Is it ok not to own property?

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JamesCletus
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Is it ok not to own property?

Post by JamesCletus » Sun Feb 01, 2015 10:21 pm

I will be selling my investment condo this year due to bad HOA mgmt and high risk of special assessments for the next 5-10 years. I could never live in it because it was in a loud college area but it was all I could afford at the time. I think owning real estate is a great idea but I question if its right for me at this point in my life.

Some details: I am 38 yrs old, never married, no kids, with not much prospect of that changing soon. My income is well below 6 figures but I live a very modest lifestyle. I didn't have my act together in my 20s and but I've spent my 30s catching up and now have about $140k in retirement and another $40k in taxable investment accounts plus a $20k emergency fund. I have no debt. After the condo sale I should have about $100k in cash. I live in San Diego now and have no plans to leave but I don't know if I will die here either. Real estate is insane in San Diego as any web search will tell you but I know I could look elsewhere and find something if needed.

I am content renting at this point in my life. I love the feeling of freedom it allows and I am not sure what will happen the next few years. My fear is that I won't be able to retire if I don't own property. This is the reason I invested in the rental condo so at least I would be "in real estate". Adding to my fear is the fact I am an avid reader of this forum and it seems like everybody here owns property. I am just curious if any of you have made it to later in life without real estate or followed similar path as I am currently on. If so what was your story? Or even if you didn't follow my current path, what are your thoughts?

mhalley
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Re: Is it ok not to own property?

Post by mhalley » Sun Feb 01, 2015 11:45 pm

Property ownership is not for everyone. The biggest advantage of it is the stability it brings to your living expenses after you retire. But if you don't want it at this time, that is a totally personal decision.
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Re: Is it ok not to own property?

Post by Alchemist » Sun Feb 01, 2015 11:54 pm

I am 27 and my career has me moving every 2-3 years, including (like the present time) living over seas. Buying/selling on that schedule makes absolutely no sense. Some of my colleagues instead have a collection of rental properties from places they used to live. But given many of the headaches they encounter as long distance land lords I have decided against that route. So for now, and for the next 5 or so years I intend to rent. If some amazing deal shows up I may purchase it, but I prefer the simplicity of not owning right now given a mobile career lifestyle. After the next move or two that pace should be slowing down and once there is more stability in locations I may live then I plan to buy.

Buying usually only makes sense if you are in a long term location and you purchase something you intend to stay in for a long time. There are exceptions, but this generally holds true. Imagine only planning to own something for a few years and purchasing it in 2007. Ouch. And I know people who got stuck in exactly that situation. If you intended to live in that place for 10 years or more than no problem, the market will recover. But a short term owner? Not a situation I want to be i


ETA: Come to think of it, its kind of like deciding where to put money for some goal you have. Short term? Probably a CD or savings account is best. Long term? Stock index fund will likely be the best way to go, as even if there are short term fluctuations, the long term result should be much higher returns. Same thing with owning/renting.

808surfboy
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Re: Is it ok not to own property?

Post by 808surfboy » Mon Feb 02, 2015 7:35 am

It is totally ok if you do not want to own property. I am 39, single, never married, no kids and I have never owned real estate. I have a six-figure portfolio of Vanguard index funds in IRAs and taxable accounts.. Real estate usually is not a "good investment" like most real estate agents would like you to believe. Real estate agents love to sell you property so that they receive a commission while you are stuck with mortgage payments, property taxes, homeowners insurance, PMI, maintenance, etc.. also commission when you sell the property. The total cost of all of these is often higher than renting a similar property. You can rent cheaper, invest the difference and end up with more wealth later in life than a homeowner in a similar circumstance. Or simply spend the difference and live better. See the below article:

http://www.hellowallet.com/wp-content/u ... -Cards.pdf

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InvestorNewb
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Re: Is it ok not to own property?

Post by InvestorNewb » Mon Feb 02, 2015 8:15 am

I am in the same situation as you.

I am not convinced that buying is better than renting. Even after the house/condo is paid for, there is still annual property tax and maintenance. That's a good chunk of rent money right there.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

gd
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Re: Is it ok not to own property?

