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The driving metaphor comes from the contrast between (effectively) renting a BMW motorcycle (since they are hard to repair), and owning a simpler model that can be maintained by oneself.
The stated benefit is greater autonomy and satisfaction derived through taking ownership and solving one's own problems - a more classical approach to life. Rather than taking a "fix this for me" attitude, you see the world as something that you have control over.
Personally, I've found it very satisfying every time I'm able to repair something in my car, which I've owned for 8 years.
The sense of control is a false one. Is there control in the availability of parts, or their manufacture?
Increasing one's autonomy has value, whether or not you ever reach full autonomy.
As an ego-booster, I'm not so sure. Since everything is so connected, why gloat? As someone who has actually built a car from scrap metal and a loose engine, I feel that there isn't much difference between putting a pre-made part in a car yourself, or having someone else do it. Everything's a tinkertoy.
Or, to put it another way, C programmers aren't "Better" at programming then I am just because they're C programmers and I use C# / Ruby / Others.
(They're better because they're grumpier and they'll hit me with their beards if I don't please them)
A lot of people with a 'vehicle is an appliance' mindset would never understand that, but vehicles are like houses in that they create and are intrinsically involved with memories. Some happy, some sad, all baked into our lives. That's why many women have to apologise and say sorry to a car they are disposing from their lives, as if it's anything but a inanimate lump of metal, plastic, glass and rubber. They're not saying goodbye to the object, they are saying goodbye to the memories.
When I was an apartment dweller, I signed a 1 year contract and they kept telling me that if anything breaks call them. That included windows, pipes, stoves, refrigerators, and light bulbs. I wasn't even supposed to change a light bulb if it burned out on me. Admittedly this is only one experience with what I hope was a very poor renting operation, but they owned all the buildings in the vicinity.
I was so happy when I replaced my kitchen sink faucet on my own and in a way that satisfied what I wanted.
I stress competent because my previous landlord(s) were less than able to fix things beyond the superficial problems. Their goal is to strike a balance somewhere between quality and ability to stop complaints. Usually the choice fell one one side of the ability to stop complaints side. (Fix it so it works, not so it works well, i.e. replace broken washing machine with cheap almost broken washing machine.)
I still own my 88 Toyota Landcruiser. 170K original miles.
And yes, I do all the work on it myself.
Convenience!
For me this is a prime motivator. I have sufficient demands on my time that added expense of owning a car is worth the 20 minutes it would take to access the closest virtu-car, and the 90 minutes I save every day driving in stead of busing.
I have enough space in my house for cold storage and a freezer. This means I can buy food in bulk and don't have to go to store as often.
Security!
Landlords kick tenants out out now and then. Rents can go up all of a sudden. My family rented for a long time when I was a kid, and we got booted out of several houses when the landlord decided not to renew to lease for one reason or another; wanted to give the house to a relative, wanted a pile more rent, et. cet.
Agency!
For some people home improvement and 'puttering around the house' is a big source of pleasure and recreation. Many people express themselves with the work of their hands, and owning tools and infrastructure to build things and so forth is important too them.
Finally, NRP's planet money has a great blog about the issue of buying vs. renting housing: http://www.npr.org/blogs/money/2010/11/05/131105373/the-frid...
tl;dr: this is about way more than money. It's about personal value choices
Being forced to move out of your rented home seems a lot less severe than having the bank foreclose on your "owned" home.
A renter with a long term lease holds just as much obligation as a home owner as far as that goes.
I would say that the risk of getting the boot from your rented dwelling is much larger than the risk of getting foreclosed.
The risks associated with foreclosure can be mitigated to some extent by the homeowner. Management of cash flow, pursuit of income security, adequate savings, all of these things are in the homeowners domain. Many many homeowners have secure incomes and live with extremely small foreclosure risk.
A renter can see the building sold out from under him and be out on his ear no matter what he does.
The bottom line is that this stuff leaves the realm of objective mathematical truth and enters personal risk profile and values very, very quickly. For some, income will have wide error bars and they need lots of flexibility. Someone else might have union seniority in a government job and be able to predict their income for the next twenty years.
For the vast majority of the population, income is insecure. I think that's part of what the author is getting at: by adding debt insecurity, one disproportionately seeks to make their income more secure.
i.e., Taking less risks, doing less things, and generally trying desperately not to rock the boat, and being less happy as a result.
> "A renter with a long term lease holds just as much obligation as a home owner as far as that goes."
I'm not aware of any rentals with 25-year leases. Most leases I've ever signed have been 12-18 months. Also, the mortgage payment on an equivalent place is, in my experience, >2x the rent. I can lose my job right now and pay off the rest of my lease without breaking a sweat. Heck, if you're really paranoid about it you can insure yourself against it.
