A Student of the Real Estate Game


Why I’m a Renter

May 7, 2012 | Market News

After 3 indescribable years in my Murray Hill apartment, I’ve decided it’s time to move on, to a new neighborhood. While I’m excited to explore a different area of the island, and to start a new chapter of my life in NYC, I’m tasked with the job (and daunting task) of finding a new apartment. With vacancy rates hovering near 1%, finding an apartment in NYC resembles more of a competitive sport than an inevitable part of city living.

I’m not alone in this situation. Many of my friends and colleagues who are now in their mid- to upper-20’s are making the move from their frat-style apartments. With record-high home affordability and projected rent increases, many of them are contemplating buying. When I talk to them about their decision, they often run through a quick financial analysis – well I could throw away $3,000 toward rent or put $3,200 toward building equity in an apartment. That’s about the extent of their argument.

I’m a renter; at least for this stage of my life.

Homeownership is not something to rush into. Most of the time, housing-related costs are the largest expense in a person’s budget. People need to stop and think about everything they are signing up for:

  • Property taxes
  • Homeowner’s insurance
  • Remodeling costs
  • Sewage
  • Water
  • Association Fees

The biggest mistake I see is people viewing their personal residence as an investment. It’s not. Housing is a commodity to be enjoyed. Therefore, personally I wouldn’t even think about buying a house unless you plan to live there for a minimum of 5-10 years.

You’ll find endless articles on the financials of renting versus owning. I’ve even written one about a Federal Reserve study that shows homeownership is generally a poor investment.

There was an article in the WSJ this weekend called renting prosperity which explores the shift from a nation of owners (or borrowers) to an economy permanently on the move, looking beyond purely homeownership to things like clothing, cars, and textbooks.

The article discusses how the transition from an ownership society to a “rentership” society will unleash a wave of economic efficiency. In the post-bust climate, renting has emerged as a more economically efficient way to pay for housing among other goods. A one-year lease is far less onerous than a 30-year mortgage.

In our society, renting is generally seen as something you do when you failed as a homeowner or are not ready to be one. This is quickly becoming less true, with the emergence of our “rentership” society.

At this stage of my life, I’m happy to be a renter. Quite frankly, I’m okay with giving up the stability of homeownership for the flexibility of being a renter.