Today’s guest post comes from Leif over at Five Year FIRE Escape. Leif bought a home, but now questions the purchase...
Have you heard the sad, sad news that us millennials will be stuck renting forever? I know. How unfair. And here’s some more sad news: If you do own a house, it sucks in retirement.
From your math teachers to your parents to the random over-friendly lady on the street, everyone agrees: owning your home should be your pinnacle of goals and it will be the greatest investment you’ll ever make.
I bought one, but now I have a very weird form of buyer’s remorse that only FIRE folk could understand.
This is my story of why you shouldn’t own a home in retirement:
Math and stuff! I’m skipping it…
First things first, we should address the numbers. Actually, you should address the numbers for your unique situation.
Sometimes owning is really amazing financially. Sometimes renting is. The beauty of this discussion is that there are premade calculators you can stuff your situation into and you will know the answer.
No thinking or deliberation. Just jam numbers in a calculator and we are all done.
I don’t dislike math. I’ve taken more calculus courses at college than I can remember but sometimes you just don’t need it.
In this case, these calculators are great and this one has all the slidey bars I could want plus pretty graphics all over the place. (Seriously how did people live in the early 1900s with no computers…ugggg hand calculations? No thanks).
No math?! What could we possibly talk about?
What I’m more interested in today are the touchy-feely pros and cons of owning a house outside of pure calculations. (And this is for your primary house, not your investment properties. I looove owning rentals.)
Actually, some of these cons have been really getting to me in my new-found retirement, and my wife told me to go find a new audience because she’s tired of hearing me talk about it.
So here I am internet, hear me roar!
Really quickly: Who the heck is this guy!?
Maybe I should have started with that.
I’m Leif of FiveYearFIREescape.com. I retired about a year ago and my wife retired a few years before I did.
I have two kids and I live in the very expensive city of Toronto, Ontario, Canada. Living there makes retirement harder but my family made it with some super saving, the best side hustle imaginable (which is a little bit of glorious cheating), index investing (I’m a converted stock picker) and a pile of real estate.
Really, I find finance is mostly about attitude and time. It’s easy to put things off because you are busy. I was no exception and was a busy dude with a busy job and nutty little kids.
I had no time for investing or saving so I figured out the best ways to do everything time-efficiently. All of my investments are geared towards saving my time, I do real estate with minimal effort and that’s why I started my blog. It’s a reflection of that – all business no fluff.
So if you like that, visit me? If you want some fluff…pet a cat?
So why shouldn’t I own my house in retirement?
1500 Days is a blog about early retirement. And there are two BIG things that are really getting to me in my early retirement about owning a house so I’ll start there.
I have to do stuff to keep the house together.
When you own a house you have to do things to keep it from falling apart. Whether I’m hiring a handyman or doing it myself it’s something that has to be done. You have no choice in that matter.
I have been doing all the home fixes myself for one simple reason. I know how to do it and orchestrating someone to come in is almost more work than just doing it myself.
Right now, my dishwasher is leaking. I’m not sure if it’s a job for a plumber or a handyman, or if I just need a new dishwasher. So I have to pull it out and take a look before I call anyone.
Then, I would have to talk to someone on the phone, arrange a time. Be around to let him in. Then repeat again since it would likely get fixed over two days. Or if it was a job that involved drywall, mud and paint, it would be approximately one thousand 5-minute visits to arrange. No thanks!
Then, I still need to pay him? Forget it. I just end up fixing it and skipping the hassle. But then, I effectively just traded my high-paying career job that I liked, for some low paying job I don’t even like doing. It’s like saying:
My $60/hr high-tech job wasn’t worth my time anymore so I retired to do this $20/hr handyman work*.
*If reno’s are a fun hobby for you. Then go crazy. I just mean the $/hr equation doesn’t work out
What’s the alternative? When I rented I would just text the landlord:
Boom, it’s awesome. Renting lets you better use your early retirement time that you fought so hard for.
1 Point for early retirement rentals!
Let’s move onto another early retirement homeownership problem. It’s like a 1st world problem, but even less relatable to most people.
When you are retired you can travel like a maniac!
I don’t have a job anymore. I can be wherever I want in the world whenever I want.
My wife wants to go to
Cuba** Thailand? Sure, why not? The world is our oyster.