On the same income, all other expenses be equal, etc etc, a renter has a lot more free cash flow than a guy paying a mortgage. Not only that, he can pivot much more easily, since his obligations are dramatically much more short-term. It's both easier to build the rainy day fund to pay the rest of his lease off and he's able to cut down his costs much more quickly than, say, trying to sell off your house that you can no longer afford.
This translates into real-life in major ways. People who are mobile, have few obligations have much more firepower at any negotiation table. When you can walk away to a better gig in another city and have your bags packed in 3 days, you can extract much better results.
Which isn't to say renting/avoidance of long-term obligations is always a good idea, but IMHO it's a very good idea while young. Your income curve will be steeper due to your ability to negotiate, and you will have much more freedom to find the life you're looking for.
People buy rentals in order to generate positive long-term cash flow. In a sane housing market, rent will be only slightly less than mortgage + taxes + insurance in the short term, and rent will rise with inflation while mortgage payments stay fixed. Thus, after a few years, rentals bought in a sane market will generate positive cash flow; otherwise it would be foolish to buy a rental property. (If you compare the historical price-to-rent ratio in most cities [0] with the expectation of price-to-PITI of 14 [1], you'll find that renting is indeed slightly cheaper over the short term, but only by about 20%, not 100%.)
In the situation you described, where mortgage is >2x equivalent rent, that's a sign you're in a bubble market. In such a market, it's a terrible idea to buy. (IIRC you're in Seattle, which is almost twice as bubblicious as the national average. It has been a terrible idea to buy in Seattle [2] for most of the last decade.)
> "all other expenses be equal, etc etc, a renter has a lot more free cash flow than a guy paying a mortgage"
If the guy with the mortgage bought in Seattle between 2003 and 2009, he's going to have poor cash flow, but that's not a criticism of buying in general, it's a criticism of buying at a bad price. In a normal market, the renter should have more free cash flow over the first few years, and the buyer should have more free cash flow starting about 5-10 years in.
[0] http://money.cnn.com/magazines/fortune/price_rent_ratios/ -- see the P/R ratio tab
[1] using this calculator to determine monthly PITI; the rest of the math is straightforward. http://www.realestateabc.com/calculators/PITI.htm
[2] my good friend Tim runs http://seattlebubble.com/blog/ , so I've been following our crazy housing market since 2005.
Agreed, except that AFAIK there hasn't been such a market in the US for years, if not decades, in any major city. Heck, I come from Canada where I know some people also buying their first home - housing up there in any major city is also as bubblicious as it is here, to varying degrees.
In just about any major city I've looked at, renting is massively cheaper than buying, which after the housing crash is very puzzling.
Renting is still quite a bit cheaper than buying in many regions. This is because the crash isn't done yet. Give it another 3-5 years.
In a completely average, non-bubble housing market, buying (counting insurance, taxes and breaks, maintenance, etc.) is about 20% more expensive than renting in the short term, but after 5-10 years of inflation and rent increases, renting becomes more expensive. There's a definite tradeoff between short-term savings with no equity but high flexibility vs. long-term savings with equity and permanence. That tradeoff was slanted heavily in favor of renting in Kenmore, WA in 2007, but as Tim's conclusion notes, it is not always so; whatever your situation, "run the numbers ... and do what works for you."
Cities with historically strong housing markets, such as Seattle and New York, have a very high ownership premium. Other cities with a more traditionally flat housing market, such as Pittsburgh or many rural communities, do not.
So if you live in Seattle like Tim, by all means, renting might be better for you. But in Madison, Wisconsin you might spend the same amount to own a house as you do to rent one.
YMMV.
I never was a big gatherer, but since then I really cut down on buying things. In addition to that I'm getting rid of my things, some are easier to lose some are harder to give away or sell, but in the end it feels great. I actually find it liberating to stand in a store and _not_ buy the fancy item which would inevitably be degraded to be clutter on the shelf in a few weeks. The money I spend goes into the few things I really use all the time, like my iPhone. I also eat better. All in all I'd say it made me a happier person.
I brought a big suitcase full of items, but probably only used a backpack full. I purchased local clothes (for cheap) that were better suited to the climate and everything else was easily replaceable.
I also agree investing heavily into a few key items is important. My Macbook was irreplaceable. I wish I spent more on a better camera, it was a good one but I used it enough to justify getting a great one.
Now that I am back I realize I have a lot of stuff that is completely unnecessary. It is surprisingly difficult to get rid of, but I am donating it in chunks.
