This part of my life is called rent or own. I am on the cusp of a major decision. Right now, it cost just as much to rent a two bedroom apartment in so cal as it does to own a four bedroom house in so cal. Rents are just ignorant right now. As you can tell from the title I am super pro home ownership but part of me worries about the potential for job loss and subsequent foreclosure. As I was hashing this out with my mom she reminded me that banks and lenders are more lenient than landlords.
What she meant by this is that when you are late on the rent, or even if you lose a job and cant pay the rent, the landlord give you a three day notice and then begins eviction proceedings. On the other hand, if you are late on the mortgage or even if you lose your job and can’t pay that month, the worst that the bank can do is send a letter. Then they have to wait 90 days and then they can pursue foreclosure. This is if it even comes to this point.
Now me, I am just thinking worst case scenario here. I want to make sure all my bases are covered because when times were rough in the economy and I was just out of college I experienced a sudden job loss or two that caused my life to go into a whirlwind. At 30 I put things in place to ensure that this never happens to me again.
One of those things is an emergency fund. I have reserves set aside to fund me for multiple months in the event of a job loss. The second is my business and my profession. As a professional (law school graduate), I can make money whether I am employed or not because I have marketable skills. Third, rental property. Whether the job loves me or hates me, cash flow still comes in from the renters.
Another plan I am putting into place is to get away from renter-ship (I made that term up) and into So Cal home ownership. This will at least give me another three month hedge against homelessness.
So many people can talk about the pros of renter-ship and the cons of ownership but another idea that came from my mom and I in that conversation is that ownership elevates you. Our plan was to rent for a year or two, establish ourselves more and then hop into ownership. The problem is that after three years we would be leaving with no equity just constant rise in rents eroding out our ability to save. With home ownership in California properties rise in value annually. My parents home has seen about 70-80k in equity in just three years. So if instead of renting for the same price as owning, we hopped into ownership, not only would we pay off all our student loans, we would be also walking with a significant check after selling our home for more than we paid. So its a double bonus. We buy less than we can afford, we hustle for a few years and then walk into our dream home with a check and no student loans. The rent rent would not allow for that.
If you choose to rent that’s on you. But don’t come telling me how you are oppressed and lack generational wealth when I am giving you the keys right there. Own your mistakes that are the root of your choices. Don’t pan off your faults to the isms.
So in summary, ownership trumps renter-ship because it buys you much more time to realign your financial affairs if you lose a job or become to sick or injured to work. The three day notice or quit can make a grown man cry, nobody can find a new job that quick. Second, the equity is a bonus move that you will never get from the rent rent. I know people who bought in SF when everyone told them it was stupid and now they have more in equity than most people will save in their lives. Renters on the other hand are still paycheck to paycheck and when they do decide to move they will get nada, just a bill for paint and carpet. Ownership elevates you.
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