Many people argue that renting is equivalent to throwing your money away. Yet, renting provides a roof over your head and flexibility for those in transitional life phases, such as relocating for work or deciding where to settle down. This was our thought process when considering a move to Hawaii; renting first seemed wise to ensure it was where we really wanted to plant roots.
Renting can also be less burdensome than owning. Homeowners can attest to the freedom from maintenance and repair responsibilities that renting affords. However, it’s important for renters to invest the money they save from not owning, perhaps in real estate, to ensure their money grows over time. For example, platforms like Fundrise allow investments in residential real estate, which can be a great way to grow your savings.
I last rented in 2002 in San Francisco, sharing a two-bedroom apartment for $1,800 a month—quite affordable compared to my previous place in Manhattan. However, after experiencing safety issues in my neighborhood, I decided to buy a condo. Safety and quality of life became more important than saving on rent.
Fast forward, and with a family, my rent threshold has increased to $7,000 a month. Beyond this, it feels excessive relative to my income and net worth. It’s crucial for me to provide a comfortable home for my family, but I’m also mindful of the financial implications. That’s why I eventually buy when rental costs seem unjustifiable, especially since rented properties often lack the care that owned homes might have.
Investing in real estate is also something I’ve pursued, having once been a landlord myself. I’ve found that managing properties can be as demanding as it is lucrative, prompting me to shift my investment focus towards real estate funds.
Who rents at six-figure annual rates? From professional athletes during the season to tech workers pooling resources for prime living spaces, the profiles vary. Understanding the financial and lifestyle nuances that lead to such decisions can provide insight into whether such expenses are justified.
Overall, if you’re spending a significant amount on rent, it should align with your financial capabilities and life goals. For those comfortable with renting long-term, it’s crucial to invest any savings wisely to hedge against inflation and future changes in housing costs.
