Bonus: Renting vs. Buying: What’s Right for Me?

Tori Dunlap:

Hello, financial feminists. Welcome back to the show. We are so excited to see you. If you’re an oldie, but a goodie, welcome back.

If you’re new here, my name is Tori. I am a money expert. I’m a New York times bestselling author, and I fight the patriarchy by making you rich. We are revisiting an old episode of the show to talk about a recent article that went a little viral, which was Talking about how for the first time ever it is now cheaper to rent in the United States than it is to buy in Most major cities.

This is a huge shift from what most of us grew up with which is this idea that Purchasing a home, owning real estate, being a homeowner is one of the biggest goals that we can and should have and is a sign of being this like financial grown up and really marks this not only a trend of opting to rent but also being forced to rent.

I know for many, many people there’s no option to actually own a house. This is just the option you have is renting. Since we released this episode where I talk about how Not buying a house was actually one of the best decisions I’ve ever made. I am still renting. I am still renting my house.

We are sitting here recording in my house right now. And I am a literally a millionaire who chooses to rent because financially it makes more sense for me. And I get into that more in the episode. Uh, why I almost bought, why I didn’t end up buying, and how it was almost the biggest financial mistake I ever made making a home purchase.

I want to mention as well as we always say on the show that personal finance is personal and there are many reasons to purchase a home if that’s the thing that’s right for you. There’s many reasons to continue renting if that’s the thing that’s right for you. But you need to decide what’s right for you using some of the factors and using some of the things that I outline in the episode.

But also like the article mentions, it’s like there’s not much of a choice in our current economic climate on whether you choose to rent. Sometimes you’re just forced to rent. So without further ado, let’s go ahead and get into it.

Hello, financial feminists. Welcome back. So excited as always to see you. Thank you for coming back, supporting the show. And if it’s your first time here, well, welcome. Hello. We have a whole back catalog for you to enjoy, I’m Tori. Welcome. I’m excited to see you. These so episodes are our way of diving in to particular financial topics. They also are a great way for me to talk about my own personal finance journey and be able to hopefully relate it to yours or give you some of the things I wish I knew, some of my lessons and learnings as I’ve progressed in my financial life. So if this is your first time here, welcome, if you’re an oldie, but goodie, welcome back. As always, your support of the show means absolutely everything. Feel free to hit that subscribe button. Rate and review the show, tell your friends, it allows us to not only keep producing the show, but your support and listens and downloads make sure that we can continue getting really high profile, amazing guests, as well as making sure that my team and I are compensated fairly.

So we appreciate your support of the show, both listening, clicking on ads, doing all of that fun stuff, so we can keep giving you this free financial advice. The month of September is our money at home series. So we are both talking about literal houses, homes, real estate, which is a bit of… That’s what today’s episode is going to be about, but also money and relationships. Money in a couple, money as a family. So money at home is the theme of September. And if you like these kind of content themes, let us know. This is our first stab at this. We’re doing it in back to school season when you’re thinking a lot about how to structure a home in order to support your family best. And for me, I don’t have children, but something about September just feels like reinvigorating. I think it is the back to school feeling. So if you like these content kind of themes, or this content series, feel free to let us know and we’ll do some more of that.

So today’s episode, we talked about this actually in the most recent episode that I did with Ramit Safey, which was such a fun episode for many reasons. One because his work as a financial expert was so informational and so origin story for my way I see money and way I teach money. He and I have very similar backgrounds in that way. We have a very similar way of going about teaching money, which is no deprivation focused on how do you build a life that you love through money? And we talked about the story of neither of us owning real estate. We are both now multimillion dollar business owners who don’t own property.

Okay. So let me tell you the story of how I almost bought a house and then didn’t. I literally was a day from closing on this condominium. And yes, I’m calling at a house, because you know what? In 2022 condos are sometimes the only homes that millennials can afford. So yes, I’m calling a condominium a home, but it was a condo. And I was literally a day before closing on this condo, on this house, and I backed out. And it ended up being, I think probably the, one of the best, if not the best financial decisions I’ve ever made. And this is, of course, contrary to everything you hear, which is that owning a home, owning property is the American dream, that it is necessary and required to own property in order to feel like you’ve made it.

