Profiles Of People Who Spend Six Figures A Year On Rent

Some say renting is like throwing your money away. If that's the case, what about the people who spend six figures a year on rent? Is that like setting your net worth on fire?

I don't think renting is throwing money away at all. You get shelter for the rent you pay. Renting is also necessary for many people in transition, i.e. those who don't know for sure where they want to live or work. Further, if you are worried about the housing market, then renting could save you a lot of money or at least provide you more peace of mind.

If we ever move to Hawaii, we will likely first rent a fully-furnished place for 6-12 months. We'd like to try before we buy to make sure we really want to be in Hawaii for years. Further, we also want to ensure we really like the neighborhood as well.

Renting is also a simpler way to live. There is less responsibility, which feels freeing. For any homeowner who has gone through a big remodel or experienced a major maintenance issue, I'm sure renting at the time would have been highly preferable.

My Last Experience Renting

The last time I rented was in 2002. I was 25 years old and had moved to San Francisco a year earlier from Manhattan, where I also rented for two years.

In San Francisco, I was renting a two-bedroom, one bathroom place at the edge of Chinatown for $1,800 a month with another guy. It was cheap compared to the $2,100 a month studio + alcove apartment I rented with a friend in downtown Manhattan in 2000.

Unfortunately, I think my San Francisco roommate suffered from schizophrenia. Once or twice a week at around 10 p.m., I'd hear his head banging on the wall as he screamed nonsense for about 30 minutes in a row. During each episode, I just stayed in my room, too afraid to check up on him.

One evening, my roommate came home from his night shift at In N' Out Burger all bloodied. He had been whacked on the head with a bottle by assailants who stole his wallet as he traversed the Tenderloin, the most dangerous district in the city.

The droplets of blood he left on our hallway floor jolted me into making a lifestyle change. Saving as much money as possible on my housing was no longer a priority. Safety and a better lifestyle was.

I had come to San Francisco with a raise and a promotion. After a year, I knew I wanted to stay for the long term. Therefore, I decided to buy a two-bedroom condo overlooking a park in Pacific Heights in 2003 for $580,000.

The Most I'm Willing To Pay For Rent

Back in 2003, the most I was willing to pay for rent was $2,000 a month or $24,000 a year. I split some of the rent with my girlfriend pro-rated based on our incomes.

Today, with a family of four, the most I'm willing to pay for rent is $7,000 a month or $84,000 a year on rent. Any more and it just feels like too much based on my net worth and income. Remember, this is with after-tax money. Hence $7,000 a month in rent is more like $10,000 a month gross.

If I can't find a nice place to rent for less than $84,000 a year that I like, then I will buy. Most rentals I see are not as nice as similar homes for sale. Landlords have the incentive to do the minimum to maximize profits. Whereas homeowners tend to spend more on their homes for enjoyment.

At my age, I'm no longer optimizing for saving money on living costs. Instead, I'm trying to live in the nicest home I can comfortably afford while my kids are still living with us. We can downsize after they move out in 16 years.

I'm not someone willing to pay six figures in rent. Perhaps it's because I'm too frugal or maybe it's the investor in me who really always wants to get a return. But spending a lot on rent does have a lot of value. In fact, renting luxury and buying utility is one of my core real estate investing strategies (BURL)!

Therefore, I thought it would be a good idea to figure out who is willing to pay six figures in rent based on the prospective tenants I've met. I'll also come up with the income and net worth necessary to do so.

Profiles Of People Paying Six Figures A Year In Rent

I was once the landlord of a home which was rentable for $8,500 ($102,000 a year). However, it turned out to be too much work, so I sold it and reinvested the proceeds in stocks, bonds, and real estate crowdfunding.

Here are some of the profiles of those prospective tenants. Not all of them hang around on yachts dressed in white. Although, that's admittedly one image that comes to mind when it comes to six-figure renters.

Profiles Of People Who Spend Six Figures A Year On Rent

1) Professional baseball player making $7.5 million a year at the time.

He had been acquired by the Oakland Athletics during the off-season. He and his family needed a place to rent for six months during the regular season. They already had a house in Tennessee during the off-season.

