As we all know, home ownership is a money-pit of never ending proportions. Maintenance, mortgage payments, insurance, taxes, major repairs, etc, etc, etc. At this point in my life, I could certainly afford to buy a small house with cash, or a much larger one with a significant down-payment. Except I’ve chosen not to. You might wonder why I’ve chosen not to do this because home ownership has traditionally been thought of an the cornerstone of financial personal finance-the foundation upon which everything else can be built.
Here are my reasons for renting:
1. I live abroad. I’m not going to live in Korea forever and I’m not planning on returning to Canada in the immediate or mid-term future. And I certainly don’t want to be a landlord from abroad if someone were to rent my house. That’s even a worse nightmare than straight-up home ownership. And, I think I can actually get a better return on the stock market than I can by collecting rent each month.
2. I like compound interest working for me instead of against me. If I save my money and invest it, I can have enough to just pay cash for a house at some point if I choose that. My money is working for me in the stock market. A mortgage is the opposite because you end up paying a significant portion of the monthly payment on interest. The power of compound interest is working against you.
3. I like the freedom. If something breaks, I just call my landlord. If I have noisy neighbors, I just move when the lease is up. If I get a new job in another city or country, I just take it and don’t worry about my house. My life is simple.
4. Diversification. In my opinion, this is the new cornerstone of personal finance. The idea is that you don’t want to have all your assets tied up on one place and a house quite often does that for most people. It definitely would for me.
5. I like investing. It brings me happiness to research companies and decide what to buy and when and when to sell and why. I like following the headlines on Yahoo Finance. Researching housing markets and mortgages and going house-shopping….not so much. I can’t really think of anything I’d rather do less actually.
6. Renting is a decent option in the city I live in. I get $350/month in housing allowance from my job. I rent a very nice 3-bedroom apartment for $500/month, with a $10 000 deposit. So for $150 out of my pocket each month (or about 3.5% of my monthly salary), I have a fabulous place to live. If I was paying 1/3 or even a 1/2 of my salary each month (possible in a place like Seoul), I would consider buying. But 3.5%…who wouldn’t rent? It just makes sense.