And I’ll talk about this a bit, but this narrative that if you’re renting that you’re throwing away money. The first reason I was pursuing home ownership was my parents. My very well-intentioned parents were telling me, well, rent in Seattle’s very expensive. And if you rent property, you basically are throwing money down the toilet. And you’ve probably heard this, renting is throwing money away. And so I felt pressured to buy a home before I was ready, because I heard this narrative from my, again, very well-intentioned parents, from society that I needed to own property the moment I could. Now I financially could have purchased this condo. I was literally a day, I had been approved, I was a day before closing on this condo, but here’s a couple reasons why I’m really glad that sale didn’t go through.

The first thing is that in order to be able to purchase property, I had to go an hour outside the city. The average home price in Seattle now is about $850,000. And I imagine it was very similar in 2016, probably around $800,000. Your girl could not afford a house or a condo in Seattle as a 22 year olds, right out of college. That was not going to happen, could not do it. So what I had to do in order to be able to view properties I could afford is I had to go an hour outside the city to Puyallup, Puyallup, Washington, if you’re from the Pacific Northwest, you know where Puyallup is, but that’s where I grew up. I grew up in Puyallup. I grew up in Puyallup Tacoma. And the funny thing about being a 22 year old and living an hour outside of the city, where all your friends live and a 15 minute drive from your parents is that, that’s not the life you want. That is not the life you want to live.

I was too far away from friends. I was living at home at the time, I lived at home for the first two or three months of my corporate career. And I had a two hour commute one way, because it’s an hour drive, but it’s two hours with traffic. So I was commuting into work about an hour and 45 minutes, one way, and then an hour and 45 minutes back home. And I would take a bus to a commuter train, take the commuter train, take the light rail into the city and then walk. That was my commute every morning. And so the only property I could actually afford was the property that was an hour plus outside the city. Now I love Puyallup, I love Tacoma. These are the places I grew up. I enjoy visiting them. My parents still live there, but again, with all of the love in the world, I didn’t want to be in my early twenties and hanging out with my parents every single weekend.

It would have barred me the opportunity to get to know my coworkers, to be able to have community and to make friends in the city. As you all know, I’m a huge foodie. It would’ve barred me the opportunity to go to a lot of restaurants that I love and to go out for drinks after work. And I honestly don’t think Her First $100K would’ve been born in the same way, because I thrive off the energy of a city. I was making contacts in the city, our now COO at Her First $100K, I met at a networking event a couple years later, that wouldn’t have happened if I was living in Tacoma, commuting an hour and 45 minutes, one way, and again, all the love in the world, but hanging with my parents every weekend or after work, that just was not the life that I wanted as somebody in my early twenties. The life I wanted didn’t match up to the steps I would’ve had to go through in order to afford that property.

The second reason I’m really glad I did not buy a house was that, again, I couldn’t afford a physical house, so I was buying a condo. Now there’s nothing wrong with condos, except most condos come with this fun little thing called an HOA, a homeowner’s association. Now some homeowners associations are great. The homeowner’s association’s job, if they’re doing their job correctly, is to maintain typically the outside of your home, maybe they’re mowing the grass for you, they’re picking the weeds. They’re planting things. If there’s a pool or a fitness center, they’re taking care of that. So they’re just the general managers of the property/ the complex you’re in. Now, if you are a professional who isn’t interested in mowing their own lawn, who doesn’t have time, or just wants to not worry about that, not have the costs or the time commitment of a home, a condo with an HOA could be a great option for you.

However, what my experience was with this particular condo, and what I’ve heard a lot of people’s experiences, and literally as we’re recording this, I said the words HOA and our podcast producer, Kristen, gave the face with her thumbs all the way down, is that you spend a couple hundred, sometimes five, 600, $700 for an HOA that does jack-shit, that is so poorly managed that you get nothing for that money. And so speaking of throwing away money, really throwing away money for an HOA that actually doesn’t do any of these things. And so actually the biggest reason I ended up withdrawing, I almost said withdrawing my candidacy. The biggest reason I ended up withdrawing my offer the day before we closed is because I heard the HOA was a nightmare.