Given his large salary, I was surprised he was even considering renting my house. Ultimately, his wife didn't like one of my bathrooms, despite asking to use it. They also ended up getting divorced.

The MLB player was eventually traded to the Kansas City Royals where he helped win a World Series in 2015. He was then traded to the Chicago Cubs where he won another World Series in 2016! Zorilla's story reminds me that anything can happen if you just hang in there.

2) A hedge fund manager of 10 years.

It was him, his wife, and his daughter in high school. They had just sold their 5,700 square foot house nearby for $7.1 million dollars. They wanted to downsize to a mid-2,000 square feet home. My home was about 2,300 square feet.

They had one daughter heading off to college and another daughter already in college.

I never learned their incomes because they didn't send in an application. My house was probably too much of a downgrade for them.

3) A Berkeley Ph.D. student.

The Ph.D. student and her friends who worked in technology and energy wanted to move in together. The Ph.D. student drove a BMW convertible that cost $60,000 new.

I'm not sure how she was able to afford the car. Maybe the Bank Of Mom & Dad was in effect. Each prospective tenant, except for the student, made over $160,000 a year.

4) Multiple groups of four guys working in tech and finance.

These guys all worked at places such as Twitter, Amazon, Apple, and Google. Guys outnumbered gals looking for housing 10:1. The standard budget per roommate was $1,500 – $2,500 a month.

Nice one-bedroom apartments in San Francisco used to cost $3,200 – $3,600. Regular two-bedroom apartments used to cost $3,900 – $5,500. Nice three-bedroom apartments used cost $5,500 – $7,500.

So by four or five people renting out my four-bedroom home for $8,500, each could potentially save several hundred dollars a month.

5) A 44-year-old private equity managing director.

The husband had a 28-year-old wife, two lab retrievers, and two live-in helpers (6 heartbeats!).

I asked whether the two live-in helpers would be OK sharing the room downstairs, and they said the room downstairs was “massive” compared to the room they were living in Hong Kong. I smirked inside because the space was not.

One helper would be the wife's private driver. The other helper would cook and clean. Talk about living large! One of the reasons why it's easier to retire abroad is because help is much cheaper.

6) A partner at a large law firm.

The partner had recently gone through a divorce and lost his home. He had a couple of kids who planned to stay with him a couple of nights a week.

He wanted to move to a more urban area where there is better nightlife, bars, and restaurants to meet people. It sounded like he wanted to look for love again. If you ever want to get in shape and start looking good again, become single!

7) A managing director at a boutique investment bank.

The MD came with his pregnant wife and two kids. They had been renting for eight years, and had decided living in an apartment with only one bathroom was too difficult.

They were the most nit-picky prospective tenants ever, asking why a door handle was loose, whether I'd repaint the walls, change the cabinets, etc. Then they played hardball with me on price by offering $7,000 a month even though I had lots of demand for over $8,000 a month.

I can see why they didn't buy property any time in the past eight years. They had unrealistic expectations for what they could buy with the money they had. I find this common with many people with doctorate degrees. They spent so long getting educated that their demands and expectations are so much higher than the average person who worked those years instead.

8) A 60+ year old couple relocating from Massachusetts.

The woman retiree said, “life is too short to live on the East Coast. The weather is dreadful.” She went on, “I went to school in Berkeley, have been away for 25 years, and want to come back to the Bay.”

Alas, I think my home was too big and there were too many stairs. Something to keep in mind as we all get older.

9) Co-founder of a bootstrapped startup with 10 million users a month.

His company was runner up for a TechCrunch award for best bootstrapped startup. He had a wife and son. The funny thing is, he is now worth between $3 – $4 billion!

My dad and wife use his grammar company to help edit my posts. I should have asked him for a job!

10) A partner at a Venture Capital firm.

He invested in financial tech companies. Meanwhile, his startup CEO wife who had an urban babysitting business. They have three sons. I was surprised they hadn't bought yet.

Maybe they just didn't have the liquidity given they were required to invest in their fund and plow as much money back in their startup. Further, raising three sons in San Francisco is super expensive due to the cost of preschool and private school.

11) The President and CEO of an advertising agency.

