February 2007, we were married and our sense of family was strong. We started feeling restless and unfulfilled in NH; we had an urge to move on and immerse ourselves in a foreign place. Then my husband's employer offered to transfer him to their San Francisco office. The only thing that stood in our way was the house. That "smart" decision we made on impulse turned into a prison, keeping us from this impulse to "live the dream." In just one year, we went from free to buy a house to trapped in owning one. Home ownership had taken our freedom hostage. Luckily, my husband's company footed the majority of the bill, and we were able to sell the house rather quickly—narrowly escaping the mortgage crisis and the plummeting housing market.

Today, we're renting a two bedroom out here in Oakland, and we love it. It's not a drag to live with neighbors on all sides anymore, because they're our friends. Renting provides a built-in sense of camaraderie; we're certainly not in competition with them to be the best tenants on the block. When we work on "home improvement," we pick only the most enjoyable projects we can come up with, and for everything else we have our landlord hotline on speed dial. If the dog messes anything up, the most we'll lose is our meager pet deposit. Down the line, if conditions deteriorate, we can move at a moment's notice. For us, in this global village of ours, staying mobile is a precious commodity.

There's an enormous emotional investment required in owning your home. Now that we've shed that burden, there is an equally huge sense of satisfaction inherent in writing a monthly rent check and knowing we have the support of our landlord in the event of any emergency. It's unnecessary to ever accrue a cent in equity; we have other ways to intelligently invest in our future.

There is no single answer to life's challenges, and we see the best options as whatever it is that makes our family the strongest and keeps us the happiest. My husband and I have a respect for those who choose to invest their wealth in personal real estate, because we now know that the decisions and responsibilities are much more than financial ones. In life, there is no single way to reach fulfillment and personal prosperity, and like many choices we make along our way, owning a home is not mandatory.

If you're one of the lucky few who can take advantage of this buyer's market, and you're weighing your own decision whether or not to buy or continue to to rent, here are my top tips to consider:

1. Can you afford it?
The news is full of gloom and doom about mortgage troubles, and it's important to pay attention. Plus, it's not just a mortgage payment every month. Consider the cost of servicing your furnace, mowing the lawn, patching the roof, installing central air...all the other costs that come with maintaining a house. And, regardless of what the news may tell you, there is no such thing as a "recession proof" job.

2. Can you live where you want and still own your house?
Think about your dream location. Is it right downtown, high on energy and nightlife? Or is it outside of town, surrounded by trees and serenity? The shift from renting to owning often pushes people out of convenient and desirable neighborhoods, forcing them into eco-unfriendly (and pricier) habits, like no longer having the option to commute to work by public transportation.

3. Do you see yourself living in the same place for 10 to 30 years?
It rarely makes financial sense to buy a house and sell it quickly—and with the current market, experts warn that you'll have to hold onto any real estate investment for at least five to ten years to see a profit (or even break even). Plus, in today's global economy, the ability to move around is a commodity that most home owners are forced to sacrifice. These are both things to weigh seriously before buying a home.

4. How do you like to spend your free time?
If you enjoy sharing time with your friends or skipping town on impulse, tying yourself down to a high-maintenance home is probably the wrong fit. Emergencies like broken plumbing or heating do not consult your schedule before they jump in to take over.

5. Are you buying because you have to or because you want to?
We're sold on the myth that upstanding, successful adults are all homeowners. We're led to believe that "settling down" has to involve a family car and the deed to a house. The truth is, you can be who you want to be without owning a house, and you just might be happier without one.

What are your thoughts on the question to rent or to own? Share your opinions and experiences with Shoestringers everywhere by posting a comment!