I ended up contacting the head of the HOA and the gutters hadn’t been cleaned in years. And there was all of this drama. It was like an elementary school PTA club of there was all this drama of people hating people, and people not showing up for meetings. And it was a couple hundred dollars that I was going to have to be spending every month seemingly on keeping my house and my property and the complex looking nice and maintained and safe. But in actuality, that money was going towards basically nothing.

So for a lot of people who aren’t able to afford that house, you might be going, okay, well, I can afford a condo. You have to really make sure that if there is an HOA requirement for that condo, that they are actually managing that money correctly, but as somebody who has never purchased property, and as somebody who especially really didn’t understand fully what an HOA’s job was, the more digging I was doing, and with the assistance of my parents, the more I realized, oh, this HOA was a nightmare. And it was actually the biggest reason I ended up withdrawing my offer.

The third and most important reason that I’m glad I didn’t purchase a home was that I was just not ready. I was just not ready to be a homeowner. And this is the one, we were talking about this Ramit and I, Ramit and I, on the previous episode were discussing this emotional readiness to own property. And this is the one that gets skirted, it gets pushed under the rug as not a valid enough reason, but really for me, this is the biggest reason I’m really glad, is that I was not ready as somebody fresh out of college to have a commitment to live in one place, especially again, an hour 45, 2 hours away from my friends, from my community, from the city I wanted to be in.

It was just not a smart move for me. Financially it may have been in theory smarter, but I would’ve been more miserable. So who knows how much that would’ve financially and emotionally costed me. Her First $100K, the business would not have taken off that way. So actually it wouldn’t have been a smart financial decision, because this business is now the reason where I am, where I am financially. And I didn’t want that commitment. I didn’t want to have to stay in a place for three, five, 10, 30 years, because that’s a 30 year mortgage. I didn’t want to have to stay blocked in a place that I felt like I just didn’t want to be. I also didn’t have the tools or the resources to know how to upkeep my house. I would’ve probably been calling my parents and that would’ve provided its own emotional issues of maybe my parents becoming resentful, or I wouldn’t have had the same independence in that way. I was just not ready to own a home. And that’s a hundred percent a valid enough reason to not do something.

Just because it maybe makes sense on paper, if you don’t want it, don’t do it. I know that sounds so obvious, but the amount of cajoling that society does with our financial decisions, it’s like, oh, well this is the smart thing. So do it. And it’s like, what if I don’t want to do that? What if that doesn’t fit with the lifestyle that I want? So I wasn’t emotionally ready to own a home. And it wasn’t the life that I had pictured and wanted for myself to be tied to a place that was outside of the city and the community I wanted to be in with a commitment for years, if not decades. It was just not something I was ready to do.

The final reason I’m really glad I didn’t buy property is because I didn’t have a really good realtor. I didn’t have somebody who was in my corner. The person I ended up working with was just not very supportive of my vision, of what I wanted. I remember going and negotiating for the price of this condo and literally having my realtor go, I don’t think you should negotiate. And it wasn’t even, I don’t think you should negotiate because other people are sending in offers, or it’s really competitive. It was just, why are you negotiating? And I was like, because I negotiate everything. Why wouldn’t I negotiate if I had the opportunity to. It seemed like he was more interested in his commission than he was in actually getting me the property that felt right for me. And it was somebody that my parents knew. So again, my well-intentioned parents were work with this guy, but he didn’t understand what a 22, 23 year old woman was looking for in property. He didn’t understand that. I was not his clientele.

So if you are going to purchase property, find somebody that is actually going to be receptive to your needs and your wants, who is a go-getter, who is willing to go to bat for you and fight for you and be assertive. I felt like this person was very passive and didn’t really work to understand me in what I wanted. And honestly, a really good realtor would’ve told me, I don’t think you’re ready. I don’t think you’re ready to buy property. Come talk to me in three years. That’s what a really good realtor would’ve done, because he knew I wasn’t ready. He knew I wasn’t ready to be a homeowner.