The family had relocated from Bogota, Colombia. Their daughter was going to a private school north of the Golden Gate Bridge. They wanted to be in the city, but I think they ultimately moved across the bridge to be closer to school.

12) Co-owners of a popular Italian restaurant in Little Italy.

His restaurant had over one thousand Yelp reviews averaging 4 stars. I was hoping they might be tenants so I could get some comped food and always get assigned a table on a busy night.

But in retrospect, that would be a bad trade since I would get sick of eating one type of food every week after a couple of months.

13) CFO of a microchip tech company.

His company was publicly listed and went from $8/share to $33/share and back down to $3/share. The market capitalization went from about $800 million to $3.3 billion now down to $250 million. He had a wife and 11-year-old daughter. The wife had a small relocation business which seemed more like a hobby.

The family showed me over $500,000 in savings and over a $500,000 household income. It's always good to see a top 1% income earner also have a good amount of liquidity. Often, this is not the case due to aggressive spending.

Rent growth in 2020 and 2021

Common Themes Of Prospective Tenants Willing To Spend Six Figures On Rent

Now that you have some idea of what types of people are willing to spend $100,000 or more a year on rent, I thought I'd tie together some common themes.

1) Lots of roommates looking to join forces.

From ages 22 to 35 it is common for college graduates, master's graduates, and Ph.D. graduates to all live with roommates. You can easily find a room for $1,000 – $2,000 a month, depending on neighborhood.

With Facebook engineers making $200,000 right out of college today, and investment bankers now earning $110,000 base salaries + $40,000 bonuses, a lot of new graduates can afford $2,000 a month or more.

2) Empty nesters and people relocating for jobs.

San Francisco is an international city that attracts people from all over. I commonly ran into empty nesters looking for a new adventure and people coming to the city for job opportunities.

There seems to be a constant supply of people who are downsizing or upsizing. The couple that sold their 5,600 square foot home sold the home to buyers who were downgrading from a 10,000 square foot place in Napa!

For three years, I held off selling my 2,300 sqft home. Instead, I rented it out and downsized to a 1,900 sqft home with one less bedroom and bath. Then I finally had enough and sold it.

3) High cash burn rates. 

It's expensive to raise a family in San Francisco. Today, with two kids, I think you've got to make at least $300,000 to live a middle-class lifestyle in a big city today.

If you're spending this much to support a family, you need to make a lot of money and save. Otherwise, you will be working for a very long time.

This is the rat race trap I've tried to capture in my post, Scraping By On $500,000 A Year. The ability to relocate to a lower-cost area of the country while still making the same high salary is powerful. However, a lot of families are stuck in expensive cities due to school, their friends, and inertia.

What's funny is when I wrote the $300,000 and $500,000 posts, there was a lot of backlash. But today, there seems to be an acknowledgement that maybe my numbers aren't unreasonable after all. Inflation is very real. So is the grind that often leaves these types of families to burn out quicker.

I've tried to leave San Francisco since 2014. But every time I try to get out, the city pulls me back in. As a result, I've continued on my quest to generate $300,000+ in consistent passive investment income. If I had just left San Francisco years ago, I probably would have felt less stress these past five years since our son was born.

How Much Do You Need To Make To Spend Six Figures A Year In Rent?

If you want or need to spend $100,000 or more in rent a year, you need to make a minimum of $350,000 a year. The renting affordability rule states that your annual gross income needs to be at least 40X the monthly rent.

$100,000 a year in rent is equal to $8,333 a month. Therefore, you need to earn at least $333,333 a year in gross income. I've just rounded the figure up to $350,00 to make it easier to remember.

$100,000 in rent on a $350,000 gross income figure equals 28.6%. So long as you are spending no more than 30% of your gross income on rent, you should be fine. It's consistent with my 30/30/3 home-buying rule. However, the higher your income goes, the more variable it is.

Minimum Net Worth Required To Pay Six Figures In Rent

In terms of minimum net worth required to spend over six figures a year in rent, that is much more subjective. You could have a negative net worth so long as your income is high enough.

I say it's good to have a net worth of at least 10X the annual rent plus an annual gross income of at least 40X monthly rent. In other words, if your annual rent is $100,000, you should have a net worth of at least $1,000,000 and an income of at least $350,000.

