General: Do you rent or own the home you currently live in?

Member since 2018 · 41 posts · 25 votes

Curious question. Wondering what the thoughts are out there about investors who are also renters. Anyone? We're looking at going back to renting yet, wish to continue on our investing ventures.

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Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

It makes economic sense in a few high-priced areas to rent rather than own, but in places like where I live, it's definitely cheaper to own. It makes even more economic sense to own as modestly as possible, unless you're working a live-in flip, in which case you accept living in a construction zone.

In our case, we're moving out of a $150,000 condo in an upscale suburban neighborhood to a duplex we bought for $45,000 in an urban C-neighborhood. We'll be renting out the other half of the duplex.

The next place we plan to move after that will be a $200,000 rental property we currently own, We'll do a live-in flip there and sell.

These sorts of moves are of course much easier to do if you don't have kids. But in all cases in this business, the notion of owning a majestic family home that costs a lot to live in and maintain and doesn't make you money should go by the wayside until you have a couple million in the bank. We feel we need a dream house far less than we need our financial independence.

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Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
It makes economic sense in a few high-priced areas to rent rather than own, but in places like where I live, it's definitely cheaper to own. It makes even more economic sense to own as modestly as possible, unless you're working a live-in flip, in which case you accept living in a construction zone.
In our case, we're moving out of a $150,000 condo in an upscale suburban neighborhood to a duplex we bought for $45,000 in an urban C-neighborhood. We'll be renting out the other half of the duplex.

The next place we plan to move after that will be a $200,000 rental property we currently own, We'll do a live-in flip there and sell.
These sorts of moves are of course much easier to do if you don't have kids. But in all cases in this business, the notion of owning a majestic family home that costs a lot to live in and maintain and doesn't make you money should go by the wayside until you have a couple million in the bank. We feel we need a dream house far less than we need our financial independence.
35 Reply
Chinmay J.
Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
8y
Originally posted by @Kim Durst:

Curious question. Wondering what the thoughts are out there about investors who are also renters. Anyone? We're looking at going back to renting yet, wish to continue on our investing ventures.
You have to be in a really unique situation for renting to make sense. Conventionally speaking, buying is mostly better option than renting. Why cannot you continue your investment carrier while still owing the place?
5 Reply
Aaron Hunt
All Over, USA · Member since 2017 · 689 posts · 756 votes
8y
We'll be renting in a HCOL, while investing elsewhere. Mortgage + HOA would be double our rent otherwise.
5 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Rarely in my mind does it makes sense not to own and to only rent
it doubly makes no sense if your in an area of historic appreciation or price gains.
Renters just pay for landlords homes.. its the whole reason or the main reason most people buy rentals
that allows someone other than the owner to pay the mortgage or create income .
Although renting instead of buying will be appropriate if your not sure your going to live in an area for more than a year or two or three.. sales cost to sell a home will cause you to lose capital.. so if rent is the same as a mortgage other than a small tax write off and I think that could have changed with the new tax plan ( not sure).. you could make a case that renting is better in that scenario.
Or like @jmartin who I believe rents as a business choice and travels the world on the back of camels.. it makes sense for him but he also has a lot of rentals for income.
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Kim Durst
OP
Member since 2018 · 41 posts · 25 votes
8y
we could keep our current house and invest as well however, we are expecting a nice profit and would like to use it towards investment properties. Not to mention, the work involved living on this lake is tremendous. Downsizing sounds mighty nice.
1 Reply
Terrell Garren
Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes
8y
@Jim K. is a smart dude. I wish I had known at 30 years old what he knows now. Either buy the cheapest house you can be happy in and invest the rest -or- buy, repair, resell every 5 years.
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Kim Durst
OP
Member since 2018 · 41 posts · 25 votes
8y
Love that! Thx. Here’s the thing. We are getting started later in life. Recently 100% debt free, other than our house. Now we have the money to invest. We want to hit it hard over the next 10 years
2 Reply
Chinmay J.
Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
8y
Originally posted by @Kim Durst:

