2019 Nov 26th

That’s OK Boomer, I’ll Just Rent

It’s no secret that young people don’t want to own things.  Uber, streaming, even rental furniture and clothing are all popular now.  When a young person needs 10% of the purchase price  of a home for a down payment, and has vast outstanding student loan debt, it become very hard to buy that starter home.  I’m certainly seeing fewer first time condo buyers in Hoboken.  There was recently an article on BrickUnderground.com about NYC renters who intend to rent forever.  It’s really a shame as buying a home is one of the fastest and easiest ways to accumulate wealth.  Good times or bad, people tend to make their mortgage payment while they may not be so diligent about savings.  Over time, property appreciates and wealth accumulates.  Yet many young people simply can’t buy a home because they have no or little saving.  Others don’t want to buy a home as they don’t see any advantage to owning over renting.  Personally, I would never live in a rental after having owned my own home.  But to each his own.

  1. JC

    I own multiple properties including my own home and today I woke up and actually wished that I did just rent. I dont want to deal with the multiple maintenance calls, the contractors that dont call me back, the raking of all the leaves in the yard, the laundry not working as well as it should and knowing i’ll need to open up my wall to investigate.

    Its work owning property, it really is. But with work comes the spoils. Financially its worked out very well (so far) and its hard to really know if I shoveled every penny into the stock market which would really come out ahead.

    In terms of owning a home, its the emotions that make it worth while for me. I dont view my home as an investment since I have to live somewhere and I put money into renovations that I personally want that the next buyer may not. I get it, I’m willing to deal with the consequences when I sell. I also know I may be unique and to many folks their home is biggest investment. I respect that.

    But the feeling of coming “home” and being proud and caring about the city and the block are all those intangible feelings that I dont believe renters have, but maybe they dont care, and to each his own….exactly Lori.

    Happy Turkey.

  2. Lori

    Thanks, JC.

    We owned as many as a dozen brick & mortar properties at one time. In preparation for retirement, we have divested of most of them (at a very nice profit, in almost every case) and we purchased some ‘paper’ real estate investments in their place (REITS, DSTs), mostly for tax reasons. I should write more about 1031s, DSTs, and capital gains. My lesson learned over several decades – don’t sell until you have to as prices tend to rise with time. I’ve never wished I sold sooner but I’ve often wished I waited. But your point is correct – owning rental properties is work and responsibility. I was ready to trade that in for collecting dividends. As for my own home, I could not imagine renting until I am simply too old to take care of my own home. It’s just not the same when it’s not yours.

    Happy Turkey Day to you and yours, as well.

  3. Charles

    I don’t get it. My wife and I are dual-income and in the highest tax bracket. Deducting our mortgage payments from our taxable income is a huge savings on our potential tax liability. (I should know, I’m a CPA). Even though we plan to stay in Hoboken only until our kids are in middle school, I have no doubt that our condo will appreciate and we will walk away with a nice, tax-free profit. Why would anyone who can afford to buy not do so in a place like this. There is just no downside.

  4. JC

    Lori….Glad to hear you are divesting a bit to simplify your life as preparation for retirement. I often contemplate selling all my investment properties and buying liquid publicly traded REITS. I would be interested in reading about this topic and curious if/how you were able to defer your cap gains.

    Charles: The SALT tax cap and $750k interest deduction cap has hit high end pretty hard. It didnt stop me making high end purchases but didnt love doing the analysis if these caps didnt exist.

  5. Lori

    JC – look into DSTs (Delaware Statutory Trusts). They are like REITs but 1031 qualified so you get to defer the tax liability. There is a liquidity issue and you need to do your due diligence but, depending on your needs, they may be suitable alternatives. If you PM or email me I can tell you the company with which we have had a good experience.

  6. JC

    thnx. No need for awhile, thnx for the offer.

  7. Joe

    There are many very fortunate people who have benefited from home appreciation in Hoboken and other areas. It’s not fair to advise people that they will receive similar appreciation. They may not, and actually in all likelihood won’t see the record gains of the last 20-30 years. Further, the tax argument depends on where your income is and how much your deductions are. Most don’t benefit nearly as much as they used to and some won’t benefit at all. Calculate modest appreciation, factor in all costs and potential sales, consider tax impacts, and make a sound decision. A rental can be a very wise alternative.

  8. Lori Turoff

    Joe – love to know the source for your predictions. History certainly shows otherwise.

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