It's very hard to build your net worth if you are spending six figures on rent. So most who want to increase their chances of becoming millionaires won't even come close to spending $100,000+ on rent.

Rent Until You've Found A Long-Term Home

Renting is a great solution for those who are moving to a new city and want to try before they buy. Renting is also great for transitory reasons, such as after selling your house or getting a divorce.

As an investor, renting luxury makes sense if you're investing in real estate that generates a much higher cap rate. Although the absolute rent prices in some cities are high, they are actually good bargains compared to the cost to purchase.

Eventually, however, it's a good idea to at least get neutral real estate by buying your primary residence. It's not just that owning long-term tends to be a better financial decision than renting long-term. Owning your home also helps you feel more grounded.

As an owner, you tend to be more invested in the community because you've got more money at stake.

If you see graffiti on the wall, you may be more willing to paint over it or call 311. You may be more willing to pick up after your dog's poop. If there's a crime, you might care more to record the crime and send it to the police or set up a video camera. Instead of letting your front yard go wild, you may spend more time maintaining it.

The more skin in the game you have, the more you tend to care. It's just human nature.

Consistently Invest The Savings From Renting

For those who are fans of renting long-term, just make sure you invest your savings to beat inflation. Not only should you invest in the stock market, you should also invest in real estate to neutralize your short exposure to inflation. For eventually, you might one day change your mind.

My favorite way to capture rising rents in the single-family housing market is by investing in Fundrise. Fundrise specializes in investing in single-family and multi-family homes in the Sunbelt region. Valuations are lower and rents are growing quicker in the Sunbelt due to technology and positive demographics.

historical National single-family rent increases

Personally, I've invested $954,000 in private real estate deals across the Sunbelt to diversify my real estate holdings and earn more 100% passive income. I just don't have the time or desire to manage any more physical rental properties anymore. Investing in single-family homes in the heartland is a long-term investment trend I'm all over.

Readers, have you ever spent a lot of money on rent? Do you have a rent threshold after which, you would rather buy? So you'll never miss a thing, join 50,000+ others and sign up for my free weekly newsletter about building wealth.

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45 thoughts on “Profiles Of People Who Spend Six Figures A Year On Rent”

  1. Rented our primary in Walnut Creek for almost $7k/mo less than a year ago, similar profile of tenants. The one you missed Sam was the recent buyer of a home (in Lafayette) doing a major reno and needed a home during construction. Ultimately we chose a family where the husband is a marketing exec at a high profile retailer and wanted to relo from Los Gatos to be closer to his job in Oakland.

  2. Good to see that FS doesn’t condemn renting outright. It’s a sensitive subject for me, as I’m one of the high-earners ($300-500K/year) who has nevertheless continued to rent (here in Santa Fe, NM) for several years. I kept “meaning” to buy, but had too-high expectations about style (I like contemporary in a city dominated by traditional), location, views, etc.

    Finally I found an ideal rental house and had every expectation of buying from the landlord at the end of my lease. But then the pandemic hit, and Santa Fe real estate went haywire. A house I could have bought for $1.2M in 2020 could somehow command $2M in 2022. I couldn’t get comfortable buying in a frothy market – so I moved out (the landlord got his $2M from a couple moving from Chicago) and I’m renting again.

    Inspired by FS, I’ve started investing in condo developments in Mexico (Playa del Carmen, Cabo) for rental income and as a potential retirement destination.

    1. Hi Michael,

      Thanks for sharing. Curious if you decided to move out on your own first or if the owner gave you notice first before selling? And if notice was given, did the owner compensate you? We sometimes have this situation in San Francisco.



      1. Michael Whitener

        Sam – sorry for the late reply. The landlord waited until my two-year lease was ending before putting the house on the market. He did give me notice (and an opportunity to purchase before a broker got involved), but no compensation was owed because he didn’t push me out early. I wanted to renew the lease, but he said he couldn’t pass up the current market conditions for selling (and I couldn’t blame him).

        I had the house appraised by two well-respected appraisers at $1.2M and $1.3M, respectively, which also agreed with the Zillow estimate (whatever that’s worth). But the landlord’s broker was convinced the landlord could get $2M, and he did – immediately.

