Why we still rent…

for-rent-sign-cartoon

Ever since my husband and I became debt free our friends and family have been asking us when we are going to buy a house. It is a fair question as most people our age are getting married, buying houses and making babies. The truthful answer to this is… I am in no rush.

After grinding away for 2.5 years to pay off $120,000 of debt, the last thing on my mind right now is to get into more debt. I know the argument that mortgage debt is good debt, but that is not the point. Yes, I agree good debt (if there is such a thing) provides you with a better interest rate and increases long term assets (sometimes) but I am not ready for that type of long term commitment yet. Owning a home is a huge responsibility and I want to figure out my life before I sign on the dotted line.

I know this feeling will probably change overtime and my husband and I will buy a house. We want to at some point, but we don’t have an aching desire to right now. When the time is right and the house price makes sense and we have sufficient savings on top of making our mortgage + other expenses each month, then we will. It might take 5, 10, 15 years, or it may never happen, and that’s ok. I don’t mind as long as I have a roof over my head and the one’s I love around me.

So here are a few reasons why I am not in a rush for home ownership:

  1. I am young and like the idea of picking up and moving cities, provinces, countries if needed to expand my skills and increase my income potential. Renting provides me with minimal costs to do this.
  2. I see residential home ownership as an expense item, not an asset. Similar to rent payments, I will need to come up with the money in order to continue living there. This also removes the added angst of timing a house purchase and hoping you buy low and will sell high. My home is a place I lay my head, not an investment. If at the time we want to sell the house has gone up in value, I see that as an added bonus. Nothing else. However, purchasing a rental property is an investment with the down payment & other expenses being the cost and rent payments from tenants the cash flow/income. Since we are also not in the market for a rental property, this does not appeal to us either.
  3. House prices are ridiculously expensive in major cities in Canada. I have lived in major cities all my life and enjoy doing so (Ottawa, Toronto, Calgary etc.). This may change as I get older but for now, house prices in major cities in Canada are ridiculous.
  4. I want to “beef” up my savings in both short terms funds like: emergency fund, baby fund (when I have them) and education fund (I love learning) and long term funds like our retirement saving and RESP for our kids.
  5. I invest in companies that invest in real estate. Currently, I have some shares purchased in CREIT (Canadian Real Estate Investment Trust) & enrolled in their DRIPS. CREIT purchases and leases out retail, industrial and office space in Canada and the United States. This provides me with some exposure to the real estate market while minimizing my risk.

With that being said, I would never rule out home ownership, but it needs to make financial sense for us. I think owning a home is great and I would like to someday, but I want it to be blessing. I have heard too many horror stories of people that are over-leveraged.

Categories: Debt, Life, Savings

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14 replies

  1. Pamela, you are a wise young woman, whatever decision you make, I know you can live with because you contemplate and think your way through the process. For this reason, I feel you will have limited to no regrets. Many your age do not have a mature outlook about finances as you do, even if you feel you gained knowledge out of necessity. I am much older, and it has taken longer to see things the way you are seeing them in regards to finances. For this reason, I admire you. Continue this journey, and thanks for using the experience and information you obtain to share with and empower others.

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    • Those are really kind words. I appreciate them more than you know. I am a planner and always have been but I think getting into so much student loan debt between me and my husband has really put things into perspective now that we are coming out of it on the other side. I like savings for the future, and investing in things that pay me money (not the other way around). This is why my husband and i enjoy renting. It allows us the ability to invest and the mobility to pick up and move for better opportunities if and when they arise. Thanks so much for reading and leaving a comment.

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      • You’re welcome. I like that you seem to remain true to what works for you and your household and not succumb to the pressure of societal norms. Create your own environment and set rules for your household. I see you both are doing that and best wishes.

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  2. my 26 year old son just purchased his first home. It has three bedrooms, he rents two to friends to help pay off his mortgage. Very good investment instead of paying rent!!

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    • Thats great! I think everyone situation is different. I don’t know if I could take on a mortgage on top $120k of debt. Now that we have paid that off though, it does open up alot more opportunities. However, we are currently more interested in financial investments, but home ownership is definetly not out of the question. Thanks for the comment!

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  3. Well analysed. I like that you are saving and living too. A young person should live a little before getting saddled with a house, except it is easy to sell it off which is not always the case or possibly as an investment to make more money. Saving culture is extremely important.

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    • I think it depends on the local economy you live in. Many people are selling their homes right now where I live well below what they bought it for. There are not as many jobs as there use to be.

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  4. The price argument, regardless of whether you expect it to go up or down, misses an important point – debt servicing. Remember that “emergency” interest rates came after house prices dropped in the U.S. So, although lower interest rate does affect prices going higher, I don’t think it’s the catalyst that’s going to cause prices to come down. But when you see MoneyMart and others like them setting up shop in affluent neighbourhoods or 3-4 in the same neighbourhood plaza, I think we may be looking at the ‘canary’ in our Canadian real estate ‘coal mine’. Great Post!

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  5. Some say “buy because rent money is dead money”.
    On the other hand, interest expense is also dead money.
    If one buys there is the risk house prices may go down.
    If one doesn’t buy, house prices might go up.
    Ergo. The question of buy or rent has no definite answer.
    My 2 cents

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  6. I haven’t purchased for the same reasons as you. I think most people end up buying because they think it’s the “next step in their life”, and that ends up costing them big time. I also think in the current market, it’s more of a risk. In my mind, houses will never inflate like they did while our parents were growing up. I would love to make a 200% profit on an investment that I can also live in – but that sounds almost too good to be true! Or, maybe I’m just cynical 😉

    Great post.

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  7. What’s that saying? House rich, cash poor? I don’t for a moment regret buying our house, because I know we’ll be here for many many decades, and the appreciation has been great for our net worth. The rental income helps with the mortgage and on paper, we’re doing “well”. (Y’know, minus this debt and all…) But I totally get not wanting to feel enslaved to a bank/mortgage for years on end!

    The one caution I have against waiting to long (assuming you decide to settle in a city eventually!) is that housing prices seem to be going up waaaay faster than incomes. Had we waited, there is no way we would have been able to afford this house now, even with the extra years we would have had to save. My brother is 3 years younger and is finding it hard to break into the housing market because of how ridiculous prices are now. But of course, if you’re not sure if you’re going to stay in a city, hold off until you’re sure!

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    • I know what you mean about not waiting too long, but I don’t think house prices can go up too much more if incomes continue to stay where they are. At some point, something has got to give. Coupled with the fact that interest rates in Canada can only go up, I am not too worried about waiting it out

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      • I know… that’s what people have been saying since before we bought, and that was in 2012! They keep talking about this housing bubble that will burst, which is partially what my brother is waiting for at this point, but it doesn’t seem to be on the horizon anytime soon. It’ll definitely be a good time to buy then, but very bad for many people’s (including mine!!) net worth.

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