we could keep our current house and invest as well however, we are expecting a nice profit and would like to use it towards investment properties. Not to mention, the work involved living on this lake is tremendous. Downsizing sounds mighty nice.
So If I were you, I would buy a cheaper house, instead of throwing away money to pay someone else' mortgage.
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Anthony GaydenPro Member
Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
8y
Kim Durst When I bought my first rental I was still a renter myself. I house hacked my second rental, so I became a homeowner.
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Jay K.
Houston TX · Member since 2018 · 32 posts · 12 votes
8y
I have only rented once in my life and that was in college. Even that was a mistake. Since the age of 22, I have owned over renting. I am now 24 and have 3 houses. 2 rentals and 1 live in flip which I am renting a room out that pays me 70% of my actual mortgage.
Even if you cannot afford to own with a mortgage, you can make it work. Run the numbers, use your resources and leverage yourself securely to come out on top in the end.
5 Reply
James Mabe
Investor · Winterville, NC · Member since 2015 · 47 posts · 93 votes
8y
it’s a lifestyle question. @Jim K. has the right idea. We own because we, my wife and 3 kids, are married to this neighborhood. As long as we live in the Greenville area we will stay, cuz moving sux! There is a time frame where renting vs owning is a wash (you can debate that to high Heaven). I enjoy my house and all is well, but if I were single, I would sell and have more capital to invest . Caveat, we got a deal on this house on the CH steps in 2012 and have 15 yr mortgage at 3.75. Usage is great but it’s not paying us anything.
3 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Well considering where I live most townhomes start around 300k, for me right now renting is way cheaper. I rent where I live and own rentals where it makes sense. Grant cardone is a flashy and sometimes over the top person but the one thing he says that I agree with is rent where you live and rent to others where they live. Keeps me mobile, don’t have to worry about maintenance etc. Let’s run some numbers. Let’s say I can do a 250k home at 4.5 percent interest and 20 percent down. Estimating taxes and insurance along with the mortgage my PITI is almost double what I currently pay in rent. So renting makes sense for me for now. I’ll buy a home when I need the space.
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James Mabe
Investor · Winterville, NC · Member since 2015 · 47 posts · 93 votes
8y
Yeah @Caleb Heimsoth. I agree. That’s the other caveat. Our price to rent ratio is 1-1.5:1 so sfrs can be had. But in high priced markets, renting may be your only option. Also factor in transaction costs for buying.
3 Reply
Ken Kwok
Hong Kong · Member since 2018 · 17 posts · 7 votes
8y
Rent a lower ROI house to enjoy the house; Buy and rent out the higher ROI house to enjoy the cashflow. That's the thumb of rule I am holding.
4 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
Originally posted by @Kim Durst:
we could keep our current house and invest as well however, we are expecting a nice profit and would like to use it towards investment properties. Not to mention, the work involved living on this lake is tremendous. Downsizing sounds mighty nice.
You wouldn't believe the excuses you'll read on Bigger Pockets for why people simply HAVE to own and live in a large, expensive house. This is almost matched by the excuses people come up with for why they have to drive a late-model, high-end automobile. Congrats for not falling into the trap.

The pattern is almost always the same: these people went to the bank, which told them what the most expensive house they could afford to pay off was, the buyers then established a price ceiling just short of the highest number the bank quoted them, and then they met a realtor who pushed them past their price ceiling and up against the highest 30-year mortgage the bank was willing to offer them.

The people buy that expensive house, move in, and then spend the next fifteen years justifying to everyone they know why the house is a good investment (usually based on inflated appreciation numbers). After fifteen years, the illusion that they're going to someday rent their (wholly unsuitable) house for passive income while buying a second, even grander and larger house, sets in. That's when we usually get them as first-time posters here: "READY TO TAKE THE PLUNGE AND INVEST."
6 Reply
Josiah Kay
Rental Property Investor · Wauwatosa, WI · Member since 2017 · 156 posts · 99 votes
8y
I choose to rent. For the area that I want to live in, it would not make sense to own. I'd rather pay comparably cheaper rent and be able to leverage the money I would of used on a primary residence down payment to buy an investment property. However, that is just the strategy that I found to be most aligned with my long-term goals. I am interested in building my cashflow as quickly as possible and forking over $50K for a downpayment when I could leverage two rental properties doesn't work for me.
8 Reply
Account Closed
Investor · FL · Member since 2016 · 332 posts · 388 votes
8y
Currently under contract to sell my primary home and started renting last month, while building 3 homes and looking to purchasing another all in a market 7.5 hrs from me. Why? I live in the DC region and it is freeing up capital which will enable me to pickup another 3 to 4 more homes in the other market. What I have noticed is my mind is not focused on updating and fixing things in the rental home like it was in my primary home I owned. I do not own it so I don't care. What it does also is free my mind and time to focus with precision on the business side of real estate while being Active Duty military. Just my 2 cents.
4 Reply
Kim Durst
OP
Member since 2018 · 41 posts · 25 votes
8y
Chris,
This is precisely what we also believe. Nice to hear that we are not alone in our beliefs! Thank you for sharing!
1 Reply
Carlos Joel Garcia
Bangor, PA · Member since 2018 · 8 posts · 6 votes
8y
This a common question which applies to unique situations. I rent a 2 bedroom home in 4 acres, house and garage for 850.00 in a beautiful country setting close to city in rural Bangor, PA. Water, sewage, garbage disposal included. It gives me the space to store all of my flipping materials, tools etc. I strictly flipping at this point and find it hard or impossible to find a similar property in surrounding areas. Taxes alone would be equal to the rent I am presently paying for the type of setting I am living in. No children, and growing the business. In my situation, at the present time, it is ideal!! the idea of owning, unless I am using the property free and clear as a equity line of credit to leverage other properties, is not in my best interest. Thank you for posting
5 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Jim K.:
Originally posted by @Kim Durst:
we could keep our current house and invest as well however, we are expecting a nice profit and would like to use it towards investment properties. Not to mention, the work involved living on this lake is tremendous. Downsizing sounds mighty nice.
You wouldn't believe the excuses you'll read on Bigger Pockets for why people simply HAVE to own and live in a large, expensive house. This is almost matched by the excuses people come up with for why they have to drive a late-model, high-end automobile. Congrats for not falling into the trap.

