Is rent really throwing money away?
Have you ever been asked… when are you buying a house?
It’s been 3 years since I graduated pharmacy school and started working. My parents say “it’s time to grow up“. I get it… but the truth is that I don’t want to buy a house.
Growing up I’ve always heard:
- A house is the best investment you can buy
- Renting = throwing your money away
But is this always true?
With a pharmacist paycheck, I can afford a home… but just because you can afford it doesn’t mean you should buy it.
The truth is buying isn’t for everyone. Here are 3 reasons why I choose to rent over buying a home:
Rent is a service
You aren’t trapped.
People lose their jobs. Opportunities open up. Unexpected things happen. The real question is how quick can you adapt?
Houses are hard to cash out and take time to sell. Sell at the wrong time? You can take a hit financially.
The biggest benefit of renting is flexibility. If I lose my job, I can downsize my apartment. If my dream job opens up, I can move across the country. If I’m sick of LA traffic, I can move.
Renting to tenants is not easy money
- You actually have tenants
- Tenants don’t magically pop up. Sometimes you have slow months where your property sits empty.
- Your tenants actually pay… and on time
- Tenants won’t always pay. Evictions don’t happen overnight. In my uncle’ case his tenants didn’t pay for a whole YEAR.
- Your tenants don’t tear up the place
- My uncle’s tenants fucked up the place… costing more headache, time, and money for repairs.
Positive cash flow can happen, but it’s important to factor in the liabilities.
…so is buying a house is a bad idea?
- Little diversification
- You have a large amount of money sitting in one investment vehicle AKA your home
- High leverage
- Most people borrow lots of money when purchasing a house
- It takes time to cash out or sell a home