Owning real estate is a huge commitment. A commitment I’ve never been willing to make.
The first eighteen years of my life I lived in a small town about an hour outside of Sacramento. But the past twelve years I’ve lived in four major cities across three continents. Each city has its positives and negatives but I couldn’t imagine buying real estate in any of them.
Real estate is simply too expensive of a decision to make in my younger years. I love to travel and haven’t found a place I would willingly settle down in for more than say, five years. This is also why my wife and I don’t own any pets. Where would we stick Fido and Fluffy when we decide to move to Madrid to study Spanish for six months?
I’m always shocked to hear about people in their 20s buying real estate like it’s the next logical step to take. Sometimes it is but I feel few understand how big of a commitment they are making.
I love renting because I can leave at any time. I don’t have to mow the lawn. I don’t have to paint the house. I don’t have to repave the driveway or fix the roof. I’ll happily clean the inside of the house, change light bulbs and unclog my sink or toilet but that’s about it. Renting gives me a huge degree of freedom and control. Also, I live in the Bay Area mainly because of the hot job market.
My worst nightmare is buying a home only to have an inconsiderate neighbor with three barking rottweilers move next door. A similar situation happened to me but luckily I rent the house I live in for much less than the mortgage payment would be.
Also, you never own your home, even when your mortgage is paid off. You always have to pay property taxes. Sometimes property taxes can be more than simply renting! This is a nice way for the government to have control over you. Thanks to Prop 13, Californians who bought decades ago pay almost no property tax. However, if I bought a starter home today I would pay at least $500 per month in property tax. No thanks! And while California has high-income tax, our property tax is actually quite reasonable compared to much of the country. I couldn’t imagine buying a home in Illinois for example, your property tax might be as much as your mortgage!
My personal rules for buying a house:
- No plans to move in the next 5-10 years.
- Buying is a similar price to renting.
- Ample savings for down payment.
- Secure job and can make the mortgage payments easily.
My wife and I have #3 and perhaps #4 covered but #1 and #2 are not in our favor.
Since I consider myself a citizen of the world I’ve also looked into buying real estate abroad, most recently in South Korea, Colombia, and Portugal. When Sally visited Korea last year I asked her to do some research on real estate there. The results were shocking. A respectable apartment might cost half a million dollars in Seoul. However, you could rent one for only $1000-1500. Buying there doesn’t make any sense!
Property in Colombia and Portugal can be had for cheap but do I really want to manage it from across the globe? Also if I’m not going to live in these places at least a few months per year, shouldn’t I just rent something for cheap when I visit? I can find a nice place to rent in Medellín or Lisbon for $500 a month. That’s a commitment I’m willing to make.
Our ideal lifestyle is living off of a seven-figure Vanguard portfolio and having a paid off primary residence. That way we have a base camp but can still travel freely throughout the year to new and exciting places, while living off of passive income. Where will this primary residence be? I’m not ready to make that commitment just yet.