But lots of younger people claim renting is better
This article is not financial advice. It’s for educational and entertainment purposes only. Do your own due diligence if you’re planning to buy a property.
Why is it that so many younger people claim that renting is better than buying? Why is it that older people that followed this path don’t recommend it?
I know that lots of younger people can’t afford to buy a property these days. However, this article isn’t about them. This article is about younger people that claim that renting is preferable to buying.
What they claim is that the money they would have spent on buying a property can instead be invested. This is supposed to lead to a better financial outcome in the long term.
The proof of the pudding is in the eating
So, let’s look back and see how this worked out for older people. Most older people own their own homes. A minority still rent.
With the stock market having done spectacularly well over the last few decades, the renters must be miles ahead?
The fact is that they’re not. Every older renter I know is glad that they bought their home. They’re now fairly secure. They can live out the rest of their lives without paying any rent or mortgage payments.
It’s true that they’ll have some maintenance expenses along the way, but these are usually quite manageable. Their costs are way less than those still paying rent into their old age.
I know quite a few of these renters. Some are resigned to their fate. Others are quite bitter.
Priced out of a location you love
I know one older woman (the mother of an ex) that has had to move to a dodgy part of town because her rent has risen so much over the years. Even though she has a fairly decent pension, it’s no longer enough to pay the rent in the area she used to live.
She had enough money to buy the home that she rented. She chose to buy a car instead. She claimed she had enough left over to pay the rent for the rest of her life. She was very wrong.
If we forget about the finances for a moment, one reason to buy a home instead of renting one is so that you can be sure you’re able to remain in the area you want to live. Many locations can quickly become very expensive.
Renters usually get driven out because they didn’t factor these rent rises into their finances.
These renters often blame the landlords, but it was their choice to rent instead of buy. Just be to clear, I’m taking about people that had a choice between buying and renting. I’m not talking about those that couldn’t afford to buy.
It can be heartbreaking to be forced out of an area that you’ve lived in for decades. Any area where all your friends are based. I’ve seen it happen. More than once.
But what I notice most of all is that the renters don’t usually have any higher savings than the owners. I guess the same will happen to the younger renters today. They may plan to invest any extra cash, but will they actually do that? Even if they do, will they be tempted to withdraw some of it in an emergency?
Don’t forget that some people think needing a new car is some kind of emergency.
I believe that almost everyone should strive to own their own property before their retire. I don’t suggest buying if you’re only going to be in a location for a couple of years. But if you’re planning to spend decades in the same place, buying makes sense.
Don’t make the mistake of ending up like the older renters of today.