Wednesday, April 13, 2016

Why I Daydream About Selling My House and Going Back to Renting


I've been daydreaming lately about selling my condo and going back to renting. When I tell people this, they usually react in horror. "How could you think about going back to renting like some lowly student-peasant when you've entered * ~ * THE HOUSING MARKET ~ * ~???"

There are many reasons for this reaction, and it can take awhile to unbury them. It's just so ingrained in people that ownership is better than renting.

Reasons to Own That I Don't Care About


If you rent, you are throwing away money: This is a common trope that I feel doesn't really hold up. I believe that if you rent, you are spending money in exchange for something valuable: a place to live. Besides, when you buy, you also throw away money--on mortgage interest, HOA fees, home repairs, closing costs, and other expenses. Even to the extent that you are investing--putting money toward your mortgage--you are tying up money in an illiquid investment.

Home ownership purely as an investment doesn't make a lot of sense to me, because it's so non-diversified and hard to get your money out of. It's basically the opposite of what you want in an investment. If I'm purely trying to invest, I should buy a mutual fund, not a house.

Forced savings plan: I don't need this. I'm good at saving. I get a lot more satisfaction out of watching my account balances grow than my mortgage shrink, because I feel like I can "trust" them in a way I can't trust my home value, which seems illusory. Even my stock market investment account balances seem more to me like money, maybe because I feel more confident that I could take them out anytime I want.

Stability / the ability to put down roots: This was appealing to me at first, and I definitely remember saying happily the first few summers, "Boy, am I thankful that I don't have to MOVE right now!" But this year, I'm jealous of the people who are moving. I like new, I like variety, I like change. I underestimated this about myself. Sometimes I daydream about moving cross-country, but even just moving within my neighborhood would be a way to shake things up.

You can change the space however you want - paint, renovate, hang stuff on the walls, etc.: Now that I have the option, I can fully state that I do not take advantage of it. Home renovation is about the last way I'd want to spend my money.

The American Dream: What even is this? I don't care about this. Get out of here.

Peer pressure / everyone else (my age) is doing it: If I'm being totally honest, this is basically why I bought to begin with.

Reasons to Own That Deserve Further Consideration


Month to month expenses are actually cheaper when you buy vs. when you rent: Logically, it makes sense that renting would have a markup since the landlord not only has to pay her own mortgage and fees and maintenance, but she also presumably wants to make a profit.

You can get a nicer place for your money when you buy: It makes sense that a condo would have fewer and more careful previous residents than an apartment. In my market, at least, it seems like when you buy, it's easier to get a bigger, nicer place, and you are more likely to get perks like laundry in unit. If I went back to renting, I might have to adjust to a lower standard of living.

Rents are always on the rise, but by owning you can "lock in" a particular monthly price: This can save you money, assuming you want to stay in the same place for a long time.

So, How Long Do I Want To Stay?


All financial comparisons of renting vs. buying basically come down to, "Buying is better if you plan to be in the same place for a long time, and renting is better if you plan to move around a lot." At the time I bought, I planned to be in my place for a long time, or at least I was open to it. Now, I'm not so sure that, at this point in my life, I want to commit to being in the same place for 5+ years at a time. I have too much itch for variety. After college, I was sick of moving house every 1-2 years, but now that idea seems kind of cool to me. Maybe not every year, but every two, three years, sure.

At four years, I think I've just barely managed to hit the break-even point with my current condo. This means I might as well have been renting this whole time! Of course, it also means that, from now on, I'm making money, providing I stay in the same place.

But I've been considering moving house anyway for a variety of reasons (the layout isn't good for our current lifestyle, specific nitpicks about the location, and other reasons I won't bore you with). Suffice to say I'm not going to do the actually most frugal thing, where you buy a home once in your life, and then you live in it until you die. If I make a lateral move to a new condo anytime soon, I negate the financial advantage anyway. If my M.O. is going to be selling and buying a new condo every 4-5 years, I might as well rent, financially, right?

Back of the Envelope Math


The market where I currently live is doing well right now. Let's say, for the sake of round numbers, that if I sell and pay off my mortgage with the proceeds, I'll end up with $100,000 (equity + increase in home value). If you assume that those dollars can make, on average, 8% per year invested in mutual funds, that $100k lump sum turns into an annual $8k per year, or $666.67 per month. That means that my rent can be greater than my monthly mortgage+fees by $666.67 per month, and still be a wash, or better, from a month-to-month living expenses perspective.

(I'm handwaving yearly rental increases, but then, I'm also handwaving mortgage interest. And market volatility. And a lot of other stuff which I think may cancel out?)

If it's a wash, it comes down to psychological factors, and psychologically, I kind of hate being a homeowner.

Why I Hate Being a Homeowner


Trapped: When I was renting, I could drop everything and move out of the country with very little planning. I'm not saying I want to drop everything and move out of the country… but I like to have the option. Just the knowledge that I'd have to sell my house to do any of it is enough to put a damper on daydreams such as: living in a new town, changing jobs or career paths, following my partner on her changes in job or career path, taking a sabbatical year, living with different configurations of people, working remotely with extensive travel, joining a commune and surrounding myself with alpacas, etc. (Okay, some of those are more realistic than others.) The fact that I have no immediate plans to do any of those things is irrelevant. Knowing that I'm free has value.

Boring: I like variety. All homes have their little faults and trade-offs, but I feel like I can appreciate the good things and ignore the bad things more when I know I'm somewhere temporarily. I'm aware that moving every 1-2 years was too often for me, and now it appears that staying in the same place 4+ years makes me antsy. Staying in one place 3 years would appear to be ideal, but that's under the break-even point.

Debt: Intellectually I know that if you treat your mortgage as rent, it's not bad to be in debt. I mean, I've done all the math above and concluded that, at the lengths of time I want to stay places, it's a wash. But… being in debt really bums me out. I hate feeling beholden.

Repairs & Maintenance (Cost): I always feel like the other shoe is going to drop, and a random thing will need to be replaced for $10,000. I'd rather have an expensive but predictable lifestyle than a randomly fluctuating one, where I have no choice but to pay large amounts at random intervals.

Repairs & Maintenance (Effort): You can shovel, garden, paint, clean, fix, repair, and replace everything yourself, or you can hire someone to do it. Either way, you need to be on top of shit, and you need to pay attention, and you need to care. I don't. I'm not interested in houses. I just want someone else to deal with it. When you rent, those costs are built into the price of the rental, but the beauty part is that when something breaks, all you need to do is call the super or management company. Dealing with this shit is their job.

If I were giving advice to a person person with my temperament and extreme vague future plans, and they had not yet purchased a home, I would tell them not to. It doesn't necessary follow that I should sell (sunk costs, etc.), but it does make me wonder.

1 comment:

  1. I can understand your problem and also your view about your decision to sell your home and live on rent, It is little bit difficult to maintain home. Get the best way to find the affordable Student Rental Apartments Australia.

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