Growing up as a millennial, I was constantly led to believe that owning a home meant I made it.
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I was homeless for most of my high school years and felt envious of those who had stability. That's what owning a home meant to me, and I'm sure it meant the same to many others.
Now, two recessions later (and after a lot of therapy), I've realized that being stable in life has nothing to do with owning a home. Yet it's still shoved onto you like it's the best investment you'll ever make in your life.
Whenever I mention that real estate isn't always the best investment or talk about my apartment, I hear the echoes of "YOU'RE THROWING MONEY AWAY" from people two buildings down the block. But I've decided it's okay for me to be a millennial who's still renting and not actively seeking to purchase a home in today's wild market. So here's my reasoning, and I'm sticking to it:
1. The stock market has historically had higher returns than real estate as an investment.
Investopedia shares that in the 38 years between 1975 and 2013, an original $100 investment in real estate, tracked by Home Price Index from the Federal Housing Finance Agency (FHFA) would have grown to about $500 over the 38 period.
If you had instead invested the same $100 in the S&P 500 over that time frame, it would have grown to approximately $2,000. The S&P 500 is the stock market index that accounts performance of 500 companies in the U.S.
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"It's important to remember that everyone needs shelter, and your primary residence is typically an investment. Whether you buy or rent, it's a preference in what trade-offs you value most at any given time," says Robert Farrington from The College Investor. In specific markets, renting can be better than ownership.
As a Latina, I try my hardest to invest in the stock market to build wealth. But the fact that I don't have control over my primary dwelling means it could be lost at any time due to a change in management. Or, as we're seeing now across the country, a rent increase.
On the other hand, a homeowner could lose their home in other ways. A job loss in today's economy isn't that far-fetched and may lead to someone having a foreclosure. Your home could also cost you your financial health due to no fault of your own, such as a spike in property taxes, costly home repairs, or a natural disaster. All of these things are beyond your control but can still affect you financially. For me right now, renting still just makes more sense.
2. As a renter, I don't have to worry about maintenance costs or repairs.
I can barely build an Ikea bookshelf without stabbing the instructions with scissors — I'm NOT about to try any home repairs.
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So when something breaks in my apartment (or now, rented home), I can quickly call my landlord and let them deal with it. Sometimes, it's as simple as contacting a plumber to come to your residence to perform repairs. But other times, it could mean paying thousands of dollars to fix something that happened out of your control.
In my old apartment complex, our plumbing was backfiring, and they later figured out that the tree roots had grown around the pipes, causing them to break. This type of issue would require not only removing the roots, but also replacing the sewer line. The average cost to dig and replace a sewer line is $50–200 per foot, or $3,000–$30,000. I'm good, beloveds.
3. I don't have to worry about property taxes.
More goes into owning a home than the initial mortgage and maintenance. There are also property taxes to consider.
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Property tax is a tax paid on the property you own to a local government. Your property taxes are based on the location of your home, in addition to how your home is valued. If your home goes up in value, so do your property taxes.
It's also harder to plan for your property taxes, as they change every year. You could try to budget for it, but who knows how badly you'll be off once you're given the initial bill? By renting, I let my landlord worry about that.
4. I get to use amenities that I don't have to take care of.
Many apartment complexes offer amenities at no additional cost to you. A lot of apartment complexes aren't lacking in the extras, either. Along with in-ground pools and onsite gyms, there are clubhouses, parks, playgrounds, a garden, and sometimes free classes and happy hours.
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Many apartment complexes try to instill a sense of community for those renting, since they aren't traditionally known for it. The sense of community at my apartment complex allowed me to make great friends and find the best cat sitter.
5. I'm not ready to make the enormous financial commitment.
Between the rising cost of living and the financial risk of becoming a full-time freelancer, I am not prepared to take on any additional financial responsibility.
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This includes purchasing a home. Many people rush into a house thinking only about their mortgage, when so much more goes into it.
"We often overrate the returns of owning a home. Most people will tell you what they bought the home for and what they sold it for. Still, in reality, that really isn't the profit," says Kevin Matthews, former financial advisor and founder of investing education company BuildingBread.
Matthews states that when you subtract the interest cost on the mortgage, all the home repairs, and maintenance costs, renters can often have a higher net worth if they're investing the difference. "For those who say that ownership is always better, my argument is that the math often disagrees, especially when you account for the changes in the tax code from 2017."
Another issue when purchasing a home is coming up with a significant down payment. To avoid paying an additional cost on top of your mortgage, known as Private Mortgage Insurance (PMI), you'll have to come up with 20% down of whatever the price is that you're purchasing your home. This can be significant, as the average cost of a home is now $453,700, which means you need to come up with $90,740 to avoid paying it.
6. And finally, renting gives me the freedom and flexibility to live the lifestyle I want.
Being a renter gives me the flexibility to live my life on my own terms.
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Not being tied down to a certain location lets me test out specific neighborhoods to find one that works for me and my lifestyle. You can always find a renter, but being a landlord comes with its own set of headaches I'm not ready for, like the ones mentioned above.
Renting also allows me to take on more opportunities as they arise. If I was offered my dream job across the country, I would be able to take it with no questions asked. I can downsize my home or find more space if needed. Renting allows me to grow as a person without worrying about everything that goes into owning a home.
Renting isn't ideal for everyone, and sometimes, you can find a great deal on housing. Some markets are for renters, and some are for buyers. While you may be like me and associate homeownership with an old dream, that's okay. And if buying a home makes you content, that's okay too. At the end of the day, renting is a personal preference that I don't see changing soon.
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