Rent vs. Buy: If You Have to Ask, You Should Probably Rent

Image Credit Martin St-Amant – Wikipedia – CC-BY-SA-3.0

Four years into writing this blog, I thought I had seen almost everything when it comes to the most common financial suicides committed by the middle class. But today I was hit in the head by a shocking realization:

When choosing between buying versus renting a house or apartment, people are making much, much worse choices than I would have thought possible.

The implications are so striking that logically, some of the world’s busiest stretches of road should not even exist. We could save millions of lives and trillions of dollars by just helping certain people operate a basic hand calculator at a beginner level. It sounds improbable, until you review the following stories from this Canadian vacation I am currently wrapping up:

Case Study One: North America’s Fourth Largest Miscalculation

The City of Toronto is famous as one of the world’s most happening and expensive places to live. With over six million people in the highly car-oriented metro area, it sprawls on forever and people commute in from an insane zoo of connected cities comprising 31,000 square kilometres, or roughly a quarter of the entire land area of England.

There’s only one real highway across this thing, the 401, which has the dubious distinction as  busiest and most traffic-jammed highway in the world. Rush hour extends roughly from 3:30AM to 11PM, so I don’t even attempt a crossing except in the 4-hour window outside of that range*.

So what has created this incentive to commute? There are great jobs in Toronto – some of the highest paying in the country. Unemployment is low. The city is clean and quite beautiful along the lakeshore and the many ravines and rivers. But unfortunately, as the saying goes, nobody could ever afford a house there. Average price for a detached residence is up to $1.05 million, and even a car-commuter special runs you $730k. If you don’t have that kind of money, you just follow standard Realtor advice and “Drive ’til you Qualify”.

Mr. Money Mustache Moves to Toronto

For years, I have accepted these prices as a given and told people to either get creative with roommates unless you have secured at least a $400,000 salary, or get the hell out of the whole area as I did.  Until I conducted a little experiment in Mustachianism: asking myself “what would I do if I had to move to Toronto myself?”

Let’s assume a worst-case scenario, because if you can prove that it also covers every other situation. Somebody offers me a job in the most expensive and hardest-to reach region right downtown. It’s an a amazing job that I can’t resist and it pays well.

And wanting to maintain my current luxurious lifestyle, I insist on only the best: living in a huge apartment in a brand-new, modern building near the shore with beautiful views, within walking distance of work, the stadium, the train station, and everything else downtown has to offer. No buses or subways for me, and let’s assume I’m not even willing to ride my bike, because hey, it can occasionally get snowy in Toronto and nobody can possibly ride a bike in winter.

So I pull open the useful apartment-hunting site called padmapper.com and set my criteria to unlimited price, insisting on 2 bedrooms and 2 baths, so I can comfortably bring my family along for the ride. I select one of the nicest looking listings at random, because it overlooks a park with floor-to-ceiling windows, has a sweet balcony, granite and stainless kitchen, and heck, there’s even a gym and a rooftop patio on this 40-story building:


This place looks appropriately fancy. A high-end pad in an expensive city’s most desirable district. I brace myself for an astronomical price, because after all, let’s look at the math:

People are commuting 40 minutes from $700,000 houses in the “closer” suburbs. A $700k house costs a minumum of $4,000 per month to operate in this area counting only mortgage interest at today’s amazingly-cheap-but-temporary 2.5%, a 7% opportunity cost of capital in the downpayment, plus property taxes, insurance, heating/cooling and maintenance at 1% annually. Let’s assume you’ve been wise enough to avoid areas with an HOA. 80 daily minutes in a car translates to roughly 900 miles ($450) and 22.5 hours of your time (say, $900) a month, for a grand minimum total of $5350.

All that, just to live near nothing but strip malls and TV-watching suburban commuters. So I’m assuming an apartment like this would list for upwards of ten grand a month. I look at the price.

$2300 per month

 Oh, and that includes free heat and an underground parking space
(parking for mere mortal visitors in this area costs about $30/day)

Is this a joke? Are apartments really that cheap? Looking through a few dozen other listings in the prime areas, I realize that yes, they are. And if you’re willing to be really badass and step onto a subway for your morning commute and move down to a less luxurious apartment building, you can find central-Toronto 2/2 apartments for $1200.

Share one of those with a roommate, and you can work a minimum wage job ($11.00/hr) in this city, pay for rent and food, and still save almost 50% of your income, retiring from your job working at Starbucks by age 37.

I repeated the same experiment in Canada’s capital city of Ottawa. Brand new 900 square foot luxury apartment with 9 foot ceilings and two walls of glass overlooking the city’s hottest “Byward Market” district: $1950 per month. And this is in a city where people defy death by driving an hour through a blizzard before paying for parking and heading in to the office. It’s also a city where some people spend $900 per month on their winter heating bills alone (this apartment also includes free heat).

The implication of this is that an amazing majority of the traffic jams, car dealerships and SUV pileups and harried lifestyles and stress-related diseases and obesity that come with a car commuting lifestyle are completely stupid, optional, irrelevant byproducts of our choices. Almost every expensive suburb should not even exist. Every major urban highway should be shut down and converted to gardens and bike paths, with a few solar awnings thrown in – just enough to power the entire city.

So I ran these numbers by a fellow Canadian, expecting full astonished agreement. Instead I got the start of a bizarre set of justifications:

“But people want a back yard. For their kids, or their dogs.”

Are you JOKING?? When you live in a high-end district, ignoring the fact that luxury apartment buildings typically have amazing landscaped common areas, you have literally a multi-billion dollar back yard. The Toronto lakeshore is an endless expanse of beaches, bike paths, fountains, gardens, play structures, volleyball courts, patio restaurants, and of course one of the largest expanses of sparkling blue freshwater in the world. In Ottawa you have a stunning riverfront, forests and parks and bike paths that lead everywhere, and rapid transit that would eliminate any need to ever own a car.

Would you really waste an extra $3,000 per month just so your kids could play on your personal fenced-in postage stamp overlooked by vinyl-clad suburban houses in every direction while you are out stuck in traffic? No.

But what about the dogs?

$3,000 per month, plus the $400 it costs to feed and treat and house and transport and occasionally kennel the a dog, compounds to roughly $588,200 every decade if you invest the money instead. That’s every decade, and they live longer than that. Are you really rich enough to spend a million dollars, and clean up warm squishing chunks of excrement daily with only your bare hand and a plastic bag, just so you can have this extra bit of companionship during your sparse time outside of work? No.

And we haven’t even mentioned one of the biggest joys of renting: unlimited mobility. On a whim you can jump to a new place anywhere in the world. Never be subject to the pain of fighting with buyers in a hot real estate market, or begging for sellers in an icy-cold one.

The lesson? If you live in an area where houses cost more than $300,000, take a close look at the rent prices around the areas you currently drive. Budget your driving costs at at least a dollar per mile (80 cents/km in Canada to account for higher costs) because you absolutely must put a high value on your spare time to get ahead in life. Doing the math on life decisions like this was by far the biggest factor in my own early financial independence.

Buying a house is a great thing to do when you’re settling down in a beautiful, affordable spot right near everything you need to do for the next ten years. And if your schedule and temperament allow some time for a good several hours a week of maintenance work. But for the rest of us, it’s worth having another look at Rent vs. Buy.

Further Reading: The New York Times has a pretty great Rent vs Buy Calculator that covers many bases and includes some nice conservative default assumptions (except I’d personally assume higher than 4% investment returns and less than 3% property price appreciation in expensive markets where the price-to-rent ratio is out of whack, such as those in this article). Also, many areas have property taxes higher than the default.

The biggest difference between NYT and MMM is just the focus on location. Rentals often dominate the market in the most expensive and walkable areas, so if you want to work and live in such a place, it might make sense to go straight to the apartment buildings.

