There’s a new argument in the rent vs buy debate. It’s that housing costs (for homeowners) are infinite, while the cost to rent is finite.
Here’s where I stand. I like debate and finding new ways of doing things. I’m fine with throwing out old ideas that don’t work and finding newer and better ways of living and solving problems. I don’t think this argument is quite on point though.
The Housing Costs Are Infinite Argument
Enter the housing costs are infinite argument. The premise is that owning a home comes with myriad costs beyond principal, interest, taxes, and insurance. There are costs like roof replacement, foundation repair, HVAC replacement/repair and a multitude of other things.
The argument continues that these costs are infinite, while renting has just one cost: the monthly rent.
There’s some truth to this but not the whole story. True that owning a home comes with costs that can far exceed the mortgage, insurance, and taxes. What’s not true though is that these costs are infinite.
There are limits to the costs, and we have a lot of control over them. First of all, there’s home insurance, which ensures that the costs are not infinite.
A hailstorm that destroys a home’s roof will have a deductible, but you can get insurance that will take care of a damaged roof. Likewise, a major storm that blows out a few windows can also be covered by insurance. So the costs aren’t infinite—it’s the amount of the deductible.
Not Likely To Happen All At Once
It’s not likely that you’re going to have all your repairs and costs packed into one year. Your HVAC, roof, and water heater aren’t all going to fail at the same time. And if they do, it was probably due to a major act of nature that would be covered at least partially by insurance.
Related: A Different Spin on an Emergency Fund: Massive Prevention
The Common Sense Factor
Here’s another reason the costs aren’t infinite. Nobody is going to pay for repairs beyond the value of the house.
For example, nobody is going to pay a $450,000 repair for a $400,000 house. Or a $500,000 repair for a $475,000 house. If property taxes and insurance rise to unaffordable amounts, the homeowner will sell the house.
Everyone has a walk-away point.
You’re not just going to endlessly pour money into something beyond its value because you “own” it.
Renting Isn’t Finite
Sure, the costs to rent are finite for the term of the lease. But life happens fast, and rents rise just as quickly. You could be paying hundreds more next February than you are now, especially in a hot rental market.
If rents increase just five percent over a five year time span, rent that started off as $2,500 per month balloons to $3,190 by year five.
And the costs can keep going up depending on what the rental market looks like.
Run the Numbers For Yourself and Make the Best Decision
If you’re on the fence about renting or buying, run the numbers for yourself and make the best decision for you and your family.
Account for all the variables, like how long you plan to stay in the house, whether you’re willing to rent your place out if you have to relocate, the difference between renting and buying in a high cost of living area, etc.
Then make your choice based on your numbers and needs. Not what someone says on the internet.
