Is renting a waste of money?
This weekend, I was catching up with an old friend when it came up that I’m renting an apartment.
“Oh my! You’re renting? Why, that’s just throwing money away!”
I’ve heard that or something like it from a dozen people including everyone from the completely uninformed to those with an interest in personal finance, and multiple real estate agents.
For starters, it’s literally incorrect. Renting isn’t throwing money away; it’s exchanging money for goods and services — in this case, the right to live within four walls, protected from wolves, snow, and my own sense of shame. In this way, it’s no more “throwing money away” than buying pizza.
On paying myself or paying my landlord
Had he been like his precursors in having this line of thinking, he might have continued:
“But each mortgage payment pays down principal and builds equity! And that equity either goes to you or your landlord.”
(As it happened, he did not say this. We were at one of the self-proclaimed “best pizzerias in New York” and all were intent on steering the conversation back to every last bit of Ricotta and Grande Mozzarella. But had he, I might have said what follows) Besides those walls, my rent also pays for a few more things:
- Not having to pay the interest on a big loan
- Not having to pay property tax
- Not having to pay homeowners insurance (NB I do like renters insurance and can post on that soon)
- Not having to pay closing costs to move in
- Not having to pay closing costs to move out
- (I could go on, but I’ll finish this list with) The freedom to move if the situation calls for it
Freedom to move
And that last bit is the part that I think applies to millennials more than it will have to any prior generation. With sky-high aspiration and motivation, and tempered in the crucible of economic uncertainty and tough job markets, millennials have learned to embrace the life changes that come with climbing to the top.
Renting means that if a great opportunity pops up across the country or around the world, I can move at a moment’s notice. It means that if I get married, I can find a bigger space, and add one room at a time with each new baby. If the kids move out or if I get divorced, I can downgrade with minimal expense.
That said, I happily admit that there are lots of reasons that buying may make more sense than renting, financially. Being too proud to help a landlord pay off his mortgage shouldn’t be one of them.