*Luckily we have now switched to taking the VIA – here’s a video I took out the window of the train traveling at 150 km/hr past a line of car commuters stuck in the usual jam leaving Toronto. This train is both faster and (usually) cheaper than driving a car the 450km from Toronto to Ottawa, which reveals a few hundred million more dollars of savings available, since thousands of people make this drive in any given week.

  • saladman8283 July 28, 2015, 2:06 pm

    Rents in good neighborhoods in Toronto appear to be far, far more affordable than those in Washington, DC. Here, a 1 BR/1 BA in a building with amenities in a good neighborhood would rent for north of $3,000/month, with a few hundred more for parking.

    • SpaarWalvis August 2, 2015, 1:32 pm

      And yet, half an hour (by commuter rail) outside DC, a 1/1 with decent amenities would be $1200 a month, parking and utilities included. Frankly, the schools leave something to be desired, but compared with DCPS . . .

      (Full disclosure: that said, we bought. After renting for several years, however.)

    • DCResident August 4, 2015, 11:09 am

      Are you sure? I pay ~$2k/month for a gorgeous 1BR/1BA in a good (albeit not traditionally fancy) neighborhood, with private outdoor space, near parks, walk to work, metro, etc. It even has all the stupid luxury things I don’t really care about and wouldn’t have prioritized (new SS appliances and granite countertops). I recent helped a friend move to a 1BR/1BA in a gorgeous old Woodley Park building that costs less than what I pay. A quick apartments . com or zillow search will prove your statement false.

  • TOFan July 28, 2015, 2:53 pm

    Thanks Mr Money Mustache for writing about the Big Smoke (Toronto) near your former hometown. Yep, I live here in Toronto and all the prices you mention are true. Just about every homeowner in central Toronto who has a (nearly) paid off house can sell and live MMM style, because the “average” house is $1.05M as you say. Do you think they do? Too few! Sadly that that would not include us!

    We bought our first house in 2005 for $425K and the same month, new neighbours moved in across the street. They were only told to move after **NINE YEARS** and for the bargain price of $1700 a month they too had the same short walk to the subway, better lawn, same amenities, same size house, slightly older finishes (but who cares, they had money for trips and private school). Their next rental would cost $1.4M to buy but $2700 to rent, bigger with better finishes and bigger yard and a brand new deck. And 3 minutes to the subway line!

    We sold in 2012 for a nice chunk of change, I enjoyed a glorious year renting on a one year lease while we figured out the next step with no maintenance work or bills for major repairs. Sadly, my proposal of moving to a smaller city and taking part time jobs, and no need for child care by working split shifts, and buying a cheaper house fell on deaf ears. So did renting in Toronto and working a few more years, but having the flexibility to move around and not having to do the work (and spend the money) that I did as a homeowner the first time around.

    A big problem is the housing bubble. All my spouse could see was prices continuing to rise, fearing being permanently priced out while landlords could tell us to move out with 2 or 3 months’ notice once the 12 month lease expired. (I didn’t care as long as I could pay the rent…. Even paying someone to pack up the house, orchestrate the moving trucks, unpack the house, while we took a 2 week vacation would be cheaper than the costs of buying, owning, maintaining, etc.) I wheedled. I argued. I showed the numbers. No dice. Emotions stronger than logic.
    In the past year since we’ve bought back our house has gone up maybe $200K in market value, “proving” that “buying is smarter” … but for how long? Meanwhile, the lifestyle is suboptimal (and everyone in Toronto is sacrificing lifestyle to basically speculate on continued appreciation that can’t be realized until you sell). Sure, we can still easily afford the tiny mortgage, maintenance, etc. but the opportunity cost is enormous when you have almost 7 figures of locked-up equity. I estimate that I have to keep working at least another 7 years to get to the point where I can “retire” MMM style at $30K a year, 15 years to “retire” at the still outrageously inflated lifestyle we currently live ($60K a year or so-includes big-city childcare of $2K a month).

    It comes down to values. I’m ready to “retire” to a smaller community, but spouse likes the big city, big money lifestyle and being able to say we own in a desirable neighbourhood and is fine with waiting another 12-15 years to retiring at age 55 at an inflated lifestyle. Being “retired” in our 30s and 40s actually freaks him out ! But he complains about how busy life is and why we’re feeling tired all the time! Barring consensus that it’s smarter to sell and rent (or move out) I read every entry in this blog, do all I can to cut the spending and save the dollars for the day when it is enough to step off the treadmill. The goal is 7 more years! or less!

  • ThunderD July 28, 2015, 3:38 pm

    If I planned on staying in Toronto long-term and loved the high-rise life, might I come out ahead buying such an apartment instead of renting one? To me, that would be a true rent-versus-buy analysis. The analysis here seems to compare house prices in the suburbs to apartment rent downtown, which isn’t really an apples-to-apples comparison because you’re not comparing like assets.

    But, overall, good stuff :). It always pays to consider your housing options!

  • Sarah July 28, 2015, 4:27 pm

    There’s a psychological factor in the rent-vs.-buy calculus that I think is overlooked — namely that many people are willing to rent relatively modest housing that they wouldn’t consider buying. The fact that renting is temporary makes it easier to settle for constraints like one less bedroom or bathroom, or less-than-ideal cosmetics.

    When you buy, you are making a longer commitment to the home (at least you should be). Even if you avoid dream-house-itis, you’ll be less willing to buy a home with a limitation you think might pose a problem down the road. And while you definitely should enjoy living in your house, it’s easy to hinge decisions on imaginary future circumstances that never materialize or seemingly terrible constraints to which you could quickly adapt. Beyond that, ownership makes a house a hefty signal of status and identity. Filling that need can lead buyers to suddenly and desperately desire bigger, fancier homes that at the outer edge (or well beyond) what they can afford or need.

    In reality, it’s often not an apples-to-apples comparison between rent vs. buy, IF you end up buying more house than you would otherwise rent. You can calculate the extra purchase/upkeep cost, but there are also costs to adapting to the lifestyle of more space and features. Gets harder and harder to cut back over time …

    In the right circumstances, I’m a fan of ownership (husband and I are former owners, current renters). Buyers in expensive markets necessarily accept more limits, but I think the “big eyes” effect of buying becomes a major temptation in markets where housing is more plentiful and reasonably priced. I definitely noticed a difference when home shopping as a buyer vs. renter–worth paying attention to!

    • Gerard August 4, 2015, 9:59 am

      I hadn’t thought of it that way, but yeah, you’re right. I’ve definitely made decisions in the past based on possible life scenarios. With renting, it’s much easier to say “We’ll deal with that if it comes up.”

    • Mark Schreiner September 22, 2021, 10:04 am

      Excellent comment. In my experience, the house you would buy is better in multiple dimensions compared with the house you would rent, for the reasons Sarah points out.

  • mikey g July 28, 2015, 4:49 pm

    This subject is near and dear to me. I bought a condo in San Francisco in 2012. It’s been working out nicely because even though housing prices are ridiculous, rental prices have continued to get even more extreme. I get to bike to work and quite enjoy my neighborhood.

    That all said, having only discovered MMM recently and realizing that FIRE is my goal, I do have the slight dilemma of that I won’t be able to maintain my mortgage without full time work without working for another 10 years. Only an hour and a half north is beautiful Sonoma County where housing costs in places can be 50% less than SF! By my back of the envelope math, I could foreseeably ‘retire’ in 3 years if I either sell or if I rent out the condo. I never anticipated even the possibility of renting out the condo (always figured I’d work forever like everyone else), and I can’t say I’m enthusiastic with the prospect of being a landlord, however considering how nice of a unit and neighborhood it’s in, I figure that unless I want to move out of state or out of the country to get even more ‘extreme’ on low cost, leasing it out is a good option because I can hold on to the investment and get a moderate net cash flow (especially if rents keep going up at the ridiculous rates they are here due to the ongoing tech boom).

    Any and all input is much appreciated!

