Before talking about real estate as an investment I think an important question is to ask what we do regarding our own home. Do we rent or own? The decision needs to be based on your situation, not an imaginary timeline and certainly not only on convenience.
If you are starting your career, before rushing to get out of your parents’ home, take some time to evaluate your situation. Staying at home a year or 2 could help you be more stable in the real world. I’m definitely not an advocate of “mooching” off of your parents, but they’ll probably understand if you delay moving out because you’re saving money with purpose. If you do move out, maybe having a roommate makes sense, so you could cut your bills in half. Maybe you find a perfectly affordable home to purchase.
My point is that you need a plan with goals and everyone in your circle needs to be on the same page. As the world changes, we have to adjust to it regarding our personal financial situation. This is why we can’t always do things as our parents did. We talk about how the world is different now, but we still make our financial decisions on past experiences.
My parents are Baby Boomers and, like their parents before them, home ownership was one of their top priorities. Renting was viewed as “throwing money away.” Today, however, renting seems to be more acceptable. With the current low interest rate environment, mortgages can be affordable in the right situation, but people can still get in trouble by buying “too much house.” It may not be your “dream home,” but you can find mortgage payments for $600-$800 a month. That’s pretty affordable for a person making $40,000 a year. Why wouldn’t you buy that home instead of paying around $1,000 to rent a similar home?
The answer is simple – convenience. Our society places a high value on convenience. However, when convenience reaches a point where it interferes with the pursuit of your goals, it actually becomes a hindrance. If you’re living in an area where you can buy a home for less than you can rent a similar home, then home ownership has become a supply and demand issue. Rent prices can only be higher than mortgage payments if a high demand for renting allows for an increase in price.
Unfortunately, we can make a mistake by renting only because we think it is more convenient. Sure, the property owner is responsible for maintenance, but is that worth the extra money you’re paying to rent the place? That can be a yes or no answer. Neither is wrong depending on your situation, but the decision to rent or own should be analyzed carefully. We should also understand the consequences of making the decision. The extra money you’re paying for convenience could be used to pursue future goals. This is where a financial planner can be helpful.
Financial planning is about listening to clients and creating a plan that gives them the best chance of being successful. It’s going to be different for everyone. Some may be renters; others may own real estate. My job is to do everything in my power to make sure clients have the tools they need to keep a roof over their heads while pursuing their reasonable goals. All of our decisions have consequences. Time is a factor, but life is a marathon. It’s a long road with many choices, but you don’t have to travel alone. Are you ready to let me be a part of your journey?