So you might be sitting here thinking, okay, cool, Tori, but that was, oh God, was it six years ago? It was six years ago. That was six years ago. Have you bought property now? No, I still have not bought property. I am a multimillionaire, I have a multimillion dollar business, and I have still not purchased property for many, many reasons. One, Seattle homes are so God damn fucking expensive. If you want a nice two bedroom, two bath anywhere you’re going to spend at least $850,000, probably closer to a million. And almost every single home, especially the ones worth purchasing or the ones worth pursuing are going for significantly over asking price, because everybody gets in bidding wars. I am in the privileged place where I could afford that, but I am frugal at heart and something about knowing that there’s beautiful Victorian mansions in the Midwest that are $400,000, but yet there’s a two bedroom, two bath, little tiny thing in Seattle that’s worth double that. It’s something about that just emotionally grinds my gears. It’s so hard for me emotionally, mentally to commit to spending that much money for so little.

Now granted, do I want to live in the Midwest? If you’re Midwest listener and you love it, no worries. I don’t want to live in the Midwest. That is not my life. That’s not what I want. So I get it’s part of what you’re paying for, but God it’s so expensive. The other thing is I just got back from a year of digital nomading. I’ve always wanted to do that. I’ve always wanted to pack up my stuff in storage, live out of suitcases, travel for a while. And I wouldn’t have had the same flexibility to do that if I own property. And I’m really, really glad I was given that opportunity.

I think the third and final thing, and the reason I don’t own is because I still don’t a hundred percent feel ready to do that. I love Seattle, I think I envision myself here for a while, but I also don’t know what a post pandemic Her First $100K looks like. HFK, our business blew up in 2020, 2021, 2022. We have been on the rocket ship, riding the rocket ship since the pandemic. And so if we end up shooting a TV show, something that’s in the works. Am I going to have to live in Los Angeles for a period of time, or New York? Is my business going to take me to different places than Seattle? And I’m not saying I want to leave Seattle permanently, but it might not make sense to own property here while also being in a location for half the year. I don’t know. So do I want to own property more than I wanted to when I was 22? Yes, a hundred percent.

If the pandemic did anything to me personally, I wanted to nest so hard. Christine, my best friend, Christine and I literally have made a game out of sending Zillow properties to each other, especially four or five, $6 million properties that neither of us can afford, and it’s just fun. And so if the pandemic has done anything to me, it’s like the urge to nest has never been higher. I want to own a home. I want to design it. I want to paint it. I want to do all of those things, but I just moved into a house that I’m renting. And this is my first time renting now in a year. And first time renting a space that I really feel like is supportive of the life I have now. I have a separate office. I have a really great kitchen. I have a nice patio, and I’m getting the taste of it now. I’m getting to go buy the dining room furniture, and I’m getting to go to the antique stores and finding unique pieces. And so I’m getting the taste of that nesting now.

So if you are listening and you’re doing the classic conundrum of, do I rent, do I buy, can I even afford to buy a house? Those episodes are coming later in this month, I promise. But if you are in the position where you’re like, okay, I think I could buy a home or buy property, but I like being a renter. Here are some good questions to ask yourself when considering renting versus buying. Number one, why am I making this decision? What is the why behind this decision? And this has to go beyond the idea of, well, someone said it was a good investment, or all my friends own a home, or, again, renting is throwing away money, because the truth is not all homes are good investments. Not all property is a good invest. We’ve seen plenty of houses or condos or different pieces of property lose money. Not every single property is a good investment.

So a couple good reasons to buy a home. You’re planning on staying in the area for several years, maybe even long term, a decade or more. And maybe you’ve maxed out your other investments and you want to expand your portfolio. You want to go beyond investing in the stock market. That’s also a reason I didn’t buy a house is all my money is either in cash or investments. It’s not locked up in a house, because if you don’t pay for that house in cash, and I think most people I can’t pay for a house in cash, no one can pay for a house in cash. You are not owning a home until you’ve paid off your mortgage, the bank owns the home. Your bank owns your home until you can pay off your mortgage. And I just liked being able to grow my investments, get seven, eight, 10% in my investing returns and not have a bunch of my net worth, my capital locked up at a home. So, that’s another reason.

