My wife and I rented until we were fully 30 years old, and then bought a 1200-square foot rambler in an inexpensive part of town. We were then, and are now, primarily motivated by the sentimental notion that our house would appreciate in value and make us money.

We bought it for, oh, $85,000 and sold it for $102,000 about four years later. Good money? I suppose. A lot of things come out of that $17,000.

About six years ago, we bought a nice tract house in Bonney Lake for, oh, $300,000 or so and watched as Bonney Lake went through its pressure-cooker price adjustment. Worth $450,000 only four years later? Wow! Who would want to rent? How can you afford to lose out on appreciation?

LOL. After the bubble popped, we wound up in the same boat as most of the folks in our development: upside-down in a refinanced house. What we wouldn't give to be renting!

You refinance to $450,000, and then try to sell for $350,000 and can't? Let me tell you, it's a feeling that no renter can (or need) imagine. If you did sell for $350,000, there are a lot of costs coming out of even that...

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In our part of the country, at least, a home that would cost you a $2200 mortgage payment could be rented for $1500 (if not less). Supposing you chose to rent, and put $700 per month into a mutual fund that averaged 12% return over a long period of time? "I suppose I'd make more than house appreciation," you admit.

Um, kinda:

$700 invested monthly at 12% per year

Year 5 - $57,000

Year 7 - $91,400

Year 10 - $161,027

Year 15 - $350,000

Year 25 - $1,315,000

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It doesn't have to be $700 a month. Throw $300 a month -- some people's cell phone bills are about that -- into a good mutual fund when your child is first born, and you'll have $150,000 in your account before she gets her driver's permit.

So you have your friends over for coffee, and you're renting a nice house with hardwood floors and stainless appliances, and they start needling you about how glad they are their little boy knows he'll never have to move (um, sure he won't). Hey, don't you ever want to provide security for your children?

"Well, we have been investing the rental-owning difference in mutual funds for some years now." (Watch how quiet they get, how quick.) "... it's a nice feeling waking up and knowing you've got six figures in your savings if things ever get tight."

How quickly do you think the subject will be changed then? :- )

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Sure, there's room to quibble. Nobody's financial picture is as simple as "rent a house, invest the difference, and get rich." There is a sequence to a sound 25-year financial plan, and it can (maybe should) involve home ownership.

But it is also true that there are an awful lot of homeowners in trouble these days. A renter who is carefully providing for his (her) financial future need not feel bad about his (her) strategy.

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I suppose it's good for the old pride to own a house. It's even better for the old pride to know that your family has financial peace, though.

Renting a home, at least in a family's early years, can be a great path to that financial peace. As long as the cost savings are going where they can do some good.

"Pride of ownership" is fine, I guess, but owning a mutual fund into which you've been socking away $500 a month for six years isn't bad for the self-esteem, either.

Cheers,

jemanji

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