A some of the bigger upsets in my life come from times I've lost stuff, either through the upheaval of moving, or data from crashed hard drives. Physical and informational tokens can act as triggers for remembrance of past experiences, and it's not nice when you lose those photos, diaries or whatever.
On the other hand, going into a store, I am very seldom tempted to buy fancy items. I usually get more joy from my ability to purchase something than actually purchasing it; probably a relic of growing up in poverty. The best purchases have been food, wine, holidays, theatre and art: experiences.
I've been watching a marathon of back episodes of "Hoarders" (http://www.aetv.com/hoarders/index.jsp) on NetFlix streaming, and it's somewhat startling to me how much some of the replies here sound like the defensive responses of some of the hoarders in the show.
That said, the reaction of the people on Hoarders tend to be defensive reactions due to not wanting to deal with the issue at hand (i.e. extreme procrastination). Which is probably why most of them pick up their hoarding habits after the loss of a close loved one (usually a parent). They don't want to deal with the loss, so they are constantly pushing it away, and not dealing with it.
{edit} This tends to bleeding into everything else in their lives. They live for the momentary thrill of acquiring things, while not bothering with 'the boring stuff' like cleaning their house, or sorting their acquired items, or even deciding which items are/aren't worthless.
Look, I think we fill our lives with too much stuff, but refusing to take an ownership stake in housing, transportation, etc. will lead to worse outcomes, not better.
This doesn't make sense. The remaining owners will still compete for renters. If my landlord does a bad job, I will find a better landlord. In fact, you can argue that concentrating ownership makes maintenance more efficient. My landlord has much more experience at plumbing, painting, installing appliances etc. than I ever would.
There are slumlords - but that's usually caused by a compression in supply (e.g., when I was in college, any place near school had notorious landlords). When supply is open though, everything works out.
You have your uber-cheap rentals where nothing will ever get fixed, and then you have your more premium rentals where they'll turnaround a stove in 24 hours or less. Like all markets, a low-end and high-end are established and work just peachy.
Of course, this is not geographically true everywhere - especially when you introduce artificial supply and demand factors (rent control, anyone?).
In the case of a landlord, they are often representing their own brand, and their income is dependent on the success of that brand. In the narrow scope of a single contract, there is incentive to defect to the point of barely-tolerable, but a landlord is not acting on behalf of the renter.
Additionally, in a world with a greatly increased population of renters, there would likely arise a more organized market for landlords. I think you'd see something a lot like what we see with restaurants. The larger brands have a very specific reputation that they reliably follow, and the smaller chains and unique locals rely on word of mouth and overdelivering. Then it's a short jump to a sort of Yelp for landlords - in fact, a lot of places have this already.
Related: back in school, the student legal union kept track of all complaints filed and who the landlord was, then made the log available to anyone. The distribution was as expected: Campus Property Management, the largest and most commonly detested landlord, had the most complaints and the highest complaints/property managed. Bill, who managed the house I lived in senior year along with a few other places, had none, and he was awesome.
When I hear these arguments I always figure they already have a great enough balance to counteract these issues or have no loved ones to pass along equity too.
I see that as a red herring. The key if you are going to rent is to save the difference between what your rent is and what your mortgage + other costs of ownership would be and put that capital to work for you through other investment vehicles. In America there is this convoluted idea that 'everyone should own a home'. It's a ridiculous premise and should be nothing more than a pipe dream for many people who do currently own a mortgage on a home.
http://www.nytimes.com/interactive/business/buy-rent-calcula...
Some spending on housing is inevitable, and some is just consumption. Investing in a house to secure the former is responsible; the latter is luxury and irresponsible if you can't afford it.
Also, people underprice issues like maintenance and risks as a matter of routine.
In turn I don't expect to receive anything from my parents, would much rather they enjoy what they have earned.
But for me, the most important thing I want to leave my kids with is experiences. I hope they'll have lots of great memories of time we spent together, trips we took together, things we learned together, etc.
I know, I know, someone is going to say "well, what about upkeep and maintenance and killing rats and xyz?" The way I'm seeing this (which, by the by, is originating completely from a 3-beer-deep opinionated loudmouth) is that it's negligible compared to the fact that you are investing your money in something that is of material value.
The education you provide your children should start them far from 0. Actual inherited wealth of a vast sum nature is rarely a good thing for character, and often is counterproductive at making good humans.
Additionally, if it's actually inherited, they don't get it until their late 40s, 50s, 60s or 70s with modern lifespans of those rich enough to get constant good medical treatment. Additionally the pandering nature that can make relationships in the later years of a parents life who has money is not always the healthiest thing to inject into family life.