All right. Number two, second question to ask yourself when considering renting versus buying, do I have a financial plan to own a home? Have I actually thought through this? You need to know whether or not you’ll be able to put 20% down or whether you need to put 20% down. Some loans, especially like if you are a veteran or you’re in the military, active military, you’re going to have a lot more home ownership options. Some other loans allow you to put less down, but you may need to consider if you’re going to pay PMI, which is private mortgage insurance, and how that will affect your mortgage amount. You also should probably have an emergency fund beyond the down payment. You should not be using your emergency fund as your down payment on a house. You should have separate money for that.

In addition, when we’re thinking about the financial plan to buy a home, again, assuming you’re taking out a mortgage, can your credit score support a mortgage? Have you taken actionable steps to increase your credit score, to be able to support a good interest rate? It’s one of the tips we’ll talk about later this month is if you are preparing to buy property, you need to do everything you can to increase that credit score, because it’s going to mean a lower interest rate for your mortgage.

And finally, number three, when you are buying a home, there are many expenses you have to think about beyond just your mortgage payment. You’re paying property taxes, you’re potentially paying mortgage insurance, PMI, you have maintenance, both appliances, general maintenance like mowing the lawn, taking care of painting the house. And then if you don’t own a home and you own something like a condo or a townhouse, are there HOAs, are there other community fees that you need to keep in mind? The flexibility of a renter is great because if the toilet explodes at two in the morning, you get to call somebody else. Somebody else gets to handle that for you. If you are a homeowner, you are handling that yourself or you are calling somebody to bring somebody in, and you are paying for the cost of that.

Literally last month, my bathroom on my main floor, toilet overflowed, that was shitty literally. Hey, but here’s the thing is I got to call somebody else. I got to call my landlord and politely be like, hello, the toilet’s overflowing. Can you fix please? It was fixed that same night. And it was a $700 payment that I didn’t have to do anything for. So can you not just afford the mortgage? Can you afford everything on top of it? Not just financially, but also emotionally. Are you in a place where your schedule allows for you to do those repairs, to do the upkeep, or to pay for somebody else to do that for you?

If I can sum up this episode, the biggest thing to keep in mind when considering anything to deal with your financial plan, your financial decisions are your financial decisions. They are based on your own circumstances. Buying a home can be incredibly lucrative, can be incredibly rewarding, but it is not for everybody. We would be remiss if we didn’t mention, of course, that the millennial reality is that very few of us are actually going to be able to own homes, which is why, again, we have to couple personal finance education with systemic change, because a trillion dollar student debt crisis and stagnating wages and home prices getting so expensive and people swooping in to purchase property to be like Airbnbs and investments, we are literally recording this after I just saw an article that a third of the homes sold in 2021 were not to people to live in them. They were investment properties or Airbnbs.

So if you can afford a home, first of all, congratulations. And second of all, is that actually the decision you want to make? Renting is not thrown away money. I am paying somebody to be able to live in a place that I want to live, and I’m paying for convenience. I’m paying for a place to live. If I go to a hotel room and I pay to stay in the hotel room, no one’s being like, that was a waste of money. Why don’t you just buy the hotel? No one’s doing that. So there’s nothing against buying a home. There’s nothing against renting a home, or renting an apartment. You need to do what’s right for you, and you need to make sure that you’re making the financial choice that reflects your values and reflects the life you want to live, not just the one that either makes sense on paper or make sense to society. Put it on my tombstone.

All right, team. Thank you as always for being here. Thank you for your support of the show. If you enjoyed this episode, if you want to share it, please feel free to do so maybe with somebody that you’ve considered buying property with, or somebody that you know is going through some of these things. And we’re going to be keeping up this series for all of September. This money at home series, talking about both real estate as our version of money at home, but also how we manage money in our relationships, in our families. So feel free to stay tuned for the rest of those episodes. We also have a now pretty thick back catalog. So if you are either new to the show, hello, welcome, or if you haven’t caught up yet, feel free to do so. Download them for your hot girl walk, download them for your road trips, download them for school pickup. Maybe not school pickup, because I say fuck a lot, but you’ll figure it out. Thank you as always. Thank you for being here financial feminists. Thank you. Subscribe, rate, review. And I’ll talk to you later.