    • L August 1, 2015, 1:00 pm

      If you bought a condo in 2012 in SF, you have my drooling envy as that seems to have been the market bottom coupled with crazy low interest rates!! I was looking at Redfin this morning and the thought popped into my head that we’re at a peak or very close to it in terms of real estate in this area (don’t live in the city itself, but in the East Bay). And I thought…if I were only interested in money and didn’t want to stay, I could sell and make a handsome little profit and pay cash somewhere else. And I live in the East Bay, not the city. And I bought in 2013, when prices and interest rates were much higher than in 2012. So you’re in a much rosier financial position it would seem.

      However, if you have to work in the city, a commute from Sonoma would suck. Horribly. One suggestion would be to subscribe to Redfin listings in your neighborhood and in Sonoma so you can see what comparables and what your dream place are going for. Real estate around here is crazy volatile — as in, the weather changes by month not year — and it’s worth keeping an eye on it. Our place has probably appreciated by at least $100,000 in 2 years, but most of that has happened in the past few months when a few comparables sold for insane amounts of money. The fear of interest rates rising, along with the desperate search for a “safe” (yeah right) asset by investors all over the world in SF has made yet another bubble frothier here.

      Either way, you seem to be “livin’ the dream” as they say. Enjoy your bike ride to work:)

      • mikey g August 1, 2015, 6:55 pm

        Thanks, L! I do feel I bought at a good time (although 2011 would’ve been even better!). But I should’ve been more clear about the Sonoma thing — that’s predicated on quitting work in 2-3 years and doing the FIRE thing in Sonoma. I’m still close enough to do the landlordin’ but far enough that I can rent for a while til I make sure things are working out, then… who knows, get a tiny house or some other solution where I don’t have to sell in order to free up enough cash to keep on keepin on.

        Don’t get me wrong, I do like things as they are now and am trying to keep learning the virtues of patience (and enjoying SF as much as I can knowing that as amazing as it can be to live here, more pastoral surroundings beckon), but now that I’ve discovered Mustachianism, and knowing myself, I know there’s simply no way I can work a full time office job for another 10 years, especially knowing there’s alternatives.

        So I guess the question I’m fishing about is really selling vs landlording. Even as insane as rents are today, they’d have to keep going up over 2-3 years to make the cash flow picture worth the trouble of leasing out. Ironically my neighborhood (Noe Valley) has had some of the lowest appreciation rates the past couple years, however, I think that’s because the rest of the city’s catching up (i.e. things were already expensive here).

        Plus one other perk of renting out your primary residence is that it always gives you the option of moving back in later, at least theoretically. I’m all for embracing change and taking reasonable chances, but I’m just trying to avoid selling after such a short stint of owning, especially because whatever I own next, I’d want to be very minimal and low maintenance and maybe can be achieved while holding onto this property indefinitely even though 2/3 of my eggs are in the RE basket…

  • Forticus July 28, 2015, 5:26 pm

    oops, misspelled my name

    and forgot to mention that moving closer to work is a very emotional issue over here. People rather commute 70 km from Dortmund to Dusseldorf all live than to give up their social environment where the feel home. The title “A vs B: If you have to ask, you should …” sounds like a title of a series. I would love to read a sequel on marriage vs partnership and about calculating the opportunity costs, honestly. ;-)

    • Matt July 29, 2015, 1:22 pm

      Marriage vs partnership – I’d love that! Me and my partner have decided that marriage is completely optional these days – that money is sitting in an index fund for me instead :-)

      • Jim August 3, 2015, 1:51 pm

        A marriage costs almost no money. A wedding on the other hand, can get entirely out of hand…

        I think our marriage (license, certificate, etc) was under $100 and our wedding was under $1500 (killer backyard BBQ and justice of the peace hire).

        • Paul Atkin August 6, 2015, 6:24 am

          @Jim – strongly agree. Our wedding cost about $3000 and that included the honeymoon in Greece (we live in UK). We asked the guests to bring food as gifts and hired a chef for the day to manage it all. People still say it was a great community event.

      • Alison August 6, 2015, 8:50 am

        +1 to marriages not needing to be expensive. Mine was under $200, including extras like beer, nachos, and wedding rings. I’m with you though…if there is no benefit to getting married (insurance, taxes, etc) why bother?

      • LHPower August 13, 2015, 7:29 am

        It won’t seem optional if one of you needs to add the other to her/his insurance, at least in the US. ‘Domestic Partner’ health benefits are fully taxable here and you’d be surprised how big an annual expense that is. Another US consideration: when one of you dies, the other gets no Social Security survivor benefits.

  • Evelyn Lee July 28, 2015, 6:20 pm

    Years ago, working in a bank in Hollywood, California, I had the “opportunity” to work with a lot of elderly clients. These were folks in their late 70’s through 90’s. They were almost all renters and WOW did they have horror stories. Remember to plan for when you will be too frail or mentally incompetent to move. Landlords can be awful, and when you’re very old, you may not have the ability to help yourself out of a bad rental situation.

    • Da55id August 1, 2015, 7:56 pm

      this is a crucial point! When we built our house, we used “zero maintenance, universal design” principals so that we could live here into our late 80’s, and even have a full apt for a live in care giver. We even built a handicapped friendly Mother in law suite…planning is a winderful thing! We will pay this house off within the year.

  • MrGruves July 28, 2015, 11:29 pm

    I’ve been following your blog for about a year now and this post has motivated me to write my first comment.

    1st of all, my 5 person family (and,…..dog) have been renting for 3 years as a way to simplify and save money. One thing we have realized is that there are so many hidden costs with owning a house that we now save our selves from by renting.

    2nd of all, pertainingto the vvideoyou posted, I’m a Mechanical Engineer who spent 7 years working for the company that designed and built the commuter locomotives that tow all the commuter cars in that area. (Unit # 659 was seen at the very beginning of the video). It’s pretty cool to see them on videos on the Internet.

    3rd, I really like what you are doing and it has been very educational, motivating, and even downright entertaining. Keep on keepin’ on!

  • Robert July 29, 2015, 2:25 am

    There are many options.Two members of my bicycle club rent a storage units at the beginning of our trail ride. They fill them and use them but the purpose I know is that their bicycles are stored there. No bicycle movement for them.

    I own. No mortgage. My taxes are fixed for the rest of my life. No increases possible. But I should rent the spare bedroom. I want to travel and having the house occupied is a plus.

    People wanting to own when rental is a cheaper option could rent and spend the difference investing in a REIT. This would give them symbolic ownership of property.

    • JB August 4, 2015, 10:49 am

      How are taxes fixed for life?

      • Frugal Robert August 4, 2015, 2:54 pm

        Property taxes in some parts of the U.S. have a cap on the amount that they can be increased. However, one shouldn’t expect those tax limits to be perpetual.

        In California, Prop 13 is an amendment to the state constitution which limits annual tax increases to 2% (or less, depending on inflation). In some areas, there are wide disparities on taxes paid when some people live in their house for a long time and are pegged to a very low rate – for example, buying at $30,000 30 years ago, whereas some others recently move into comparable homes at $500,000 and are paying the full bill.

        Nevada law also limits a primary residence’s property tax increase to 3%.

        While these tax limits are popular and a common agreement is that taxes shouldn’t price retirees out of their homes, one shouldn’t assume that these laws won’t change over a lifetime. They may change laws to limit the exemptions to a primary residence as in the example of Nevada, or require back tax payments (recapture) out of home price appreciation when selling the property.

  • David Wang July 29, 2015, 3:20 am

    If you guys thought Toronto was crazy, have a look at Sydney, Australia. Apparently the median house prices are over $1 million AUD now! Compared that to renting a detached house would be something like $500-$600 per week ($2k-$2.5k), buying is easily double that!

    • Doug July 29, 2015, 6:33 pm

      Does that tell you something about the prices in Sydney? It tells me that Sydney, as well as Toronto and Vancouver, are in an EXTREME bubble and it’s not a good time to buy.