Admittedly, I have positioned my argument strongly from a renter's perspective, as I believe the "default setting" is heavily skewed toward ownership.
Fact of the matter is that many of us believe we need to own everything, when many things can be rented more economically and fruitfully (e.g. car co-op versus car ownership).
Home ownership is less clear-cut since homes tend to preserve their value well (not as well as we've thought, though!), so it's realistic to leave something of substantial value behind.
Cars though, cars are 100% consumable. There's not a lick of persistent value behind them. Personally, I'm avoiding the car ownership pitfall for as long as humanly possible, but in this country that's not indefinitely.
It's a gigantic money sink - one that most people I grew up with don't even realize, since they bought their cars along with their first jobs. They've never done a budget without their car being in the mix, to them this $1K+ per month expenditure is perfectly normal and unavoidable. A necessity of life.
Buy a simple used car in good shape, with 30K-60K miles on it. This will cost $7-12,000, and last for at least 8 years with a bit of maintenance. Figure $60-150/month for gas, $100/month for car insurance, and you're still in the area of $350/month. Add a few hundred per year for tires and repairs. When the repair bill reaches $100/month, buy another used car.
Buying a new car, a fancy car, or a car with poor gas mileage will make these numbers much worse, of course.
* Insurance was $150/mo. This was without an age surcharge, no speeding tickets, no accidents. As low as it was getting.
* Payments were ~$500/mo for 60 months at 4.9%. That was after putting about 23.5% down, and taking sales tax into account.
* Gasoline? This was a car that got 4mpg when you caned it, and averaged about 14mpg. I drove 500 miles a week. When premium was $3.50-$4.00 a gallon. Gas was $500 - $700 a month, as 150HP/liter doesn't come for free.
* Maintenance? I changed my own oil (synthetic) every month. Even DIY, that was $40/mo. Nevermind everything else. A set of brake pads (DIY) was still $500-600. Rotors? More like $900. I ended up doing two brake jobs in 3 years.
* The summer tires, between track days and usual commuting, lasted ~12K miles a set, at $1300/set. I also had dedicated winters at $900/set, but those never needed to be replaced. But basically, a new set of summer tires once a year meant $110/mo in just tires. "Cheaper tires" weren't an option, unless I wanted to completely neuter its handling characteristics.
Honestly, it was close to $1500/mo to run that thing, and that was simply a $36,000 car that could happen to hang with things 2 to 3 times its price on a road course. I was contracting for years, and never got anything close to where I was. If I was commuting to the same place, I would've absolutely moved, and saved $300-600/mo in fuel/maintenance quite easily.
I have a Miata (MX-5) now which costs dirt to run, mostly because mileage is all fun, and < 4000 a year. Insurance is cheaper than an economy car. Gets 24mpg driving it like an idiot. Proper tires are only $750-800/set. Maybe costs me $150-200/mo, since it's paid for.
Rather than "trivially" making it to $1500/month, I think you pushed most parameters to the expensive side.
As a contrast, I have a 2001 Passat that I've owned for 6 years and do all the maintenance on myself. Over 6 years I'd estimate it's cost me $25k total, which ends up being $350/month. But then I've only driven 40k over those 6 years, too.
The Yokohama Advan A046s had a 140 treadwear rating. High-output turbocharged engines (140HP/liter bone stock) tend to require frequent oil changes. High-output turbocharged engines also tend to run rich, basically using unspent fuel to help cool the turbo -- 14mpg is seriously what was observed under mostly rush-hour highway traffic. Premium fuel was required since it still had a near 12:1 compression ratio.
Those cars would never be offered via co-op, and I can't think of a car sharing service that even offers genuine bona-fide sports cars. They are rare, not mass market. They're incredibly noisy. Not very comfortable. They're "compacts" (in the US). They're only offered with manual transmissions (until recently). They'd be absolutely catastrophic loss leaders, especially with hooligans beating the piss out of them. They were engineered to be the most entertaining cars for the lowest transaction cost possible... but they very quickly compensate for their low sticker price with maintenance bills from a 911.
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What about those who purchase, say, a new Toyota V6 Camry, load it up to $30K, then put the minimum they'll allow down? Right there you're looking at a $550-$600/mo payment (and dealers won't care if they're getting paid and have the car off their floor plan). Add $100-150/mo in insurance. Assuming a 25mpg average, it's not hard to get right on the cusp of $1000/mo for the first 5 years, depending on how far people commute. That's with a vehicle that's around the average transaction price for a new car in this country.
