Why Renting May Be Better For You In The Long Run
Do you know why many people own a house? Because they think that’s what they’re supposed to do.
People who have no business being homeowners allow society to pressure them into making the biggest purchase of their lives. So, they save their downpayment, rush to the bank and sign their lives away for the next 20 to 30 years.
It’s a decision that costs them upfront and down the line.
It’s hard not to fantasize about home ownership, especially when you see the Property Brothers doing a fabulous renovation or watching Chip and Joanna Gaines transform a dated ranch-styled fixer upper into a modern home filled with character. It’s enticing. But, it could also be a bad investment.
It Ain’t For Everybody
Society has a way of making people feel inadequate if they don’t have a home. They are judged heavily for it. In fact, many feel downright embarrassed if they reach a certain age and are not a homeowner.
Even after that person buckles under pressure and gets a home, he or she is judged again because it’s not in the best area or the right size. Then, when they lose that home because they couldn’t afford it, they’re judged yet again.
One only need scan the newspapers to see the amount of distressed properties listed. While there are many people who legitimately fell on hard times and lost their homes, others simply bit off more than they could chew. They bought the house at the top of their budgets and couldn’t keep up with the payments.
The statistics, though startling, help to highlight the problems we have. Ninety percent of Bahamians have poor savings (less than $5,000 in the bank), nearly 50 percent cannot make ends meet and many are overburdened with debt.
According to the Central Bank, the Bahamas continues to be faced with a mortgage crisis.
Last year, we learned that 3,300 Bahamas Mortgage Corporation (BMC) mortgagers are in default of their loans. The value of the loans in arrears is more than $34 million.
Never Go To The Bank
Minister of State for Legal Affairs, Ellsworth Johnson recently warned Bahamians to “never go to a bank” to build a home. He said opening a line of credit should be for a much more significant investment.
I grew up at a time when many Bahamians would build their homes out of pocket, rather than approach a bank. It took years for the house to be built, but the homeowner didn’t owe anyone at the end of the day. That still goes on today, but to a much lesser extent. Most people want their homes now or they at least want to be in in it by Christmas.
Signing up for a mortgage is one of the most expensive decisions you will ever make. I feel it amounts to a form of modern-day slavery. Not only are you beholden to the bank, but you feel indebted to remain in a job because you don’t want to lose the income to pay for that home.
The reality is, many Bahamians cannot afford to buy a house, particularly the ones on minimum wage. Even if they saved for 10 years, many of them would still probably not be able to make the purchase.
It may be more practical to rent for the rest of your life. That way, you can avoid paying the mortgage, real property taxes, insurance, maintenance and the list goes on.
No real estate developer in this country has addressed this need. Bahamians don’t need homes. They need shelter. That doesn’t have to come in the form of an expensive house. I would love to see sprawling communities of rental units.
In the U.S., many American families are long-term renters. There are entire communities – beautiful, well-kept communities with all of the modern amenities one could ask for – that house generations of families, and they are quite happy.
When I was in college in Atlanta, I lived in several communities. They had modern facilities, pools, hot tubs, laundromats, gyms, you name it. Whenever there was a problem, I called the leasing office, they sent the maintenance crew and my issue was resolved.
A House Is A Liability
American businessman and author, Robert Kiyosaki famously wrote in his bestselling book, Rich Dad, Poor Dad, that a house is not an asset, but rather a liability. Say what? Many people, including me, always looked at a house as a positive thing; an asset. But, Kiyosaki is right because an asset is something that puts money in your pocket.
So, if you’re renting your home or have an apartment/townhome attached to your home that you rent, then that’s an asset. But, if you’re just living in your single-family home, day-to-day and paying out money to maintain it, then it’s a liability because you’re losing money.
A good friend of mine who lives in Atlanta dreamt of home ownership for years. She was a long-term renter who wanted to do backyard farming and have barbeques outside in the summer. She felt she could only do that in her own home.
What she later discovered was that the high costs of home ownership left very little money left over for entertaining guests outdoors. She bought a house that turned out to be a money pit. She eventually sold it and went back to renting. To this day she swears she will never buy another home again.
Sometimes we want what we want until we get it. Then, we realize we never wanted it at all. That pretty much sums up home ownership.