  • Bob999 July 29, 2015, 4:04 am


    I am surprised that no one has mentioned leveraging/tax into the equation. If I buy a 500k house @ 20% deposit then I have 500k growing. Very unlikely that I would get a 500k Margin loan to buy shares/REIT. Plus capital gains on PPOR are tax free if/when you sell or pass onto your kids.

    from Australia.

  • Lianne July 29, 2015, 7:01 am

    These comments are fascinating. I’m in the UK, and that doesn’t seem to be discussed much…

    We on the South Coast, in the cheapest area of our town (but even then still only a few miles away from the Millionaire Footballers in their £5m+ houses)…

    Our rent is around 50% of our income, and even then we’re a family of 4 in a small 2 bed flat on the 1st floor (2nd floor in america?) with no lift. Our rent is also cheap as we’ve been here for 4 years and the landlord would rather keep us here as stable, reliable tenants than get someone in who will pay a higher rent who might only stay for a few months. An identical flat in an adjacent block just rented for £55 more than we pay and didn’t come with the garage that we have.

    If we want to move to a 2 bed house with a bit of grass to sit on, we’re looking at at least an extra £150 per month…When the kids are old enough to need their own bedrooms we’d need an extra £450 on top of what we pay now….

    Buying on the other hand would be about 3/4 of the price we would need to pay to rent.

    Unfortunately no matter how mustachian we are with our money, we won’t be able to get a mortgage until both of us are working full time (right now I’m only part time), which will only happen when both kids are at school and old enough not to need childcare in the holidays. Most banks here work on the 3x your income principal to work out how much they’ll lend you. The amount we could get right now wouldn’t even buy us a studio flat.

    So right now we don’t have the option to buy at all, let alone choose between renting and buying.

    If I won the lottery though or inherited/saved enough to buy a house outright I would definitely do that!

  • Michelle July 29, 2015, 7:12 am

    My favorite part of this post is the reference to the cost of owning a pet. I am not excited about picking up dog poo for 15 years, feeding them, walking, them, and dealing with the cost. I would prefer to puppy sit (love puppies!) when the mood strikes me to be around a pet and give it back its owner when the mood is gone. I am amazed when people don’t connect the fact that their dog and new(ish) car might be the reason why they don’t have any money.

    • Kiwikaz July 29, 2015, 5:25 pm

      I feel EXACTLY the same about children. The exorbitant costs, the 20 odd years of domestic servitude involveld in raising them, cleaning up the vomit/urine/poo, the constant laundry, dealing with head lice, gastro and snotty noses, the ferrying them around to school, doctors, playdates and activities. Can’t understand why any one has them! Get a dog instead.

      • Doug July 29, 2015, 6:43 pm

        Although I have neither kids or a dog, the one difference is the kid grows up to be someone you can have a conversation with, someone you can really relate to and, unless they die young, should be around for the rest of your life. Try that with a dog! I don’t have children but would if I met that partner I absolutely COULDN’T live without to have kids with, I would have done so by now.

      • medithi July 31, 2015, 7:05 pm

        I feel that way about dogs and kids. Cats are my thing! You don’t have to walk them, feeding is less expensive, they bathe themselves, they put you in your place with their attitude (very needed with our human egos), they pee and poo in a box filled with perfumed litter, and they smell amazing! unlike dogs! And you get all the furry delights of dogs, all the backtalk and snapping of children, with very little effort in return!

  • G July 29, 2015, 8:09 am

    I realise that Toronto real estate is expensive, but I don’t know why this article assumes that the alternative to renting is living in a house in the suburbs. I live in Toronto, in a condo that I own. It’s a beautiful 1+1 loft with two full bathrooms and a large balcony. It’s extremely close to the subway, a big park, a major street with shops and restaurants, close to my work, all the benefits of living in a city that MMM describes in the article. Living here costs me a lot of money every month, but I figure that my non-principal housing expenses (interest, maintenance, property tax, insurance, gas, internet…) work out to less than it would cost to rent the same place. On top of that, I’m “saving” about $1,500 bi-weekly in principal, in addition to other savings. Recognizing that this is a luxurious housing choice, and that I’m privileged to have been able to buy into this market, I think choosing to rent it rather than buy it is fairly neutral in terms of my long-term prosperity.

  • Kurt July 29, 2015, 9:22 am

    The choices people make, evidently oblivious to the financial consequences, can be astounding, as your piece makes clear. People will happily spend tens of thousands of dollars for the privilege of keeping Fido happy, for example. I’m astonished by the proportion of home buyers on HGTV shows like Househunters who will reject perfectly good (for the human residents) and far cheaper properties in favor of one that would work better for the family dog. Amazing. I like dogs, but c’mon…do you really want to work an extra 5 years so the dog can crap in his own back yard?

  • Kristina M. July 29, 2015, 11:14 am

    In rural places, like where I live in Kansas, the reverse can be true. We put 20% down on a 15 year mortgage and our payment including escrow is $580/month. Some of the houses and even 2 bd apartments can be upwards of $1000/month, although the norm for apartments is about $700. We aren’t in the suburbs, so there’s no longer commute for us vs. Our neighbors who rent the house next door. It always pays to do the MATH for your specific situation and consider all of the options.

  • Bridget July 29, 2015, 11:49 am

    As a happy renter in Calgary, Alberta I LOVE THIS ARTICLE!

    We rent an super-cheat 2-bedroom apartment in the heart of the city where both my fiance and I get to work in <30mins by walking or taking public transit. Now in our late 20s, most of our friends have headed out to the land of urban sprawl and spend upwards of an hour commuting in hellish traffic only to pay $200/mo to park their car at the office. Ridic!

  • Mika July 29, 2015, 1:55 pm

    Speak of the devil. I think conventional wisdom in our society highly overrates the value of home ownership. Based on my experience with owning and variety of articles and blogs on renting versus owning, I have also come to reject the conventional wisdom that renting is “just throwing your money away”. It didn’t take long for my husband and I to tire of feeling super tied down to the DC area both by our careers and our house. We occasionally take a stab at applying to jobs elsewhere when interesting ones pop up. When I tell friends I’m ready to sell the house, keep the profits from the sale liquid, and just stick to renting, the look at me like I’m stoned and proceed to give me their superior advice.

    (This is followed by the question of what I would do if only my husband found a job that took us elsewhere, to which I respond that I’d use my GI Bill benefits for a some kind of career certificate or second bachelors in something I find more interesting than what I do now. To which they respond I must use my benefits for a masters degree which (depending on your chosen career field) I also think is an overvalued “asset” for the money and effort required.)

    Thanks for the app! I used it to scope out the San Diego region where my husband just applied to a job and found a very nice looking and surprisingly affordable apartment (compared to buying costs in the same area) right in the little town the job is based in (Solana Beach). He could bike if not walk to work and we could probably dump the cars. (Assuming he got the job… fingers crossed)

  • Paul July 29, 2015, 2:16 pm

    This is one of those that really varies by market, as much as lifestyle. For instance, I live near Amarillo, TX. There’s a fair amount of unpredictability with our rental rates since people flock to the area when oil’s doing well then leave when it isn’t. Right now it’s kind of middling. Also, for some reason, for a long time our apartment market was undersold; our mortgage on an 1100 square foot house (an old one, admittedly) is less than our rent on the 600 square foot apartment we were in when we moved. Obviously there’s taxes which put it to the break even point, then maintenance which makes it more expensive, but not by tons.

  • Prudence Debtfree July 29, 2015, 2:39 pm

    My niece and her boyfriend, both young lawyers, have just rented a place in the brand new apartments in Ottawa by the market. (I think you’re referring to the building across from the art gallery.) He is a reader of MMM. He has moved from a plum Bay St. position in Toronto to be with my niece, and no doubt to reach financial independence earlier in our less costly city. I will be passing this post around to other nieces and nephews who are in the throes of the question: “To buy or to rent?”

