Ownership vs Flexibility

Last month, I had the chance to read up on the latest CNBC's Make It series where they featured a 40-year old Millennial, Travis Jang-Busby, and how he maneuvers life being a husband, father, the owner of a $450,000 home, lawyer, and $150,000 student debt all around him. On the other side of the renting vs ownership spectrum, 35-year old customer relations specialist, Andres Moringo, who makes over $200,000 a year, is a proud renter who says owning a home doesn't make sense unless you plan to build a life in the neighborhood of that home. I thought this article was an important piece due to the spectrum of where Millennials are in terms of their financial wealth and living arrangement.

Reading from both perspectives motivates me to sit down and take a look at how I would want my living arrangements to be. Should I choose to continue renting an apartment and have the flexibility to go anywhere I choose? Or should I settle down in a more permanent, long-term home that I could own after about 30 years of mortgage payments?

Pros on Renting

1. The option to move if it's not the right fit for you. On average, lease contracts will last between 6 months to a year per tenant. Which is plenty of time to figure out if you want to be there long-term, or move onto the next residence.

2. Splitting the costs. If you cannot afford to live on your own and need to move in with someone else, splitting the bill in your unit will benefit your pockets in the long run. You can split on groceries, electricity, cable/subscription, water, whichever you agree on.

3. Subleasing. If you're like many graduate college students this spring who plan on moving back home or got a full-time job offer in another state, you know it's pointless to keep paying for an apartment you're not going to be in. So what's wrong with subleasing it to someone who can take it over?

Pros on Home Ownership

1. More privacy. When someone wants to experience your space, you as the property owner can deny or grant anyone in at will. Way better than a landlord randomly showing up to your space whenever they please.

2. Limited noise. Usually, in apartment spaces, a frequent issue is noise control. Whether you're working on a work project or resting before a 12-hour shift, having roommates or neighbors being obnoxious causes unnecessary stress and wastes time.

3. Paying to own. After the usual 20% down payment plus moving costs, this "good debt" investment will have you paying a monthly mortgage to the bank as well as property taxes and fees for the next 20-30 years to be able to say, "I officially own this house!"

Cons on Renting

1. Lack of privacy. As much as sharing a living space with a stranger or friend can save money, if that person expresses flaws that leave a bad taste in your mouth, you'll be looking for the quickest exit.

2. Need to make 3x the rent in net income to qualify. Most apartments require you to make 3x rent in the form of net income for liability purposes. This could be ideal for a project manager or CEO, but what about an Amazon warehouse worker or grocery associate? For the working class, this will be perceived as a lack of financial sensitivity or even as classism.

3. Potential for rent increases. As a person who has been living in my college off-campus apartment, my rent has increased each year ($465 1st year, $489 2nd year, $506 currently). As a college student, coming up with $400-500 every month with no income stability is difficult and stressful. And it's most likely the case for other college students as well as working-class people, especially since the start of the COVIDD-19 pandemic. Rent increases work against your wallet.

Cons on Home Ownership

1. Hidden costs - Buying your first home can be among the most exciting events in your life and on social media. On Twitter, people emphasize the 20% down payment as the only cost to worry about when you first purchase. It's important, but what about other fees that are important but don't get the limelight? Closing costs, property taxes, insurance, and maintenance add up and take more out of your pocket than expected. Is this a financial commitment you're willing to take?

2. Little flexibility - Owning a house is more of a permanent situation than renting. We're talking years instead of months. What if unexpectedly, you decided to move to a new area and make a life there? It's a must to find a realtor to sell your home, complete the upkeep for resale value purposes, and find a buyer. The time to complete the sale remains unpredictable, especially in the 2021 housing market.

Personal Opinion

Making the decision between owning a home versus renting requires you to look at your financial health. Can you afford a $15oo monthly mortgage payment on a $50,000 income? Will your liabilities such as credit card or student debt impact your decision-making? Does renting keep you within budget even if you hate it? All of these questions are important to answer.

In conclusion, no matter the decision, you need to be comfortable with the trade-off (what you're giving up to obtain something else). I also think it's wise to make the most economically sound decision that benefits you and your future. Don't just listen to what others are saying about their living arrangements. Take your personal experience and conduct intensive research to help the decision process become clearer.