Post by gd » Mon Feb 02, 2015 8:20 am

mhalley wrote:Property ownership is not for everyone. The biggest advantage of it is the stability it brings to your living expenses after you retire. But if you don't want it at this time, that is a totally personal decision.
As a 30-year renter and an almost-10-year homeowner, I agree completely, except-- it gives a stable lifestyle. Living expense stability is paying rent and having options that allow you to adapt to changing circumstances around you. There is nothing stable about home ownership finances other than in the sense of a ball and chain. Property taxes, insurance, maintenance costs both knowable and unknowable that vary wildly based on your circumstances, RE valuation, and an extremely illiquid way to park your money. It will probably reduce your *planned* cash flow, but that is not the same thing at all.

dolphinsaremammals
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Re: Is it ok not to own property?

Post by dolphinsaremammals » Mon Feb 02, 2015 8:29 am

It isn't really stable owning real estate. Property taxes can go through the roof if the town screws up its finances.

If it weren't for items like living in the family home, I would prefer to buy a house over renting simply because over years of renting in different places I got tired of management barging into my apartment with little notice, regardless of what the lease said. A house has a huge privacy advantage.

However if you have terrible neighbors as I recently acquired, if you rent you can at least leave in fairly short order. Similarly if there's some disaster, just walk away.

epitomist
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Re: Is it ok not to own property?

Post by epitomist » Mon Feb 02, 2015 9:28 am

mhalley wrote:The biggest advantage of it is the stability it brings to your living expenses after you retire.
I think property ownership decreases the stability of living expenses. With a rental, you know exactly what you're going to pay with few surprises.

With a house, you could:

1) Need a new roof
2) Need a new septic system
3) Need your well dug lower
4) Need to repair a burst pipe from the main water line to your house
5) Need a new HVAC system
6) Have a special assessment from your HOA
7) Property taxes could grow tremendously

Obviously, varies by circumstances. But the bottom line is that owning a house can lead to unplanned expenses that can equal a year's worth of rent.

To me, the only reason to own your home right now is if you have kids and need to give them a sense of permanence.

mhop
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Re: Is it ok not to own property?

Post by mhop » Mon Feb 02, 2015 9:49 am

It's a huge YMMV situation when people get into renting vs. owning. In the places that I renewed at, my rent went up $30-$40 and when I left the last complex, rent was increasing nearly $100 (on a sub $1000 unit). Why? Much like houses, apartment complexes require improvements as well. Your rent is covering the expense to re-tile, re-carpet, paint, improve the kitchen, etc. of the neighboring units as people move out. As well, in my last apartment complex, the whole complex was undergoing improvements (remodel gym, pool improvements, etc.) to market to a more affluent crowd. Sure you can "walk away" when the lease is up, but then you incur costs to move, and in my experience, the next complex will raise your rent every renewal.

stinkycat
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Re: Is it ok not to own property?

Post by stinkycat » Mon Feb 02, 2015 10:02 am

The main downside to not owning property is listening to all the comments from people who are convinced that you are throwing your money away by renting. I say that as a homeowner and while home ownership has its benefits, if I were single I would be renting in a heartbeat. I had an uncle who was single all his life and had no interest in homeownership, he would rather spend his time on the golf course. He passed away about 6 years ago in Florida. Thankfully he didn't listen to people who thought he should buy a house.

Novine
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Re: Is it ok not to own property?

Post by Novine » Mon Feb 02, 2015 10:14 am

For most of US history, for most people, a home was never "an investment", it was a place to live.

Johno
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Re: Is it ok not to own property?