The pattern is almost always the same: these people went to the bank, which told them what the most expensive house they could afford to pay off was, the buyers then established a price ceiling just short of the highest number the bank quoted them, and then they met a realtor who pushed them past their price ceiling and up against the highest 30-year mortgage the bank was willing to offer them.

The people buy that expensive house, move in, and then spend the next fifteen years justifying to everyone they know why the house is a good investment (usually based on inflated appreciation numbers). After fifteen years, the illusion that they're going to someday rent their (wholly unsuitable) house for passive income while buying a second, even grander and larger house, sets in. That's when we usually get them as first-time posters here: "READY TO TAKE THE PLUNGE AND INVEST."
I basically agree with this.. with one exception realtors do not PUSH people to over extend or spend.. I have been a broker for 4 decades my wife 3.. We serve our clients they tell us what they want and we provide that.. we do make them get preapproved and one thing is certain .. when a lender says your approved up to ( in our area starter homes are 450k or so) up to 500k that's what they shop for.
But this last year in our latest community we are building we had two deals that did not go together over a price difference of about 15k.. we just don't discount in our market so when we ask 450k we sell for 450k not 435k.. ( at least in this time of the cycle this is true)
but two folks would not go higher because the payment was a touch higher than they wanted even though they were approved and it was less than 50 a month or about that.. they held their guns so did we they bought somewhere else and we sold to someone else.
But there is just something about a new home never lived in that drives our markets out here on the west coast.. But its the buyers not the brokers reaching higher than they can or should.. you can buy used homes in the 350 to 400k range in the same areas. And you can buy smaller townhouses in the high 200s ..
AS your growing your portfolios I see this austerity plan working.. but I would say the biggest driver of young families is school districts at least were we live its not like the deep south were far more kids go to private academy's .. so school districts will command much higher prices if they score well. . Then its an inventory issue .. etc etc. Also on the west coast once you get into a home you have a very valuable asset not a liability generally speaking.. I totally get the rent verse own in many parts of rural type merica where there is Zero appreciation and probably depreciation..
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2 Reply
Eduardo Rodriguez
New Braunfels, TX · Member since 2018 · 19 posts · 10 votes
8y
Kim, if your current property is not going to make you any money as a rental, how much money will it bring in on the sale? If this is a fairly new property you might not have enough equity but you have already paid money for purchasing the title, agent, etc, you are willing to pay those fees again?
Tip: use the BP calculator to see what your property could do, I performed this exercise with a property I currently own and determined to keep after analyzing for rental with proper investing(already have the equity in them to do this).
I am fairly new, but think positive cash flow even if very low is still cash flow, but Jim K has some solid advice.
2 Reply
Matt Millard
Lewisville, TX · Member since 2015 · 344 posts · 264 votes
8y
A down payment here in North Dallas would cost me at least $60k plus closing costs. That’s just for a basic 1500 sq ft starter home in a so so neighborhood! I would much rather put that $ into syndications & grow passive income than pay 3% property tax the rest of my life & own a home that would never cash flow! Renting is the way to go around DFW. Househacking isn’t even possible without a 45 minute drive with tolls to a bad neighborhood & more traffic!
4 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
8y
@Kim Durst I prefer to be the only one with rights to enter my property. I prefer to not have rules to live under. So for me owning is more about control and security. Renting may make sense in some markets or situations. If you are moving around for your job, then renting usually makes more sense.
Rather then renting, I would suggest buying a smaller house that needs some work. You can live in the property and fix it up.
3 Reply
Eduardo Rodriguez
New Braunfels, TX · Member since 2018 · 19 posts · 10 votes
8y
Matt, your rent payment includes the property tax on it, you are just paying it for the owner, however, it does make sense to rent when owning is not affordable, and income projections are better if used for investing rather than living. I just happened to start busying before I considered investing and analyzed for best case scenario, the math comes up as keeping the houses for rental since that is my objective.
I still own where I currently live but want to transfer that property as well to my LLC and rent it out while I look for my next purchase probably with an FHA loan.
2 Reply
Ahmad H.
Rental Property Investor · New York, NY · Member since 2013 · 136 posts · 101 votes
8y
@Kim Durst It depends.
Here's a link to one of the best rent vs buy calculators out there. The output obviously depends on the assumptions for appreciation, opportunity cost, etc.. but it lists most if not all items one should think about and runs the numbers. It's also fun to see how tweaking things changes the decision.
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
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