My point remains that it's not hard to hit $1000/mo. I don't consider that prudent in the slightest, but a fair number of people experience just that.
As I said, I know how to not spend money on a car as well. I bought a Mazda MX-5 cash. Moved close enough to work to take mass transit. Negotiated secure garaging in my lease. Just use it as a toy. Between insurance ($120/mo), maintenance and fuel, $200/mo would be exceptional. I think I've spent $600 total on gasoline in the past 22 months, whereas 4 years ago, I remembered spending that every month on just fuel.
$1K is payment + maint + insurance + gas. Hell, I've gone over my parents' finances and that's roughly in line with how much they shell out for their cars (note: Mazdas and Toyotas, nothing fancy). Around where I grew up, unless you're driving a junker, $1K a month is pretty easy to hit (last I checked, my parents with their perfect driving record are doing ~$250 on insurance alone).
I also don't buy the radical minimalism/anti-ownership ethic either. Being so independent of things makes you in turn totally dependent on merchants who provide the things you want or need.
I'm with Heinlein: 'specialization is for insects.'
edit: formatting
One of the 'people' in opposition is Warren Buffet[1]:
> "Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline," Buffett said. "A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy."
http://www.calculatedriskblog.com/2010/11/ny-fed-continued-d... "Since its peak in the third quarter of 2008, nearly $1 trillion has been shaved from outstanding consumer debts." "So are consumers becoming more frugal? Yes. Holding aside defaults, they are indeed reducing their debts at a pace not seen over the last ten years."
Looks like we're moving from a loan-and-own economy to an age of access, where you only pay for access to stuff (aka "rent").
I can only go as far as to my self.
I don't buy CDs anymore, I pay for access to Spotify.
I don't buy books anymore, I pay for access to an ebook on my Kindle (although it's a one time fee).
I don't buy DVDs, I pay to get access to an online stream.
And so forth.
Sometimes I feel more uprooted than liberated by the lack of stuff.
I could see not needing an apartment, if I had an FTL spaceship like that.
Despite the game's apparent freedom, it only gives you one option - to take the ship and go. You can't, for example, sell the expensive space ship, re-invest it into the fish processing plant you work in and use the proceeds to live like a king on the poverty-stricken planet.
http://www.ideasonideas.com/2010/11/your-bank-balance-is-at-...
Perhaps it's not the author's main point, but living lightly means we have more time to invest in the things and experiences that interest us, and that is a good thing.
This article is a one-sided exploration of the buy-vs-rent debate. It doesn't explore all of the emotional connotations of owning something durable, and overweights certain experiences from the point of view of the author, when this cannot possible apply to a population of people.
Finally, as Russ comments - it's wrong to sneer at the purchase of a handbag or BMW - the person might be spending their money on a combination of quality product and brand, but once you start getting into the argument of purchasing x is right, and purchasing y is wrong- you're arguing simply from a relative point of view. As long as the transaction was not done under duress, where is the problem? My neighbour spends all his money on sailing. I find it a waste of money, but he clearly gets enjoyment from it. Who is right? Is it remotely possible for me to suggest that buying a sailboat is wrong? Wrong to who? As compared to what? Free choices are just that.
Owning a house in a falling market may seem like a foolish position, and for many, perhaps it is. But that goes to assume that the person owning a house does it for purely financial reasons, which, again, is wrong. Another neighbour of mine is an old lady in her 80's who owns her house and lives by herself. By any object measure she'd be better off selling the house and both investing and spending the considerable cash that would generate. But she enjoys her garden and the memories of a house that once contained her husband and family over the span of 40 years. Is she wrong to hold this position? Financially perhaps, but perhaps the currency aspect means very little to her in comparison with pleasure of her little piece of land with a house on it. She could sell her house, rent a nice retirement apartment and afford a around-the-world cruise. A rental-is-best mindset would recommend this view. How can I tell her she is wrong and someone else is right?
Like I said, it is great to encourage others to evaluate what is a need vs a want, but I dont necessarily think something should be considered a cage just because it is purchased or unnecessary for life.
What concerns me is the idea that so many feel they need to own something, in order to enjoy it.
I believe it gets a little closer to the heart of what I was working to convey--particularly as the discussion seemed to later spiral into a primarily financial one.
Few of us want to die, as evidenced by such statements as, “if I die…” (like there’s some possibility of an alternative). I hate to break it to you, but the only real variables are how and when. Other than that, we’re probably best to accept that you and I are both just toast. I find a kind of liberty in this knowledge. In fact, it suggests that most of the things I fret over are largely inconsequential, and that I shouldn’t squander these moments.