Post by Johno » Mon Feb 02, 2015 11:02 am

An owned home is definitely an investment in an asset. I think part of the trouble some people have with recognizing this clear fact, according to any consistent definition, is that when they see 'investment' they actually read 'good investment', or even 'investment everyone should make'. :D And it's true there's a lot of cultural pressure in favor of home ownership. But investment doesn't necessarily mean good investment. It also means risk, including undiversifiable idiosyncratic things (bad neighbors, particular town or city's property tax blow out, unexpected major repairs etc), undiversifiable at least unless you invest in fairly numerous other residential rental properties. And then there's the broader risk of regional or national home price down trends. OTOH there's upside. I didn't buy my house mainly to make money on it but it has gone up greatly in value since I bought it 20+ yrs ago, and actually tracking the history of its price further back (though not a factor in deciding to buy it) I found that its price return has far outrun inflation over the last 75 yrs, though OTOH still behind the stock market over either period. In many regions and on average that's not so, but in some places it is. Now sure I use it to live in, but that doesn't make its price appreciation entirely irrelevant.

But it's definitely a 'YMMV' situation, and moreover the important reasons to make this *investment* include a lot of reason which do not factor into the decision to make other investments (the 'stability of life' issue etc., real to some degree). That's perhaps another reason why some people confuse themselves into saying houses aren't investments. They are investments, but involve considerations which don't factor into making some other investments.

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max12377
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Re: Is it ok not to own property?

Post by max12377 » Mon Feb 02, 2015 11:20 am

As a single guy I find not owning property to be absolute bliss.. :sharebeer I don't have to do diddly squat other than keep the insides clean. I've owned 2 houses over my lifetime and am unlikely to ever own another one. Perhaps it's just my personality but I love to come and go as I please and not have to worry about the next repair or paint job or lawn cutting or snow shoveling or weed pulling or realtor's fees when I sell or realtor's fees when I buy or house inspections or lack of mobility if the housing market tanks... etc... And if something bad happens, I can leave at the end of my lease!

Now when I look at big houses I just see big hunks of wood/brick that someone has to maintain just to say it's theirs. All that time that has to be invested.. No thanks.. :-).

The caveat for me is that if I had a family I would probably buy. But as a single guy... heck no..

If I do buy again I'll likely go the condo route but right now the time that renting has freed up for me is well worth the premium I might be paying for it.

Buy a house or rent if it suits your lifestyle. There are good and bad to both. I, like you, was told I was "throwing my money away". It led me to a bad decision.

john94549
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Re: Is it ok not to own property?

Post by john94549 » Mon Feb 02, 2015 3:17 pm

Condolences. It's a life-style choice, not one we would choose.

Carefreeap
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Re: Is it ok not to own property?

Post by Carefreeap » Mon Feb 02, 2015 3:44 pm

I think you need to take a breather from home ownership for a couple of years and rent for a while to be reminded of the down side of renting is. I think you'll have a couple of years before we go through the next real estate correction.

I grew up in San Diego, got my real estate license in 1981 as a way to finance my college education (at UCSD).

I think if you want to stay in San Diego long term you should buy. Owning (even if you relocate) is also a good longer term investment in which you plan to return to San Diego.

My husband and I have relocated 5x including an overseas stint. We're in the SF Bay Area now but have 2 homes in San Diego County; a condo in La Jolla and a house in the Fire Mountain Area of Oceanside. We are likely going to be spending time in one of those rentals.

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dumbbunny
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Re: Is it ok not to own property?

Post by dumbbunny » Mon Feb 02, 2015 4:08 pm

epitomist wrote:
mhalley wrote:The biggest advantage of it is the stability it brings to your living expenses after you retire.
I think property ownership decreases the stability of living expenses. With a rental, you know exactly what you're going to pay with few surprises.

With a house, you could:

1) Need a new roof
2) Need a new septic system
3) Need your well dug lower
4) Need to repair a burst pipe from the main water line to your house
5) Need a new HVAC system
6) Have a special assessment from your HOA
7) Property taxes could grow tremendously

Obviously, varies by circumstances. But the bottom line is that owning a house can lead to unplanned expenses that can equal a year's worth of rent.

To me, the only reason to own your home right now is if you have kids and need to give them a sense of permanence.
I tend to agree with this advice. There is something always to worry about when owning a house. And don't forget, you might end up with neighbor issues. The American Dream often turns into a nightmare.
“It’s the curse of old men to realize that in the end we control nothing." "Homeland" episode, "Gerontion"

randomguy
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Re: Is it ok not to own property?

