Get richer by renting

April 23, 2007

A while back, I opined that homeownership isn’t for everybody.

In that post, I was focusing on folks who over-extended themselves to buy a house. Too many of them didn’t have a solid financial foundation and relied on "creative" and/or subprime mortgage loans to buy. We’ve all seen how that turned out.

But Jack Hough, writing for SmartMoney.com, says Renting Makes More Financial Sense Than Homeownership, regardless of your financial situation.

House_money_scale_2
In the article, Hough says he could easily buy a house, but prefers to rent and put his money into stocks. He contends that businesses are great investments while houses are poor ones, so he’d rather rent the latter and own the former.

He makes some interesting points, some of which are sure to rile homeowners and real estate investors.

For example, Hough says shares of businesses return 7 percent a year over long time periods. Houses, on the other hand, have an average real return over long time periods of zero. Yep. Zilch. Nada. Nothing. Nil.

He explains his math in this collection of reader questions and objections he anticipated.

Homeownership tax benefits: One of the issues Hough touches on is the tax breaks allowed homeowners. He argues that the tax benefits are nominal at best and notes that most taxpayers, including many homeowners, don’t even claim them. They take the standard deduction instead of itemizing all their residential and other tax-deducible expenses on Schedule A.

Hough might be correct about the negligible effect of home-related tax benefits in general. For the hubby and me, however, deducting our mortgage interest and property taxes made a big difference on our latest tax bill. Without those expenses, we’d have owed the IRS even more.

But tax savings are not why we bought any of our houses. In fact, the long-term financial implications weren’t the driving forces behind our search for the first or subsequent homes we’ve purchased.

Despite the annoyances of owning a property, and there are many, we just like having our little fiefdom. We are the king and queen of our castle, although we would occasionally like to have a moat. That intangible reward counts for a lot — the most, actually — in our eyes.

And we’ve never looked at any of our homes as an investment. They are places to live. We picked them for that reason only. That they’ve afforded us a bit of financial reward, despite Hough’s analysis, has been a bonus.

Climbing the housing ladder, one rung at a time: We’ve been lucky in that we made at least a little money on every sale and, thanks to the Florida real estate value run-up and my hurricane-fear induced demand to move in 2005, a lot on the last transaction. That was definitely one of the few times when panic paid off!

The point is, if you want to own a house, do it. But do it wisely. If your credit is questionable, get it in shape first. Then save for a down payment or come up with the money from somewhere else.

We got into our first home, a small suburban Maryland condo, by selling the hubby’s car to help make the down payment. When we sold four years later, the profit went toward our first single-family home. And that’s what we’ve done in each subsequent move.

I know it’s human nature to want to have the biggest and best immediately. I have personally known some young couples who, as soon as they returned from their honeymoon, started house hunting. Some were prepared for the full costs of homeownership; others, sadly, were not.

For those whose home dreams are much larger than their bank accounts, I highly recommend the real estate route the hubby and I took. We started out our married life with a small residence and moved up the housing ladder.

It’s really paid off. We built equity in each residence and preserved our credit and overall financial security in the process, all the while enjoying every one of our homes.

Share:

The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

Latest Posts
6 tax moves to consider this June

June 3, 2026

Definitely take a break this June. But taxes don’t take vacations. So, you also should…

Read More
Tax Season 2026 Continues!

We made it. Tax Day 2025 is finally over. For most of us. When the filing season started on Jan. 26, millions who were expecting refunds filed immediately. Most of us got our returns to the Internal Revenue Service by April 15. But plenty of taxpayers also got extensions. They are looking at an Oct. 15 filing deadline.

Those procrastinating filers aren’t a problem. In fact, the IRS appreciates taxpayers who take time to fill out their 1040 forms correctly. It also is grateful that tax submissions are spread out a bit, especially now that the IRS is a leaner agency. Processing returns is easier when they arrive throughout the year instead of in massive bunches.

But enough about Uncle Sam’s tax collection issues. The focus now is on all y’all who filed for extensions, giving you another six months to complete your return. Since your new mid-October due date will be here before you know it, let’s get started now on meeting it.

The ol’ blog is here to help you finish up your extended Form 1040. You can start with January’s tax tips page, which has links to the rest of the year’s tips by-month collections. You also can peruse various tax categories for more tailored advice by clicking on the More Tax Posts drop-down menu at the top of this (and every) page.

And to make sure you don’t miss your new filing deadline, the count-down clock below will let you know just how much time you to file by Oct. 15. At the latest.e. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

Comments