        Incidentally, the landlord is a FS fan and is obviously profiting from your guidance!

  3. I feel that is some parts of SE Florida there is a bit of “inverted yield curve” when it comes to renting vs buying. There are some properties that rent out for just a few thousand annually over the RE taxes and HOA (Granted some of the property owners bought long ago and are willing to settle for modest cash flow returns).

    My thoughts are to maintain flexibility, try out a few areas, and save the slug of capital until we decide where to settle down in retirement. Oh, and by the way, Momma has indicated proximity to grandkids WILL be a factor.

      1. We bought a rental in SF where one of the units was occupied by four young guys. They are all nice kids, but some of them are still in the party lifestyle. Beer pong all the time, large parties, etc. Super glad the group fell apart like a couple of guys are on the more mature side and moved in with their girlfriends.

        Take away: Say no to early 20s young guys…

  4. Really interesting to learn these profiles of folks dropping $100k on rent, Sam. I can understand dropping that kind of money for a short term situation, but I would personally never drop that money in the long term. I’d rather just buy and rent .

    I know many people here in San Francisco paying way more than me in rent who make way less. There’s only one way I’m going to be able to buy here and this sacrifice is my plan. To me, the benefit of spending several hundred bucks more on rent doesn’t give a proportional rate of return in quality of life.

    1. This is probably a misunderstanding of the benefits of renting. Look at any rent vs. buy analysis. It isn’t like once you get to a certain absolute rent number, you should only look to buy. It all scales. Renting a place for $10k a month is a better “financial” decision than buying a $10 million home. Typically it doesn’t make sense to buy for an equivalent place unless you’re staying for 5-7+ years

    2. Are you close to buying and have seen more purchase opportunities? I have and haven’t. There are a lot of head scratchers that have gone way over asking. Then there are some that were mispriced and languished and people got a deal.

      1. Alex Hamilton

        I’ve definitely seen the head scratchers. The tough one for me being single is not interested in condo due to lack of control of HOA and don’t want a very large SFH and unsure where I want to be in the long haul (SF, Oakland, Marin…) Gunpowder is ready when a) there’s a good deal and b) I finally make a decision. Any pearls of wisdom?

        1. More good deals will be coming due to higher rates and a slowing of the economy and upcoming layoffs. You will have 1-2 years of opportunity. If you miss one house, there is always another great house.

          But maybe best to find a life partner! Then buying is more fun, more affordability, and more purposeful! Serious here. Once I had kids, my motivation to earn and provide went way up.

          There is no way I would have been able to keep publishing 3X a week, write a newsletter once a week, and write my new book, Buy This, Not That, these past two years. Kids provide super motivation to try harder.

          1. Alex Hamilton

            Thanks Sam! Hopefully there will be a great opportunity in the next few years.

            RE life partner, oh I’ve been trying :)

  5. I’m currently a renter. I recently moved towns for work. My rent is high and at my rent threshold but I thought it would be worth it as it is a brand new apartment – unlike my last apartment which was a filthy, mouldy ex-roach motel when I moved in.

    I initially hated my apartment because the contractors did such a sloppy job and I have to be extremely careful and alert to not cause any damages. Sidenote, apart from the filth and the rotten kitchen cabinets, the ex-roach motel was a surprisingly well laid out and well built apartment which either had sloppy tenants and/or a neglectful landlord.

    So I’ve been looking at the local property market and the houses are tired and overpriced. They sit on the market for 1-2 years. To compare, a 3 bedroom house with land in a major city is cheaper than some of the smaller townhouses in this middle of nowhere town.

    I’m not comfortable buying an overpriced property that’s been standing years and clearly needs renovations but I wanted to move into a house after my lease is up. I was flip-flopping until I used Vicki’s decision framework this weekend.

  6. No way. We’re way too cheap to spend that much on rent.
    Once our son goes off to college, I wouldn’t mind renting. I’m tired of fixing all the stuff around the house.
    Some people live in Airbnb and travel around every month.
    That sounds like a lot of fun to me. But my wife probably won’t enjoy it for long. Maybe we’ll do it for a year and then find a place to settle down.