Post by randomguy » Mon Feb 02, 2015 4:34 pm

Peterjens wrote:
epitomist wrote:
mhalley wrote:The biggest advantage of it is the stability it brings to your living expenses after you retire.
I think property ownership decreases the stability of living expenses. With a rental, you know exactly what you're going to pay with few surprises.

With a house, you could:

1) Need a new roof
2) Need a new septic system
3) Need your well dug lower
4) Need to repair a burst pipe from the main water line to your house
5) Need a new HVAC system
6) Have a special assessment from your HOA
7) Property taxes could grow tremendously

Obviously, varies by circumstances. But the bottom line is that owning a house can lead to unplanned expenses that can equal a year's worth of rent.

To me, the only reason to own your home right now is if you have kids and need to give them a sense of permanence.
I tend to agree with this advice. There is something always to worry about when owning a house. And don't forget, you might end up with neighbor issues. The American Dream often turns into a nightmare.
Unless you have a rent controlled apartment and never move, long term renters pay for all that stuff also. They also get to pay the cost of increase in property value over time.

Renting is often cheaper short term (partly because you are willing to rent cheaper than you would buy, partly because of the lack of upfront costs) while over the long term having most of the cost fixed (p&i) and only part variable (taxes, upkeep) beats out having the whole value variable (rent). But that is most of the time. Your individual case and lifestyle can change the numbers around. The person who bought Phoneix (to pick one city that got crushed) in 2006 probably regrets it. The person who choose to rent in SF in 2009 instead of buying (assuming no rent control) also regrets it as rents have gone up over 50% since then and property values have also gone up by about the same amount. Real estate returns aren't great but when you leverage them up 4x, you can make really nice money.

Personally I don't look at this as a financial decision. Pick what works for you and go with it

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gunn_show
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Re: Is it ok not to own property?

Post by gunn_show » Mon Feb 02, 2015 5:25 pm

Carefreeap wrote: I think if you want to stay in San Diego long term you should buy. Owning (even if you relocate) is also a good longer term investment in which you plan to return to San Diego.
I would agree with this, being born/bred/still here San Diegan. For many reasons. Most good to great neighborhoods are doing nothing but going up in valuations, no matter the market. God only invented so many bay views or La Jolla's.
Plus, many neighborhoods, being a renter would suck (PB, OB, el cajon, south county). But, many neighborhoods would be cool to rent a condo (such as gaslamp, north park, south park, UTC, hillcrest, etc.) and not have the home owner pains.

Your story makes sense for renting now, very similar to many of my friends. They prefer to be liquid and able to move at moment's notice. Two recently left for Seattle, one to Houston. Being a home owner and land lord does not appeal to many and for good reason. Lot of work. And cost.

A recent case study on JLCollins site kind of fits for you
http://jlcollinsnh.com/2015/01/30/case- ... ransition/
He also has a few rent vs buy threads that are good reads
http://jlcollinsnh.com/2013/05/29/why-y ... nvestment/
http://jlcollinsnh.com/2012/02/23/rent- ... e-numbers/
"The best life hack of all is to just put the work in and never give up." Bas Rutten

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JamesCletus
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Re: Is it ok not to own property?

Post by JamesCletus » Wed Feb 04, 2015 6:34 pm

After reading many of the responses and doing more research it seems like renting vs owning boils down to a personal decision. Both sides, own vs rent, have valid arguments. I can't say anybody is any more right or wrong than the other. Therefore I feel its safe to say that it is "OK" not to own property. There are paths to a successful retirement without real estate ownership. It seems it is fair to say a home is generally not the best investment. That's not to say it can be a good investment. Rather it may not be better when compared to other investments over time. However it's very important to realize a "home" is more than real estate or just an investment to many people. Its their home and that can have huge value and personal joy in itself which doesn't show on a spreadsheet or calculator.

The same "home" argument probably doesn't hold true to investment properties. To the owner of investment properties they are not homes. They are just investments. If the numbers look good and you have the time as well as temperate for it, they can be very profitable. Really if you can't beat the 3 fund return over the same period of time it might be better not to put your money in an investment rental.