  • jestjack July 29, 2015, 5:05 pm

    Good Blog! And the “divide” keeps getting wider.DD2 has experienced this very thing on not as grand a scale. She moved West for an employment opportunity to an area that is full of $750K to $2M homes. She looked around and found an apartment for $650 a month….INCLUDING 2 bedrooms….heat….gas …. electric….parking and is close enough to the University she MAY get wifi internet as well…. Now more than ever the numbers have to work to buy a home…..

  • Emma July 29, 2015, 6:04 pm

    Wow! There is some really good deals out there for those who live in the States/Canada. I presume your tenancy laws are much more favourable than ours in the UK. By the time we left our flat, we had had an oven door that had broken hinges, being ‘fixed’ by the landlord by screwing in a piece of metal to the side to hold the door in place (For 18 months!) and only after I threatened to ring the authorities because our food wasn’t cooking properly.

    After the initial six months tenancy, rates can be renegotiated, and only two months notice is to be given for eviction (i.e. four months after the start of the contract). A lot of places are badly maintained and ‘property taxes’ are liable from the tenants, not the landlord. A disturbing trend combining these things is when a Section 21 notice or ‘No fault termination’ is served, for asking for repairs to be done. It’s called ‘revenge evictions’.
    Also there is a deposit or bond held at the beginning (something like 1-2x first rental payment) for damage done to the property and it seems to be a game to get the most amount of that held back from being returned, often for cleaning charges, or ‘decorating’ that ‘needs doing’. We negotiated, because we’d been fucked right off by the state of repairs and how much they wanted to keep. But not everyone would.
    Finally, letting agents can charge all sorts of fees at the beginning,renewal and end of a contract, there’s no limit on these, nor any justification required for them to be levied. It can cost anything from £500-£1500 in costs PER MOVE, which as I’ve said before can be as regularly as every 6 months.
    We were very fortunate, we paid one set of £500 fees, some of which was converted into bond after taking the flat (otherwise, it would have been surrendered), we got a really good price for the area, at least £65/month less than others in the block and we were able to stay there with no changes to the rental for 4 years.

    When all these costs are considered, outside the South East of the country (Around the sucking black hole that is London), it is usually much better to buy, assuming flexibility is not a problem, and with our relatively comprehensive public transport system, it rarely is. In my area, Landlords are getting about a 10% ROI annually. Whereas in London, the margins are razor thin and they are really banking on capital gains. Renting wins there!

  • Doug July 29, 2015, 6:22 pm

    Good post! I also follow the blog http://www.greaterfool.ca where the host Garth Turner says the same thing, especially about overpriced Toronto and Vancouver. These markets especially, and some others in Canada are in an extreme bubble, and when it corrects a lot of heavily indebted people will get burned badly. It has happened before here in Canada, as well as more recently in other countries like the United States.

    I see you’ve mentioned the OUTRAGEOUS amount of money some people spend on their dogs. I’m surprised you’ve never mentioned the expense of pets before in past posts, unless you did in a post long ago. I don’t get it myself, and think some people have more money than they know what to do with. Companionship? I’ve lived alone a large part of my adult life and never felt such a need.

    • Michelle July 31, 2015, 6:54 pm

      Different personalities, different lives, etc. I have struggled with depression my whole life, but I’ve always told my friends they don’t have to worry about me unless suddenly all my pets have died (like in a house fire or something). They are the glue in my life. They give me smiles every day. But good for you for being a happy well-adjusted person living alone ;-) I seriously can’t imagine living alone with no pets. But I’m an animal person…

  • Just Plain Marie July 29, 2015, 6:28 pm

    I lived in Ottawa ten years. I don’t recall the driving being *that* scary. :) You can still buy a duplex in Ottawa South for under $500K, and we had a nice, big yard in a safe, residential neighbourhood. Live in one and rent the other – it worked for us.

  • Lisa July 29, 2015, 7:02 pm

    I have to say I’m glad I moved back to the Hammer after I graduated from U of T. I am a teacher. Teachers make the same in Hamilton as they do in Toronto. There were more jobs in Toronto than in Hamilton when I graduated, but there was no way I wanted to attempt to afford Toronto or do that deadly commute. More than 20 years later, I sure do not regret my decision.

  • Jon Stein July 29, 2015, 7:15 pm


    I loved the buy vs. rent piece. Saw it via our friend Mike Reust who posted it on Betterment’s #slack.

    Still renting after 13 years in NYC – because every time I look at the NYT BvR calculator, it makes no sense to buy anything (much as I hate the idea of how much I’ve paid in rent, I like the savings I’ve accumulated at the same time).

    A 2Br 2Ba in NYC could be found for $4-$5k – depending on where you live. And to buy a similar apartment in the same areas would be $1.5 or $2mm.

    My parents taught me the simple rule of thumb that your monthly rent payment should be 1/100 the price of a place. Or, doing rough math, 1/10th the annual rent. I like it because I think of a 10% yield on owning the property as pretty good return – I’d invest in that. But I wouldn’t invest in a 5% annual return.

    The numbers I’m looking at in NYC are more like 1/300 (generously). A 3% annual return to the property owner. Who would buy that, with other investment options available?



  • Dave July 29, 2015, 8:19 pm

    For anyone in Toronto or Vancouver who have condos that they rent out on airbnb, is it worth buying one for this reason as an investment. The Vancouver rental market seems very strong and i dont see how it will go down if ever. At some point there wont be any more space to build more condos but people will always want to live and visit Vancouver. So would buying one now not be a worthwhile investment?

    Im 33 and I have $100,000 saved right now. I am trying to figure out how i should invest it. Part of me says buy a place (like a condo) in Vancouver and rent it out on airbnb could be a good move. What do you think…?

    • Mr. Money Mustache July 30, 2015, 9:12 am

      ” i dont see how it will go down if ever”:

      Until you’re able to foresee a catastrophic decline and have a nice plan for how you’d deal with it*, you are not ready to invest, in real estate, or anything else!

      *A good plan is often to comfortably wait it out, but you need to have the resources to manage this too.

    • lenka August 4, 2015, 7:47 am

      I think it is a bad idea. We just started renting out our basement on AirBnB and are having fantastic experiences. $500 in the first month and we have met some incredible people. It is great pocket money (I will let you do the math for how much savings you need for Mr. S & P 500 to pay you that kind of monthly dividend). But it works because we are on-site, I do the cleaning myself and we love to meet travelers and show off our neighbourhood/city. In short, there are plenty of positive externalities for us and our kids. But if it is a purely financial decision, I think there are less time-intensive, and stable ways to grow your stash. However, to anyone with a vacant room/basement/camping car that is contemplating AirBnb – DO IT! Incidentally, if you are looking for lodging in Mtl, we would be happy to have you! https://www.airbnb.ca/rooms/7469184

    • JB August 4, 2015, 10:45 am

      You will rarely be able to rent out a place on airbnb on a consistant basis. Airbnb isn’t for renting on a long term basis.

  • SI2K July 29, 2015, 10:24 pm

    Nice idea in theory if you’re a single or a dual income couple with one child. The trouble being with Toronto’s tight rental market and terrible bylaw enforcement is that landlords won’t take your dog or your kids. They don’t have to when there’s fifty singles in line right behind you. Hopefully this will change when the bubble goes pop, but since about 2006 it’s been extraordinarily difficult to land a rental in Toronto with kids or pets. The other issue is once you do land one you’ll likely have it sold out from under you in this RE-as-commodity market, which is a real PITA with children. We currently rent in Toronto with two opposite gender tweens. No one would rent to us when they were little. No one. AAA credit and no one would call us back. The condo we were renting when my son was born sold out from under us after one year. We rented from two sympathetic friends for the years surrounding my daughter’s birth, then when one returned from abroad we bought a crap shack so we could remain in the neighbourhood long enough for the kids to attend primary school. Six years of crap shack later we found a three bedroom rental close to their schools (the TDSB places students willy nilly – we know one family with five kids in four schools bc of ridiculous spec ed geography – and don’t get me started on daycare spaces. They’re so rare that people often have one kid across town from another!) The three bedroom near a school is like the holy grail. $2700 a month, roundabout. They just aren’t being built. We’ve got one, but the godawful stench of Mary Jane is everywhere in these sardine buildings, too. They’re full of students in their twenties. We’re out to the suburbs in June ’16 after fourteen years of this crap. Been here twenty years total, but forget about it. Toronto is really unpleasant now for families of 3+.

