Intentional Success - Renting vs. Buying a Home

We all have that “holy cats” moment when we realize we are actually an adult. We notice we have created an established income, our own unique mix of a partner/kids/ pets, and we decide we need a place to really call home. Home certainly doesn’t have to a single-family home with a picket fence, but it certainly does need to be where you feel safe, comfortable, and at peace.

When one is deciding what their home will look like, there are two key factors that are paramount to a sound, educated decision. Cost and Lifestyle. Here are the three crucial lifestyle considerations:

• Am I planning to live in this area for more than 5 years?
• What will my family unit look like in 5 years? A fiancé or 4 kids?
• How important is having long-term neighbors and a sense of community where you live?

Here is what I learned about cost: I was expecting lifestyle to be the bigger factor, but writers like Sam Woolley (Why the rent vs. buy debate is completely pointless) have made some strong arguments for lifestyle truly being the only factor.

After reading Tony Robbins Money, Master the Game, I understood that the value of homes rises at about 3% every year, or 1% over the rate of inflation. The value of homes rising nominally, and isn’t a strong factor as a “pro” for owning a home. You may make a bunch of money flipping a home, or lose if there’s a 40% market correction, but those are markets, we can’t expect to time them, so we don’t factor the housing market into the equation.

Home ownership also comes with higher taxes than renting, annual insurance costs, and general maintenance. As if the case for renting isn’t strong enough already, the money you would use for a down payment should become your retirement nest egg! Pop that cash into index stocks (Money, Master the Game) and let it grow at market value the next 30 years. Average stock market return is 7.5% annually, so you’ll be just slightly behind the sell price of a homeowner, who also had higher expenses each year. Here’s a fun tool I found on Trulia to map out break even points.

I was shocked that there is such a logical financial case for renting. The financial upside is very compelling as long as you invest your down payment-sized funds into the stock market.

It all comes back to those lifestyle questions, which are answered completely based on your unique family situation.

As a homeowner myself, I have a ton of pride in caring for my home. My wife and I have made consistent improvements to fit our family’s needs, we have a wonderful neighborhood with people of similar values, and I get to cut the grass. I love to cut the grass.

If you’re going to spend a large sum of money on your future, it’s a coin flip if a house or the stock market is the better financial option. If you’re not investing though, owning a home is a much more cost effective way to live.

I would encourage you to run your plans and values through the above three questions. When you’ve decided which option makes the most sense in your life, connect with me to get your renters/ home coverage in place, and start making your choice your home!

We encourage you to insure differently. We are driven to serve.

Elevated Insurance is located at N19 W24400 Riverwood Drive, Suite 350, Waukesha, Wis. 53188. For more information on Elevated Insurance and owner Jackson Bublitz, please call 920-629-0468 or Jackson@elevatedins.com. www.elevatedins.com