Why do some families rent and not buy?

Question

For a while now, I've been hearing from multiple real-estate investors that "families make the best tenants"; they're more likely to keep the rental property in good condition and they tend to rent for a longer period of time, usually several years.

But what I don't understand is why do some families rent---and not buy---a property for themselves? I feel like it would make more financial sense to buy a property you plan to live on for several years. So, why rent?

I'm curious to hear what you guys have to say about this.

Dennis Cosgrave · Answer

I always rented the house I lived in, but put my money into rental properties. For example, the last house I rented had a market value of $600,000. The property taxes alone were $1,000 per month. My rent was $1,600 per month. Owning that house with a 20% down payment would have cost me more than double that. The mortgage payment alone would have been $1,900. Add in insurance and maintenance, well, you get the picture.

JD Martin · Answer

Pretty much all the reasons have already been listed. But some people (see @Dennis Cosgrave, above) go by the idea of owning assets, renting liabilities. Your primary home is not usually an asset, when all things are considered, outside of a few places with insane appreciation. So I've known people who rent their primary home and own rentals like above. Not my preference but it works for some people in some situations - especially when housing ownership prices are far more expensive than rental prices.

Jim K. · Answer

@Jonathan Feliciano

You're asking about a very big part of why broke, depressed people stay broke and depressed.

Theresa Harris · Answer

Reasons I've heard include: no money for a down payment, poor credit, don't want the responsibility of owning a home or they don't plan on staying in the area for long.  If you are only planning on living in an area for a year or two, it is often better to rent than buy.

What people don't realize is if you are staying in an area long term, owning doesn't cost much more than renting except you have to budget for repairs and maintenance.  At some point you own the home and payments go down and you are much better off financially.

Brian Geiger · Answer

@Jonathan Feliciano

You are correct that families make the best tenants in that they are more likely to rent for a longer period of time. As far as keeping the rental property in good condition, well that depends on the family. In addition, for the multifamily units, families are more likely to rent out bigger spaces which then in turn mean higher rents. As far as single family, as you mentioned, the best benefit is the likelihood of staying there longer.

I spoke to some families about why they would rather rent than own. Surprisingly, it doesnt have that much to do with affording a downpayment for house or having good credit. In fact I know a lawyer and his family living in a rented out space and he has excellent credit and enough money for a down payment for a house. He is making six figures.

1. Upward mobility: If things go south, they can pack up and leave with out having to be stuck at the property.

2. Not having to be responsible for repairs.

3. In some places, they don't have to go through the hassle of taxes.

Zachary Ray · Answer

It may appear that way but not everyone can see things the way you are seeing them. Sometimes it is coming up with a down payment, credit etc that can stop them. Also they may not be ready to buy as the area could be new to them and they are looking everything over.

Jonathan R McLaughlin · Answer

@Jonathan Feliciano kids are expensive, jobs are uncertain, debt is high and growing families usually find their needs changing as the kids get older. Scraping together just enough to buy a a small 3 bed 1 bath house in a school district that’s “meh” may not seem appealing when you can rent one with the extra bath etc.

Jonathan Feliciano · Answer

Wow! Thank you everyone for sharing me your knowledge! You’ve all given me a newfound understanding of rent vs ownership! Thank you!

Greg Stetz · Answer

Sometimes a family or renters loves the neighborhood very much due to safety etc... however that sometimes comes with an extra cost called HOA fees that their landlord can absorb if their landlord bought the property and has 100% equity. If the family takes ownership- they might not be able to pay the $200-300 plus dollars per month to maintain mandatory HOA membership. This prevents them from leaving since the neighborhood is safe for their children and also prevents them from making that monthly payment.

Lien Vuong · Answer

Read: Rich Dad Poor Dad

Why do some families rent and not buy?

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