  • Jay July 30, 2015, 12:09 am

    I forgot to mention something in my previous comment.

    I recently have been asking friends and colleagues: Would you live in a house/apartment for ZERO rent? Meaning, you would sign leases for the same terms as my leases, but without any monthly lease payment.

    If the answer is, I wouldn’t live in a house/apartment even for ZERO rent, then the issue is not a financial one for that person. For everyone else, then, there is a price at which renting becomes more attractive than buying, despite the non-financial issues.

    The opposite-side-of-the-coin question, for me and other renters who have the resources to put a down payment down on a house/apartment, is: At what price would I buy a house/apartment to live in instead of renting? My price would be much lower than the market prices for apartments/houses in my area, or I imagine, almost any area. Meaning, the issue is almost completely non-financial for me, too.

    Also, if I did buy at that low price, I’d have to be confident of receiving basically the same amount of money in rent that I pay now (or more), so that the financial arguments outweigh the non-financial ones, for me.

  • Matt July 30, 2015, 5:58 am

    Timely article and a highly controversial one as well. As my economics professor consistently said over and over again “it depends ” always a back a forth however give me a market and a personality and I can tell you what works best for the situation. If I were to pick apart one thing it’s the dollar per mile commuting cost. Let’s say for example I bought a 2012 Honda Fit today for $10,000 with $35,000 miles. Ill pay cash and consider final value costs of $20,000 after the 12 more years of car ownership and repairs after $200,000 miles and $0 salvage value. I’ve used 165k miles and spent $20k over life of vehicle that’s roughly 12 cents a mile. Yes my $40k AWD SUV is probably .55 cents the govt rate, but still. Nice thought provoking post as always

    • Mr. Money Mustache July 30, 2015, 9:08 am

      Sure, there is always room for fiddling with numbers, as long as you have the big picture right.

      For example, I’d argue that a $10k fit would probably have higher initial miles, would cost more than that to run for another 200k miles (320,000 km!) without much higher costs especially in Eastern NA where roads are wet and salty. Insurance in TO is $100-200 per MONTH for many people, fuel (not counted in your 12 cents) is 50% more expensive than in the US, etc.

      But the real cost comes up in the time and health effects of car commuting – inefficient and almost always avoidable.

      • Money Saving July 30, 2015, 10:54 am

        Yes – let’s also factor in the health benefits of walking to work every day vs. sitting in the car for 1.5 hours each day. Night and day difference! That has got to amount to hundreds of thousands in the long run when you get up in age!

  • MacGyverIT July 30, 2015, 9:40 am

    I’ve always preferred renting until it came to the annual “up-the-rent” renewal. At the least, one hundreds of dollars per month increase. I could hold out for two years, then I’ve have to move b/c I was priced out. And the costs of moving every two years or so… insane. I bought when the market settled in 2011 because I wanted to rely upon a consistent monthly payment. I’ve loved the stability of owning, mortgage remains the same and the property has appreciated 50k in the last four years. That said, I’ll be the first one to admit I rented in much nicer neighborhoods than my residence.

    • JB August 4, 2015, 10:43 am

      If your property taxes go up $50 a month each year, you will get priced out of a house.

  • Seanna July 30, 2015, 9:45 am

    Great article! You should edit it for newspaper release. Great information and would make a great feature in the personal finance sections of the Star or National Post!

  • Money Saving July 30, 2015, 10:50 am

    Time for me to move to Canada!

    I find that nearly 99% of the people I talk to commonly ignore insurance, property tax, PMI (if that applies to them), down-payment opportunity cost as you mentioned, 2%-3% annual maintenance expenditures, trash, electricity, water, heating/cooling, internet, yard work, commute time, etc., etc., etc. when estimating the cost of home ownership.

    It is nearly impossible to come out ahead when owning a home if you are close to a metropolitan area unless you get lucky with timing the real estate market swings! You can just as easily time things wrong and be stuck holding the bag!

    Very good article MMM – you always seem to break things down to their fundamentals :-)

  • Skynaut July 30, 2015, 12:00 pm

    Great article and comments.

    One angle that has perhaps been missed is that if your home is a large percentage of your net worth, then your portfolio has a problem called “home country (city) bias”. The local economy will have an outsized effect on the value of your portfolio, similar to working at Blackberry and having most of your assets in Blackberry shares.

    Currently my friends in Calgary, Alberta are discovering this as the local economy has hit the skids as the oil economy has plummeted and home price projections have to be shifted downward considerably.

    People generally over-estimate the financial security provided by a home when in reality a globally balanced portfolio has a better track record.

  • Eric DeMenthon (PadMapper) July 30, 2015, 6:20 pm

    Holy crap, huge fan, MMM. Thanks for recommending us!

  • Laura Beth July 30, 2015, 8:56 pm

    Insightful article. I’ve gone back and forth from renting to home ownership and as you point out, there are pros and cons to each, depending on the city you live in. I think it comes down to lifestyle choice.

    If I could add anything, it would be that your article did not highlight the importance of school choices. I would live downtown in a heartbeat if they good schools were nearby, but that is not the case in most major cities. I would easily forego the backyard and the insane morning commute to enjoy the amenities of downtown living, if only there were better school choices in the areas closest to downtown.

    Loved the post!
    Laura Beth

  • Joe July 30, 2015, 9:47 pm

    I really feel that my home is my secret savings weapon. I have a 4 bedroom/ 2 bath (1500 sq. ft.) updated home that cost 85K. Rentals in my area cost between $400 – 600/ mo. for a 2 bed/ 1 bath. Since my mortgage + escrow costs about $540/ mo. and I’m locked in at 3%, I have a major advantage over renters. I will have paid off my home in about 7 years and then will only pay the $2100/ yr. in taxes + maintenance + heat + water (maybe $360/ mo.).

    I live in central Wisconsin, and the local economy is not so great. My wife and I make 78K combined, but our cost of living here is LOW.

    • Mr. Money Mustache July 31, 2015, 9:34 am

      Excellent example of a great time to buy. I want TO people to see that houses can be this cheap, so they become properly outraged when shacks sell for $1M

  • Sanjuro July 30, 2015, 10:03 pm

    Mr. MM,

    Long time fan & my first post.

    I live in West Los Angeles, where a decent single family house starts around $2 million. Currently, I live in a small but comfortable apartment (a walking distance from my work) for $2,000 monthly rent. All my friends and colleagues give me that line that I am throwing away money in rent. I envy the house owners, then again, I can’t bring myself to tie up my most assets to buying the first house and work next 30 years to pay off that gigantic mortgage.

    Can you give me a punch in the face, please.

    • Mr. Money Mustache July 31, 2015, 9:32 am

      Great job Sanjuro! $2k is an amazing bargain for an area like that. Buy a house later if you have a spare 2M in cash laying around, and if even that won’t put a dent in your freedom. Otherwise, keep renting!

      • JB August 4, 2015, 10:35 am

        A $2M house would be about $12K a month in a mortgage payment. You can buy the house for cash in about 25 years of living at $2K a month. I find it hard to believe the apartments are that cheap with $2M houses in the area.

    • Taylor July 31, 2015, 1:36 pm

      YES! I lived in Westwood, Los Angeles for the past year and buying in that area is utterly insane. The good news is that there are some awesome apartment rentals and honestly, $2000 is pretty good deal. I was in a studio that was walking distance from UCLA for $1500. I now live in San Diego and rent prices are a bit cheaper, but not by much. I definitely feel the pull to buy sometimes, but ultimately, I think that renting makes the most sense in a lot of Southern California cities.