    1. This is probably a misunderstanding of the benefits of renting. Look at any rent vs. buy analysis. It isn’t like once you get to a certain absolute rent number, you should only look to buy. It all scales. Renting a place for $10k a month is a better “financial” decision than buying a $10 million home. Typically it doesn’t make sense to buy for an equivalent place unless you’re staying for 5-7+ years

  7. I’m glad you put in the message at the end that it’s ok to rent until you can buy, and to invest the difference while you are renting.

    Renting get’s too much attention simply because people assume it’s “throwing money away” but Ramit makes a good analogy in that if someone questions why you pay your landlords mortgage for them, do they never go out to eat either because that’s “paying the restaurant owner’s mortgage?”

    Labor is getting more scarce, materials are not being regenerated fast enough, and people don’t want to do the maintenance themselves. In places like TX and FL, property taxes and insurance are also going up. Renting allows people who can afford to buy the freedom and flexibility to focus their time and attention on things that matter to them.

    1. Yes, definitely positives. And most renters I’ve met are pro renters and vice versa. We tend to justify our decisions.

      But I think Ramit is around 40 and has lived in NYC for over a decade? If so, it was a suboptimal decision not to have bought a decade ago.

      1. Gary Grewal


        I’m not sure how old he is but judging from his interviews and when he got married I would say he has been in NYC for a while.

        That’s the thing though, is it really a suboptimal position? I think his net worth is over $10-15 million now based on other posts, and he has said he could afford to buy but chooses to rent.

        If one finds greater value in renting, and spending their money in low cost investments that seems to be a valid argument. Plus, how does one place value on not having to worry about maintenance, renovations, and the flexibility renting provides?

        1. Agreed. The way I read Ramit’s comments on this, my takeaway is your last paragraph. He has put the last 10+ years of energy into building a phenomenal, world class business. He took the right decision for him – to save all his energy and focus for the business instead of the extra tasks, responsibilities and attention-suck that home ownership takes.

          Elon Musk has also recently said that he never intends to buy a home again – does not have time for it.

    2. Is Ramit the guy who wrote a book on how to be rich when he was a poor 26 year old? How do people fall for this guy and his $2,000 e-courses?

      I remember him having a $1,000 course on how to get a raise and promotion, when he has never gotten a raise and a promotion himself. Are people that easily manipulated and gullible?

      I can’t wait to see him start an e-course on how to successfully juggle parenting and work as a childless person lol.

      1. I’m sure that book will come out right after he writes one explaining the proper way to breathe on Mars…

        Why do people fall for this? Few do due diligence.

      2. Gary Grewal

        I’ve never taken any of his courses or bought his book, I read his books at the library and they actually have some pretty excellent advice. I can see how someone would be disappointed by taking a course that expensive though, which is why I never would.

        People give advice on blogs all the time when they haven’t done the exact thing themselves. I’ve read many people write about how to teach kids about money when they don’t have kids yet.

        I guess he doesn’t need to justify it, the money he makes and having a multimillion dollar net worth speaks for itself :)

        1. People need to learn how to differentiate between a person like Ramit who makes his money off selling products on how to make money versus people who’ve made their money by actually investing.

          Ramit is the guy who got rich teaching people how to get rich making money online. It is one of the biggest jokes in the “make money online” world. He has no finance background. He is an online marketer and he’s got you fooled. But that’s his skill.

          If you want to buy his upcoming course on something he has no experience on, be my guest.

          1. Gary Grewal

            I’m not sure if you actually read his book, but he doesn’t teach about “getting rich online” He teaches things that many others do, including other bloggers who have gotten rich selling ads and affiliate links, such as conscious spending, generosity, and passive index fund investing.

            No fooled here, as I said I never bought anything from him. I have gotten wealthy following some of his advice though, as I read his book in March of 2010. There are plenty of people selling courses online so more power to them.

            Appreciate your perspective. We can agree to disagree :)

  8. Fascinating insights, thanks for sharing! Living in a city like San Francisco, I can totally understand these profiles. It’s crazy when you actually think about the numbers of paying six-figures for rent, but it’s not that uncommon. Everything is expensive here, but at least the salary ranges are higher than most parts of the country to make up for it. Everything is relative.