**Oh you guys can’t go there. It’s nice… and I hope the government doesn’t firewall this!
But wait! I have to keep paying my mortgage. Ack. That sucks.
I just came back from a long trip where I was spending about $2000 a month… But my mortgage payment/property tax/insurance was about $3000 a month! Hey! Now I’m paying $5000 a month for this trip. What gives? A house is what gives.
I can already hear everyone saying. Just pay off the mortgage! Yeah, I could pay off my mortgage but why bother when I can just not have one in the first place! Plus the taxes and insurance don’t go anywhere (around 40% of my month’s expenses) and I miss out on the ability to invest all that money.
Also, sure, I could rent it out while I’m gone but finding a short term tenant is hard work and the person is probably weird. Who rents a place for 2 months in the suburbs?
Cutting off a month-to-month lease is easy. You just text your landlord and burn everything you own (or put it in storage) and walk away.
I can’t leave my house hippo behind. He’s adorable. Maybe they only exist in Canada.
Same goes for doing something else crazy. Oh, you miscalculated your retirement spending. ***Ninja Magic*** I just moved to Ohio. It’s fun, it’s cheap and apparently undergoing a renaissance! Thank you rental flexibility!
And… the most dangerous part of owning a house.
People think this is a strength of owning but once you are retired it turns evil.
You own the home and can do whatever you want with it.
Free time and lots of liquid money leads to renovations!
(I’m looking at you Mr. 1500!)
Mr. 1500 note: I see what you did there! It is true, I am renovating a home. This morning, I picked out 101 2x4s from the local lumberyard. However, I willingly signed up for the renovation work. Building stuff makes me happy. So does making more money. I admit that once my kids have left the nest, I probably won’t sign on for another live-in flip because I’ll be exploring other corners of the world.
When people have time and piles of liquid assets laying around they tend to start renovating things. I’ve seen it happen countless times. I don’t know thought process but in my head it goes like this:
- Retiree: I’m bored and I never liked that wall
- Spouse: Let’s smash it?
- Retiree: OK!
If you rent. You aren’t allowed to smash the walls. Hurrah! Keep those liquid assets liquid and your hammer in your tool belt.
Sorry, honey, we can’t renovate the kitchen…but you can spend your energy shooting your amazingly well-practiced evil eye at the owner until HE does!
Plus, there are no “surprise repairs” when you don’t own the house. It can make financial planning hard when your roof costs $10,000 to repair and a few too many big storms leave it leaky (true story: I thought about doing it myself, then I didn’t).
So am I listing my house?
As you can tell, I have my grievances and a little buyer’s remorse about owning a house. It made me a pile of money but it doesn’t match life in early retirement.
I think I’ll keep living in a house for now with a few changes.
Why? My kids.
They are young and I want them to have a home base. Plus I can’t make use of my amazing retirement flexibility unless I want to move my kids all over the place and pull them from school at random.
Ah kids. You are adorable, but way too good at throwing a wrench into my maniacal schemes.
So this will be my fix!
Perfect scenario: Rent a house I can AirBNB while I’m away and find a management company to deal with it.
My house now isn’t AirBNB friendly so my 2021 goal* is to sell our house and rent a new one that we can walk away from easily when we want to. If I can’t find a rental like that. I don’t know. I’ll figure something else out.
*Who makes goals for the current year… that’s lazy planning. Next year’s resolutions are where it’s at. My 2022 goal is to recover after I break my leg in the 2021 house move.
Anyways, I understand why owning a house is nice. I bought one. (Well I bought a lot but just one for me.)
- Your parents are proud of you
- A sense of ownership
- It can help you hide your wealth
- Sometimes the financial situation of owning is way better
- Paying off debt feels kind of good.
Those are the reasons I bought my house. But now that I don’t have to work, I’m starting to look at things differently.
I’m sure some of this was a little infuriating or at least went against the narrative of some people’s lives. But I think it’s worth giving owned homes a second thought.
I’d love to know if you’re willing to look at things differently too, or what you think of the topic in general. Visit me at FiveYearFIREescape.com or on Twitter or Facebook to let me know.
Mr. 1500 note: Home-ownership isn’t all it’s pumped up to be. I’ve had this conversation at least 3 times in my life:
- Other human (OH): I bought a house!