      • Craig October 26, 2015, 3:01 pm

        I also live in Westwood, Los Angeles and completely agree – we have a beautiful 1 bedroom apartment for 1650/month, where a similar condo can go for $700k+, not including HOA fees. Houses here are well over $1m. The only way I could afford a house would be to move 20+ miles away to the SF Valley (Burbank, Noho, Glendale are all decent areas) but the cost of commuting would be enormous (not to mention that 2-3 bedroom houses still start at $600k+…). Many people aren’t doing the math, and are working in west LA and adding a ridiculous commute (as evidenced by the absolutely fucking insane traffic on the 405 or 101 all hours of the day).

        It’s funny, though – LA can be one of those odd places that when using MMM’s cost of commuting calculations, and accounting for a very generous hourly rate, it can still somehow come out favorably to commute 20+ miles. In these cases, you would need to account for other less tangible things like health costs from sitting for so long, missed time with family, etc., since a commute is always a bad thing to be avoided. When I first moved to LA, I commuted almost two and a half hours a day and I’ll never do it again – without any exaggeration whatsoever, it was slowly and insidiously ruining my life. People who say otherwise are kidding themselves.

        Westwood, Santa Monica, Brentwood, etc. are all great areas, close to the coast, and great 2-3 bedroom apartments can be found for 2k-3k/month, which makes sense if your work is in these neighborhoods. We’ve been renting for a long time because it just makes sense financially to do so, and it’s really refreshing to hear someone not spouting the nonsense of “throwing money away on rent” (which my father in law loves to tell me, ha). As always, just do the damned math, listen to the facts and statistics, recognize that your emotions are there and important but are of limited utility, and let go of your preconceptions.

        • Robert October 26, 2015, 3:44 pm

          Hi Craig,

          I totally agree. I live in Irvine, right in the middle of Orange County. I just moved within walking distance to work. That’s right, walking distance. Just sold my car and am trying the car-free life for a while.

          I attended a financial seminar last year at USC and the advice I received from the one of the consultants on being able to purchase a home as a young professional living in Southern California was to move to the Apple Valley. Three plus hour commute one way, no thank you. Many of my peers and family members are pressuring me to buy a house because it is a smart financial decision. I couldn’t agree less in the area I am in.

          Splitting an apartment with a friend seems to be working out well for me.

          Just run the numbers and they will tell you what you should do.


          • Craig October 26, 2015, 4:12 pm

            Holy shit, Apple Valley? What kind of insane person would think 6 hours a day on the road is even a possibility? That’s a new one for me, and I’ve heard some pretty horrifying suggestions. I thought someone telling me to consider Valencia was crazy (and very telling about the real estate market here in LA).

            I find myself not even bothering to argue about the rent vs. buy argument most of the time, because it gets so wrapped up in people’s emotions that they’re unwilling to consider any alternatives. Meanwhile, they’re locked into enormous mortgages and car payments and long commutes, complaining about not being able to get ahead.

            As a freelancer in the entertainment industry, renting is great for mobility as well. Most of my work is on the westside, but that may change over time. Once I commit to an area, I’d lose that flexibility. I’d rather have freedom, time, and money in an apartment over crippling debt, a tiny cement backyard, two claustrophobic bedrooms, and a soul-crushing commute every day.

  • Alicia July 31, 2015, 4:23 am

    I live in one of those weird places where it seems to pay to buy rather than rent.

    The financials:
    – Apartments I was looking at ranged from $750-800+ in a good side of town for a two bedroom around 750 square feet
    – My mortgage on a 3 bedroom, 2 1/2 bath 1400+ square feet townhouse is $654, including way too much escrow coming out. Actual P&I is pretty close to $480 something. One day, I’m going to address that.

    The other perk of where I live is that other townhouses on my street are renting for around $1000-$1100. I suppose if I was really savvy I’d go ahead and move out and rent my place, since I could potentially make $400/month in income after I paid the mortgage, but I really like this place so I can see myself living here for a while.

    If times got really hard, I could rent out my other two bedrooms to roommates for $500 each including utilities and they would save money over renting apartments (1 bdr apartments go for $600+ on my side of town and don’t include utilities), plus I would be living for free and even bringing in a bit of income every month. I really ought to do that for early retirement’s sake, but I rather like having a stupid amount of clown space to stretch out in. I like having a music room and an exercise room.

    • JB August 4, 2015, 10:14 am

      Just make sure you add up all the maintenance costs with the lawn, AC filters, plumbing issues…..

  • JaredY July 31, 2015, 5:58 am

    The first year of home ownership for me was a dream come true. I happily told all my friends how we chose to buy because it was cheaper to buy than to rent. After all, average rent for a place similar to this would be 20%-30% more expensive.

    Now: I have to get out of here and rent a house/apartment. I have no time, I have no freedom. What am I doing tonight? Maintenance (since obviously I’m doing it myself and not paying someone to take care of my house.) Oh guess what? I’m also paying all kinds of bills that renters don’t pay. Water, sewer, trash…ah, that’s chump change. No, its not. The final straw for me was when I looked up what it would cost to have my brickwork re-mortared as its age is getting up there. Nope. Time to sell.

    Future: We rent. In 10 years, we may just have enough money to buy a house with cash. Once a house is purchased with cash, and not on a loan, that extra capital can either be saved or go to those untimely maintenance issues. Until then, I just don’t feel its worth it.

    Advice: When you “crunch the numbers” on renting vs buying, don’t forget the expenses (including time investment) that you are committing to with buying that simply don’t exist when you rent.

  • ABOUT TO RETIRE July 31, 2015, 8:29 am

    I am sick of renting, making a rich landlord even richer. My work has a kitchen and shower so I was thinking of getting a van to live in and sleep in the parking lot. It would save me a ton of money and what are they going to do, fire me? Why pay for something when you can get it for free?

    • Mr. Money Mustache July 31, 2015, 9:23 am

      I was just thinking the same thing. If I worked at one of the massive luxury campus companies like Google, I’d love to just get a cozy converted Sprinter and sleep there. All waking hours could be spent on campus (free food and amazing people everywhere), or out on day expeditions/vacations.

  • Edith July 31, 2015, 9:22 am

    Dear Mr. Money Mustache, seeing how you base a lot of your philosophy on science and research about happiness, it suprised me how you mentioned having a dog gives you just “companionship” in return. Maybe you are not aware of the research done about it: It improves health and happiness tremendously. I agree having dogs is expensive and requires a lot of sacrifices that can overturn their benefits, for example, if you get a house in the suburbs for the sake of the dog. In fact, I advise my friends to get a cat instead, since they give you the same benefits and require less effort, time, and space. Pet instead of kids, financially, very very mustachian decision. I am also worried of the way you showed the cost of having a dog: there are tons of irresponsible people out there who get a pet, like it’s a thing, and then they abandon it because of the sacrifices and costs, instead of wising up and making the best out of the situation. I think once you take the responsability of a pet, you should stick with it the way people should stick with the kids they brought into the world. I know you don’t have pets, and you have one kid, the article about why you can have one kid was amazing. I’d love to see something similar with pets: a research article here about pro’s and con’s of the different kinds of pets, to help people in the decision before they mess up and ruin the life of an animal. Cheers!

  • Paul July 31, 2015, 1:18 pm

    I live in Toronto (for now) and the price-to-rent ratio here is really out of whack. I currently rent a 1 bedroom condo for $1300/month. A 1 br condo in this building sells for about $330k. For some reason, a large number of very foolish real estate investors buy condos for 330k and then rent them out for $1300/month. If you do the math, you’ll quickly realize the mortgage, condo fee, tax, and insurance on a 330k property is far higher than 1300/month, not to mention the lost opportunity cost of investing the downpayment. Two bedroom condos or townhomes are even worse. These landlords are subsidizing tenants to the tune of hundreds of dollars a month and for some reason they think that’s a good investment. I really don’t understand what goes through their minds, but I’m not complaining, thanks to them I’m able to live in a luxury condo for much cheaper than if I had to buy it.

