Buying versus renting is a huge decision. In the long run, buying a property is generally better than renting because you're building equity and owning an asset that tends to rise with inflation or faster. This post will discuss if people have regretted buying a house instead of renting.
Remember, the return on rent is always negative 100%. You will end up with no equity and no wealth after all the time you've spent renting. Yes, you will have gotten a place to stay, but same with the buyer, so that variable cancels everything out.
The only property I truly regretted buying was a vacation property in Squaw Valley, Lake Tahoe in 2007. That was a big time mistake because the financial crisis pummeled its value by 50% between 2009-2010.
But 14 years later, the value of my Lake Tahoe condo is back to almost even. Further, I finally have a baby boy to take up there and enjoy as a family. This has been a dream of mine since the day I bought the property. And I’m grateful the dream is finally coming true.
Over this 14 year period, the vacation property has dropped from 25% of my net worth to around 3% of my net worth. As a result, it’s not that big of a deal that it’s been such a poor financial performer.
Other Property Buying Regrets
Instead of regretted buying property, I regretted not buying MORE property since I graduated college in 1999.
I regret not buying a two bedroom, two bathroom condo with double balconies with a view of the Chrysler Building in Manhattan in 2001. The condo was on Madison and 24th, a prime location.
I also regret not buying as much property as a I could in San Francisco in 2003. Instead of buying the $1,000,000 place I was considering that would now be worth $2,500,000 today, I bought a $580,500 condo that is worth about $1,300,000.
It is very scary to put down a 20% or greater downpayment, assume a mortgage and all the maintenance and property taxes that go with homeownership. But it did put a fire under my butt to work hard at work so I would never become unemployed.
Real Estate Is Great For The Long Run
Buy real estate as young as you possible can if you know you plan to stay for the long term. Inflation is too powerful a force to combat. It’s best to be a price dictator than a price taker. Your children, and your children’s children will thank you for it.
Take a look at the price chart of San Francisco real estate. The median price has gone from $560,000 when I bought in 2003 to now roughly $1,700,000 in 2021. Not many people have regretted buying property over renting that I know.
Rental Property Can Be Full Of Regret
Owning rental property is a different matter. The regret associated with owning a rental is higher because you have to deal with people, and people tend to disappoint with their tendency to damage your property, pay late, and violate lease terms.
My tenants were late paying rent eight times out of the 18 months they lived there. Not only that, they created a lot of damage to my home with their house parties and the neighbors e-mailed me to complain a lot as well. My rental house essentially turned into a fraternity house.
In 2017, I finally sold the rental property I bought in 2005 and redeployed the proceeds into 100% passive investments including: real estate crowdfunding in the Midwest, dividend stocks, and municipal bonds. I'm so glad to no longer pay $23,000 a year in property tax and deal with tenants anymore.
Rental property is a young person’s game. Own rental property until you just can’t take it anymore, and redeploy the proceeds into investments that don’t require work. Your life will thank you for it once you're too tired to do anything beyond taking care of your family.
Invest In Real Estate Crowdfunding
If you don't have the downpayment to buy a property, don't want to deal with the hassle of managing real estate, or don't want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today.
Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible. For example, cap rates are around 3% in San Francisco and New York City, but over 10% in the Midwest if you're looking for strictly investing income returns.
Honestly, my biggest regret is not buying more San Francisco real estate when I had the chance. But today, I'm buying as many panoramic ocean view property homes as I can. I believe big city real estate will come back strong.
There are too many reasons to list why the housing market will stay strong for years to come. I want to be properly exposed to the housing market so that years from now, I'll be much wealthier as a result.
About the Author
Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing. He spent the next 13 years after college working in investment banking at GS and CS. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.
In 2012, Sam was able to retire at the age of 34 largely due to his investments. He spends time playing tennis, hanging out with family, and writing online to help others achieve financial freedom.
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