I found a cool article doing web searches that might fuel the fire but thought I would share anyway:
http://patrick.net/housing/crash3.html
You can also change the address to crash1 and crash2 to see some more articles. I don't entirely agree with all that's written there but it is an interesting take on things.

DeerRunner
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Re: Is it ok not to own property?

Post by DeerRunner » Wed Feb 04, 2015 7:49 pm

JamesCletus wrote:...

I am content renting at this point in my life. I love the feeling of freedom it allows and I am not sure what will happen the next few years.
Obviously owning has to work for you and you need to be able to afford it. But since you mentioned the "feeling of freedom", made me think that years ago when I rented I didn't feel free. Don't like the carpet or other interior items? Can't touch them. Rent goes up? Nothing you can do, besides move. Want to modify the apartment (ie. bigger window)? No.

Also, think about the area you live in and how much the cost of living increases. Buying a house/condo locks you in at that price, minus tax increases. Rent will always go up.

I can see why some people just like to rent, to me, living in a dwelling my whole life someone else owns is the antithesis of freedom.

Leesbro63
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Re: Is it ok not to own property?

Post by Leesbro63 » Thu Feb 05, 2015 9:16 am

I can see the OPs point of view. The biggest risk would be if we enter a 1970s (or worse) period of inflation. Homeowners would be shielded (although maintenance and tax costs will rise) while renters will not.

wassabi
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Re: Is it ok not to own property?

Post by wassabi » Sat Feb 07, 2015 9:25 am

OP, I'm around your age but probably make a little more (I'm in the 28% bracket). I do not own property, nor do I want it. I'm unmarried (that may change next year) but even if I get married and have children I do not want to own a house right now. The market I live in is very similar to San Diego, so I just cannot fathom paying so much for a house or a condo. I certainly do not want to spend my time and money fixing my house.

I could go on and list all my reasons, but that's not the point of this post. Just count me as another fellow late-30s single guy who is happy NOT owning property. Nothing wrong with it. Save your money and when the time comes you can pay cash or put a nice down payment. If I ever buy, I will move to a cheaper market, retire, and pay cash for a house. :happy

Carefreeap
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Re: Is it ok not to own property?

Post by Carefreeap » Sat Feb 07, 2015 11:26 am

I read the first argument in the article and stopped. While his argument is logical it's not necessarily true. Real Estate is local. In an area like San Diego, prices are driven more than just jobs. San Diego's real estate market is also influenced by second homes and foreign investors/owners. Because of the climate it will always be that way.

Unlike some expensive areas like San Francisco and New York San Diego doesn't have rent control. Therefore the option of fixing your monthly payment and investing the rest won't work if your rent keeps rising.

I know that during the real estate down turn housing prices did dip but I didn't have to lower my rents.

As I wrote in my previous post, I think it's fine to take a break for a while (hey I WANT qualified renters :wink: ) but if you're planning on staying (or returning) to a desirable area like San Diego you would be smart to buy in again during the next dip.

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obgyn65
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Re: Is it ok not to own property?

Post by obgyn65 » Sun Feb 08, 2015 6:49 am

To the OP - there is nothing wrong with renting. I rented most of my life, only bought a small condo in my mid 40s.
"The two most important days in someone's life are the day that they are born and the day they discover why." -John Maxwell

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Re: Is it ok not to own property?

Post by FireProof » Sun Feb 08, 2015 6:59 am

In the current US market, buying is a better deal in most places, and far better in some Rust Belt and Sun Belt cities. But obviously you sacrifice a lot of mobility and flexibility, so it's certainly OK not to buy. However, there are a lot of people who think that buying is ALWAYS better than renting, regardless of the market - in Spain, almost everybody owns a home, because they are convinced that renting is "throwing away money." In fact, it's quite the opposite - the obsession with owning property means that purchase prices are through the roof, and BUYING a house is actually throwing away money. For example, rents in Madrid are about 1/2 that of Chicago, but purchase prices 25-30% more.

The problem is that most people are financially illiterate and don't understand the opportunity cost of money.

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