    If I had to stay and work in Toronto, I’d probably buy a house somewhere like Barrie or Oshawa and commute by train. Yes it takes an hour and a half but you can use the time to read, relax, sleep or get work done on your laptop. Much nicer than driving in stop and go traffic, and cheaper too. 300k will buy you a nice detached house in Barrie or Oshawa. Condo living just plain sucks. There is constant noise both from other condos and from outside, there are constant smells from your neighbors cooking, ridiculous rules you have to abide by at the condo board’s whim, the long waits for the elevator to arrive is really inconvenient, etc. What if you want to work on your car? If you have a house with a garage you can, but you are not allowed to do an oil change in the condo’s underground parking garage.

  • Michelle July 31, 2015, 6:48 pm

    Well, I was coming to the actual page off of my email in order to plead with you to tell people that they don’t need a yard for their dog, rather than saying they don’t need a dog =P But it looks like plenty of people have already come on board in the “dog”s defense. I especially liked the person’s comment in regards to discouraging pet ownership while having kids of your own. Hypocritical, to say the least. Human children are SIGNIFICANTLY more expensive than pets ;-) Anyway, with all the animals in need of homes, and how much of an emotional benefit pets give to their owners, I would NEVER discourage anyone from getting a pet who wants one. For me, I have three rescue cats and one rescue dog, and they are my life. I want them to be happy as a person with human kids would want their kids to be happy. They are a part of my plan as opposed to being an obstacle. We all make our choices on how to spend our money depending on our priorities. I go without a lot of things for myself in order to afford my pets while still saving a significant portion of my income to go towards my financial goals. My pets are NON-negotiable ;-)

  • JT August 1, 2015, 9:55 am

    The main thrust of this article (don’t buy if it’s way cheaper to rent) is pretty much inarguable.

    Some of the reasoning is just silly, though. “Don’t invest in houses, because the housing market could drop! That’s why *I* invest in the stock market, where such a thing NEVER happens.” Pardon my eyeroll, but any asset class can tank. Buying a house that appreciates may sometimes be luck, but may also be a smart appreciation play by an investor who’s done the research.

    And like with stocks, buying a house should be a long term move, since over the long term you’ll see growth every year. Don’t be an idiot: avoid HOAs, do your own maintenance (and negotiate with/manage sub-contractors), buy in an area you actually want to live (minimizing the car-commute-to-everything), and take advantage of the insanely cheap financing offered currently and the ability to leverage and depreciate while building equity in an object that you have to have anyway (shelter).

    Oh, and my 80lb dog costs me ~45 bucks a month. Worth every penny.

    • JB August 4, 2015, 9:56 am

      Housing is all about Location. Houses in the burbs with a house that looks like every other house appreciates slower than a long, established neighborhood where there is no more land to build and you are close to a nice area. Our house has never gone down in value, but we also paid more than we would have living in the burbs at the time.

  • LKS August 1, 2015, 12:36 pm

    We bought a home.

    It wasn’t because buying was such a great deal, but because renting was becoming such a bad one in the Bay Area. We moved here over two years ago; since then, the average rental price where I live has gone up by over 50% (this is for someone without connections, i.e., a family friend willing to let you live there for below market rate). The argument is often made that the Bay Area is a classic example of a place where you should not buy….however, our costs are now fixed as buyers. Being a renter on the open market (with pets!) around here is fiercely, fiercely competitive and horrifyingly expensive. We pay about $100 a month more for a two bedroom co-op with a big yard than we paid for our studio apartment, into which we squeezed the two of us, two cats, and two dogs. The “urban cabin” as we called it, the studio was a fantastic short-term solution…but not a long-term one if you want kids.

    That said, a mortgage really has become yet another tool that can separate rational, thoughtful people from their money. Caveat emptor.

    • JB August 4, 2015, 9:52 am

      Rental prices come down when the demand goes down or the salaries can’t support the rents. Raise rents until you have nobody to rent to.

  • MarkRN August 1, 2015, 1:21 pm

    Where have all the Boomers gone?
    To the few Baby Boomers who read 3M. The wife and I cashed it in at the age of 57. Sold the Condo and five unit we owned outside of Chicago last year and moved to Clearwater, FL. We had been visiting my mother-in-law for over 10 years not realizing the opportunity here for low-cost living. You can’t throw a stick down here without hitting an Over 55 Adult community. We bought into a park for $45,000. Land (share) value was $20,000, home valued 25,000 fully furnished and updated. HOA fee of only $125, includes lawn care, water and garbage. Swimming pool 50 yards away heated to 90 degrees all year round. The gulf beaches are a 5 mile bike ride away. Tampa International airport or cruise ship port a 30 minute bus ride. These parks are full of the millionaire next door types.

  • Aja McClanahan August 1, 2015, 10:38 pm

    The home ownership “lie” has been fed to us as the American Dream and now most American’s live pay check to pay check. Home ownership can work, but after you factor in interest, PMI, etc. It turns out to be a terrible investment. If you can rent for cheap and invest the difference you are much better off.

    • JB August 4, 2015, 9:54 am

      There have always been people living paycheck to paycheck. Taxes are included in rent so you can’t escape property taxes.

  • Frugal Bazooka August 2, 2015, 1:02 am

    I fall squarely in the “buy real estate no matter what” camp. I have a few reasons:
    1. I came to dislike my landlord and co-renters immensely. Esp the ass below us who would bash our floor w her broom whenever she was drunk. The gunfight between next door roommates was another small issue…BTW our apt was only 3 blocks from Bev Hills.
    2. I love working on the house and yard.
    3. Owning matured me quickly.
    4. Regardless of the hype schools in the city mostly suck.
    5. Saving for a house was a tangible that I could envision. The stock market at that point in my life was not an option – evil wall street said the former hippie
    6. I used the equity several times to grow, expand and succeed in business. Try refinancing an apt. I know this is not mustache appropriate but in the world of business even small biz u must have collateral avail quickly
    7. Control. Yes I need to have maximum control over my daily destiny
    8. Space/Rooms – I would not have survived sharing a small space w my rambunctious family that I love dearly
    9. Without the deduction I probably wouldn’t have bought a house
    10. Appreciation – the capital app tax free will be astronomical relative to even my equity portfolio when u factor taxes deducted over a 20 year period plus the market increase during the same period

    I realize the market is different today but wages are increasing in leaps and bounds while inflation has been nearly zero. I still think real estate in the right location can be a huge wealth builder.

    Finally by way of anectdote… I had 4 dogs over a 20 year period and never spent more than $400 on medical bills yearly…mostly shots and check ups. Food and misc was equally cheap considering the love and positive vibes they brought to our family. I feel like our financial successes are due in part to the motivation and love they gave us to frugal on when the frugalling was tough!

    • JB August 4, 2015, 9:51 am

      OK, but there are millions of situations that aren’t like this. You could have just moved to a different rental. the interest tax deduction goes away and if you pay high property taxes, it shouldn’t be make or break to live in the house.

  • Joe August 2, 2015, 8:42 am

    When I moved to the Tampa, FL area a couple years back my wife and I made the decision to become renters. For us, it was a decision based mostly on being unfamiliar with the area. We wanted a “mulligan” so to speak if we ended up in an area we didn’t like. I’m often shocked at the people who swoop into an unfamiliar area and commit to a mortgage on a house.

    Now that we have done it for a couple years, I doubt I will ever go back to being an owner. I think the renter/landlord relationship is perfect. The landlord gets the tax benefits (and far better write-offs than if I was an owner), and I get near 100% risk mitigation.

    That’s the part owners often gloss over when debating with me. Yes, I lose all those write-offs, but that is more than compensated in my mind by the landlord taking on all risks of ownership. Not to mention all major maintenance is out of my hands.

    It’s a perfect example of what they call a symbiotic relationship. :)


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