- Me: Why did you do that?
- OH: It’s a great investment! And it’s what I’m supposed to do, right?
- Me: Not really. House prices have historically risen at about the rate of inflation. Owning a house may make sense emotionally, but usually not financially. If your goal is to end up with more money, you may have been better off renting and putting the down payment into VTSAX.
My soapboxing is usually met with a blank and confused stare.
My personal situation is a little different. I buy houses only a DIYer would love and make them beautiful. Instead of a “home owner,” I like to refer to myself as a “very long-term flipper.”
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SWFL Financial Coaching says
I’ve read articles that say owning a house is a key to building wealth, and others that say thee is no correlation. When I get asked about saving up to buy a house, I tell the person to not be afraid to rent because owning a house is not cheap. Especially if you are a single person. Are you just buying a 3-bedroom house just to say you own a house? Seems silly.
Nice write-up on the subject. I agree that owning in retirement might not be the best thing.
SWFL Financial Coaching recently posted…Things You Can Do When You Are Debt-Free
Leif Kristjansen (@ FiveYearFIREescape) says
The stats own owning a house leading to great wealth gains are very strong (in favor of owning) but I’m pretty sure that’s because your typical rental keeps renting due to horrible saving skills.
FIRE folk reading these blogs are a different breed than your run of the mill people.
Leif Kristjansen (@ FiveYearFIREescape) recently posted…Can you negotiate rent? Yes! This way is win-win for tenants AND landlords
Totally agree. I told my spouse recently that my goal is to never buy another car. Once the kids are out of the house, we will sell this house and start some FIREy slow travel around the world. Staying in city centers. And rent all along the way.
I acknowledge that I may end up with a house and car eventually, but I want that flexibility to travel the world, and not have to worry about a dishwasher too.
Leif Kristjansen (@ FiveYearFIREescape) says
Oh wow, never even buying a car! You are taking it to the next level MW!
I need to think about if that makes any sense for me if I don’t slow travel forever (I do travel a lot so who knows).
Revanche @ A Gai Shan Life says
My younger relatives were fed that narrative that buying RE is the way to wealth, but it’s coming from our decidedly not wealthy older relatives, so I am the voice chiming in saying: Not necessarily! NOT if it’s your primary residence *and* owning rental RE is no passive income picnic.
I don’t share the fact that we own our primary residence and a rental, I just share the litany of headaches that owning either or both have brought on and how those must be weighed against their lifestyles. If they don’t mind (or like Mr 1500 ENJOY) doing reno type work, sure, go for it. But if they have a career they love and have worked really hard to build as some of them have, it really makes no sense to pile on the (then joyless) work of maintaining a property on top of their chosen stressors.
I’ve spent 25 years as a renter and 10 years as a homeowner. Renting is much much easier! Granted, we did also make more money with the RE but that was more because those ten years happened to be easy years. I still choose homeownership for now but I’m always aware that it’s not because it’s all kittens and rainbows.
Revanche @ A Gai Shan Life recently posted…Good Things Friday (51)
Leif Kristjansen (@ FiveYearFIREescape) says
So maybe it’s a silly question. Why not just go rent again?
I am trying to after seeing the light. I know sometimes the financials of owning are better so that can be an easy answer 😛
Revanche @ A Gai Shan Life says
I wasn’t sure if this was a reply to my comment but in case it was: Because where we are, rent for the same size place costs as much as buying, and we are then subject to the LL’s whims as far as rate increases and rules about pets. We are accepting more headache in maintenance for less headache in stability. If we were in another location, that would be a different story. Also, I am a hermit that spends 95% of my time in this home. I love my home and never want to move again 😀
Revanche @ A Gai Shan Life recently posted…Just a little (link) love: coyote and badger edition
Thank the author for a very realistic perspective.
However, renting or buying a house depends on many conditions of each individual and different country.
In Vietnam, renting houses are becoming a trend of the future. Especially for young people. However, the value of real estate in Vietnam will grow strongly. So, owning a property is a must to prepare for retirement planning. 😀
Zoe Campos says
My favorite part is where you mentioned that owning a house is an amazing financial decision. We’ve been renting for years and we’re frustrated about contract clauses where it is said that we can’t do any renovation projects to our place. It would be better to look into homeownership and title settlement to determine if it is really for us.