  9. “I say it’s good to have a net worth of at least 100X the annual rent plus an annual gross income of at least 40X monthly rent. In other words, if your annual rent is $100,000, you should have a net worth of at least $1,000,000 and an income of at least $350,000.”

    100X annual rent would be $10 Million net worth

        1. I’m assuming your household income is way more than $500,000 then? If so, what prevents you buying? Ever since I was in college, I wanted to buy a property as soon as I could come up with the down payment. So I’m fascinated by how other people view buying and renting.

          Thx For your insights.

          1. We rented at >100k for 2 years. Bought since we’re having a family just recently. Buying isn’t a good value proposition in NYC. If you’re renting for 10k, the owner’s equivalent is ~$3m and it only makes sense if you’re staying for 5+ years. If you have to do any work in an apartment, the cost and headache in NYC is astronomical (and you get no mortgage advance against it). Maintenance fees for buildings are high due to doorman union labor (not that I have anything against that, it’s just a cost). High transaction costs on mansion tax, building flip tax, etc.

            We looked at both rentals and buying to get an extra bedroom. We would have preferred to rent but when we were looking there wasn’t a ton of nice 3-4 bedroom inventory unless we wanted to spend 15k+ (vs. condos / co-ops in the 3-3.5m range), we’re fairly settled at our jobs, the apartment needed no work, and we got a 10-yr IO ARM for <2.5%.

            I'm a big believer that renting is not throwing away money if you're investing the down payment / investing the difference. I unfortunately don't think the average person (and I mean actual average, not average on this site) has the discipline or understanding to do that – they see X amount in their bank account or coming in from their work and think to themselves that after saving 10-20% in 401k and paying the mortgage the rest is for spending (rather than my lifestyle / budget is X and let me invest the difference)

            1. “they see X amount in their bank account or coming in from their work and think to themselves that after saving 10-20% in 401k and paying the mortgage the rest is for spending (rather than my lifestyle / budget is X and let me invest the difference)”

              This is a really great point. I wish I understood and acted on it earlier in life. It seems to be a very conscious way to avoid or at least really evaluate lifestyle inflation

              1. There just isn’t enough personal finance education, and it is probably intentional. No employer wants their employees to save – they want them to be extremely incentivized to make the minimum they’re willing to make. And so when people talk about buying things, they commonly ask themselves what can they afford rather than what they actually want, what they value, and the tradeoff.

            2. The quality of living space was one of the biggest issues for me. Couldn’t find rentals with as nice a quality as homes available for purchase.

              Bc rental properties will get beat up over time, landlords tend to stop reinvesting in them.

              1. Right but that’s a personal decision, not a financial one. If you’re renting a “crappy” place, then you can probably only afford a “crappy” place, and in order to make it nicer you need to put money into it (which then may not be a better financial decision). I find at the higher levels, rentals are well / finely maintained. You may not be able to change things as you want (another benefit of owning), but maintenance staff is on-hand, things are fixed when they break, etc. Plus a lot of owners put their condos on the market for rent

                1. Actually, I’m doing a 1×1 personal finance consulting call with an old client tomorrow. She made over $400,000 last year and lives in a studio. It may not be crappy, but it’s still just a studio. So I would say there are definitely some people who can afford to pay way more for housing, but don’t.

                  I meet them all the time.

  10. Seems like you have had a lot of tenant turnover in this home. Why do you think that is?

    You mentioned that you sold it because it became a lot of work. Did you also consider outsourcing property management?

    I’m also curious about how it was as an investment. Return on equity? Cap-rate? And how has it done value wise/income wise since you’ve sold it?

    1. It was in the past and I recounted the experience plus added new examples from another property. It was in a popular neighborhood for the 20-something and 30-something crowd. Fewer families, hence more roommates and turnovers.

      Decent high single digit returns for IRR. Cleared seven figures in returns after fees and 12 years. In the end, buying the property in 2005 was way better than renting for the next 12 years. It was like living for free and then some.

      How about you? How has your rental property experience been?

      1. I started with cheap single-family homes (when they were super cheap in 2009) that cash flowed pretty well, but exchanged them for small development deals and land over the past 10 years. My current stuff is more hands on, but has higher capital gains.

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