Should You Be Renting Your Home?

Where Did All My Money Go - Doug WarshauerI was reading through Doug Warshauer’s new book, If I’m So Smart, Where Did All My Money Go?, and he pointed out something I have a hard time arguing with.

He essentially says that, financially speaking, we should have probably continued renting a home back in 2007. We ended up buying.

Doug says (in the fictional narrative of the book) that the following people should rent their homes:

People Who Should Probably Rent

Someone who…

  • Is not married, but planning to marry
  • Has no children, but plans to soon (like we were in 2007)
  • Has children, but wants more
  • Plans to move soon
  • Has a job with relocation expectations

The common thread in all of these scenarios is change. Change in your life can sometimes mean change in the type or location of home you need. When you buy and sell real estate, you incur some fairly significant transactional costs.

Therefore, if you expect things to change for you soon, don’t go from renting to buying. Wait until the dust settles, and then, if no other changes are on the horizon, make your purchase. Following that pattern will leave you feeling glad you didn’t buy a home.

Consequences of Buying Too Soon

If you do buy too soon, here are some of the negative consequences:

1. Lose Money on the Transaction – Unless you stumble upon some rare market where homes are appreciating at the speed of light, you will need to stay in your home for a few years before the improved value overtakes the cost of buying and selling (i.e. a home is typically not a good investment).

Buying a home right before a major life change will put you in a spot where you have to choose money over convenience. If you choose convenience (i.e. selling and buying something else), then you will most likely lose money. In his book, Warshauer gives a general recommendation of staying in your house 10 years before you sell. Moving too often can destroy your wealth.

2. The Accidental Landlord – If you buy too early and need to sell just a few years later, you may find that you can’t sell the home without losing a lot of money. This kind of scenario forces people into what I would call an accidental landlord situation. Instead of selling your home, you turn it into a rental unit.

We are considering this move as we’ve seen our home value plummet. We can’t stomach the thought of losing money on our house no matter how much we can “make up” on the other side of the transaction. Granted, we purchased a town home and somewhat considered the idea of keeping this as a rental. But I didn’t want to be financially forced into the situation. Which is where we are now.

3. Stuck in an Uncomfortable House – If you don’t choose to sell and lose money or become a landlord, then your last option is to stay in the house. If your house is too small for your family or too far from your new job, then you might just be uncomfortable for a while. In Doug’s book, he recommends sticking it out as long as you can, throwing all your extra savings into your mortgage.

When the Heck Do You Buy Then?

After all of this, it seems like buying a home is only reserved for the most boring of people (i.e. people who rarely, if ever, experience change in their life). Unfortunately, I think that’s the case when you plug in the numbers and look at how your wealth will be affected.

But you guys know that buying a house is sometimes about more than just building wealth. Buying a home involves wants and needs. And up until 2008, it didn’t involve much in the way of financial requirements.

I guess the key is to avoid mixing the message. If you buy a home when you shouldn’t financially, just be aware of that fact, and be willing to accept the financial consequences of doing so.

If you decide to keep renting, then take heart in that it’s probably the best financial decision you could make.

What’s your take? Did you ever buy a home when you should have continued renting?

Thanks to Doug for a great read. I would encourage you to check out If I’m So Smart, Where Did All My Money Go?. It’s a very fun read (written like a novel) and it covers all you need to know to help maintain the proper balance in your financial life, including controlling your spending, saving for short-term goals, investing, saving for college, and saving for retirement.

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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon. He created this website back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence. He uses Personal Capital to track his wealth. All the content on this blog is original and created or edited by PT.


  1. Neal: Wealthy people tend to own real estate, that’s a correlation but not necessarily a causation. How many people do you know that BECAME wealthy due to owning property other than their primary residence? I can walk down my street and point to at least 5 homes that caused former occupants to become poor in the last 4 years.

  2. Here’s the thing that is fascinating.

    Yes…the numbers prove your point.

    Having said that, most of the people I know who have money, made the money by owning real estate for a very long period of time. Conversely, I’ve met very few wealthy people who never owned real estate. In fact, I’ve never met a single one.

    Granted, this is just my experience….but I’m just saying…..maybe there is something to this real estate thing….huh?

  3. It makes sense to buy if the house costs within 3x of household income.

  4. It is refreshing to see an article that does not simply state that renting is throwing money away and we should all buy, buy, buy. I rent. I have for some time. I live outside of Boston (not by choice) and the real estate market is a joke with respect to the costs. To buy something that would be about 75% the space I now have, not include water, trash, yard work, maintenance, snow removal, etc. would more than double my rent. Even with the hope of equity and the tax benefits, your are talking an extra $20K a year which the aforementioned benefits would be hard pressed to cover.

    If we had kids or needed flexibility in our living space like expanding rooms, changing styles, etc. then I will buy but until then, no need.