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Dear Liz: I’ve gone back and forth over whether to buy property to live in. I would only consider a condo, because I don’t think it’s ecologically responsible for a single person to live in a stand-alone house, plus I have no interest in or aptitude for maintenance. But through family and friends’ experiences, I’m worried that condos can be a nightmare to own. That leaves me stuck with renting, which gives me flexibility. I also live in an extremely expensive area (Boston) and do contract work, so purchasing something I would want to live in might be tricky. But I feel I’m being barraged by people telling me that renting is a losing proposition and that buying is great for my future. I’d rather keep putting money away in my retirement funds, but I wonder if I’m just refusing to “be responsible” as others say. I have no debt at all, so I feel responsible.

Answer: You would think the recent economic unpleasantness would have cured people of the idea that homeownership is right for everyone all the time.

Real estate investors often tout the benefit of “leverage”–using borrowed money to control an asset that can appreciate in value. As we learned, though, leverage can work both ways and can leave you owing more than a property is worth.

In reality, much of the financial benefit of homeownership comes from the “forced savings” aspect of paying down a mortgage. Homes do tend to appreciate in value over time, but on average the appreciation usually doesn’t exceed the overall inflation rate. Plus homes are expensive to own and maintain, which can dramatically reduce the return on your investment. Investments in stocks and stock mutual funds probably will give you a better return over the long haul, and you’ll never have to buy a new roof for them.

Homeownership can be a good idea if you can afford all the costs, plan to stay put for several years and truly want to be a homeowner. Otherwise, renting gives you freedom and flexibility. That’s neither irresponsible nor a losing proposition.

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5 Comments

1

I know people always harp on the appreciation aspect, but I think the feeling of security as you age that is important to people to. As long as you have your mortgage paid off by the time you retire, and depending on your area, most people will pay much less in taxes and insurance than they would in a monthly rental payment. And that idea that no one can evict you from a home that is bought and paid for (and the taxes are paid), that you control how much money you put into it, etc it all adds up to a sense of security during a time when you’re not really making much money anymore.

2

I am 67, and I’m glad our house is paid for–there -is- a certain feeling of security in that–but if I were single, I think I’d prefer an apartment.

The most important thing, whether you’re buying or renting, is to spend -less- than you can afford, and save for the future.Real security is knowing that you can replace your car if you total it!

3

My dad and mom have a paid off home and they are retired.
But they’re both not sure if they have enough money for thier retirement.

A paid home isnt a great comfort when you havent saved enough to live there.

People harp on you for not owning, but when they cant pay for thier water and heat in their retirement and your living off your fat retirement fund, you’ll be glad you didnt take the plunge.

4

Please consider home ownership carefully. As a single-parent of 3 and a traveling contract employee- I’m never in one spot long enough to make the investment. We travel with a nanny on the road and tutor the children.

I had considered the “investment” of owning a home (and have in the past owned 4). A single parent or single working person (without kids) should only consider a condominium if they can manage to stay employed in the same area on a long-term job.

All real estate comes with it’s pluses and minuses, but to say that taxes and insurance are less than renting is foolish. My grandmother and grandfather paid cash for their house he built from the ground up. She is now widowed and responsible for fixing and/or replacing (not to mention fueling) a riding lawn mower, a push mower, a weed trimmer. She also has to keep pruning tools oiled and maintained, keep the trees trimmed, occasionally hire out a tree to be treated for pests or to be removed when dead (one fell on her house and she had to fix the roof). There is also painting, staining the deck, staining the shed (that stores all the tools), painting the fences, replacing the mailbox when it gets hit or smashed by a neighborhood driver, repair or replacement of washers, dryers, furnaces, water-heaters, toilets, windows, floors, cabinets (staining/painting), shingles- you name it. Let’s not forget water/sewer bills (or the occasional pumping out/draining and/or replacement of a septic system, well and pump, etc.- this list is constantly going. Taxes go up when neighbors improve also.

All-in-all after her “free” home since it was built 23 years ago- she’s paid “HAND OVER FIST” PILES (PILES and PILES!) more to thoroughly maintain her home than I’ve paid for rent. She warns that the ‘American Dream’ of home ownership is- as I’ve agreed- for two-parent households and more-so for those that have a parent that is home. When one is home, there is much quicker response for a sump-pump that failed and a basement that’s flooding than if both were gone working all week and nobody noticed. Damage adds up much faster with out someone to jump on it. Leaky roofs, overflowing toilets, trees crashing through a window, etc.

Don’t let family pressure or a realtor wanting to max-out your buying “potential” to pad his pockets on a commission check. Think for yourself and ask all your home owning friends if there’s anything they don’t like about their home. Get all the minuses before you look at the pluses. After owning one home in a resort community (highly taxed and historic so many problems with that old money trap), one condo in a snobby community with neighbors that complained about every little thing, and two homes in the “burbs” that required more yard work than I have time for- it’s not for everyone. Not for me and my bank account has been thanking me ever since I quit trying to make something work for me that wouldn’t fit my lifestyle and schedule.

Best wishes on your decision. I’ll be at my community pool soaking up the sun while you’re frustrated because the mower won’t start, your pool is still green and the birds just crapped on your new lawn set :)

5

I forgot to add- the cost of heating and electric is higher for her too.