Rent... and collect rent.

A short while ago I wrote a post about rules I've broken that while I'm investing in rental homes, I actually don't own my personal residence. I rent.

I don't think I've ever read a book or an article that came out and admitted that sometimes it's better to rent than to buy. But I think it's definately true. So here's my reasons for renting.

1) I plan to move, possibly at the end of the year. My fiance and I are considering moving to London in January. However, while an excellent reason to not buy, this has only become a possibility in the past 3-4 months.

2) I live in Washington DC, but buy 3 hours away. A townhouse up here will run a minimum of $300,000 (closer to $400,000). Each of the houses I own were bought for less than $200,000. AND I bought with a partner. Simply put, I couldn't afford a very large down payment on a house here (less than 10%).

3) While home prices skyrocket, rents have stayed low. My rent is only $1205 a month (less actually, since I don't live alone). Since my brother pays $555 I'm left with a tiny bill of $650.

Running some quick number on a mortgage calculator I can see that if I bought a $350k townhome and paid down the $22k I've put into the company, then got a 6% rate for a 30 year mortgage (I have excellent credit, and we'll assume I did this back in January-ish), I'd be paying $1,966.53 a month, just on the mortgage. Add in insurance, property taxes, Home Owners Association Dues (always expensive in townhome communities) and PMI (less than 10% down, remember?) And my bill would likely come to somewhere around $2,500+ a month.

If my brother moved in at the same rate I'd have to pay over $2,000 a month. To be able to afford that I'd have to cut out my 401k and put all my money into the house. Now that I have a fiance that might be a more manageable number, but it would still severely restrict our ability to save.

So instead of buying, I've chosen to buy homes for other people. It's a lot more work than owning your own home (all the same repairs, plus the people skills and extra accounting skills), but it's far less costly.

4 comments:

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