A few days ago I posted on my story about how I just paid an $8,800 bill for my annual property taxes. I offered that as an example of how it’s not JUST renting that is “throwing money away.” (PSA: Neither buying nor renting is throwing money away. It’s paying for housing.) That got me thinking about where I’d be today if I never stopped renting, so I threw all the numbers in a spreadsheet and this is what came out!

For what it’s worth, the results are this dramatic because I made the classic financial mistake of homebuyers: I bought way more home than I was renting. If I was renting a $5,000 penthouse, then downgraded to a studio condo 15 minutes inland, the results would probably be flipped. It’s not whether you rent or buy, it’s WHAT you rent or buy that matters.

That said, to answer some questions you’re going to write in the comments:

• “But MY house blah blah blah”. Yeah, maybe! These are just my numbers, yours are certainly different. Although, 99% of the time I get this comment, it’s not giving honest credit to the opportunity cost of not having your housing money invested.
• “You didn’t include the value of LEVERAGE”. Yes I did. That’s the second scenario where I borrowed 80% of the money to buy the house. It still came in behind renting, plus would have exposed me to risk in the case the housing market went down.
• “Your landlord has to pay taxes too!!!” Yeah, I know. But there’s economies of scale to renting an apartment. Plus I bought more house than I was renting so I’m paying way more in taxes.
• “But property tax/mortgage interest is a WRITE OFF!!!!111”. OH MY LORDY LORD, A WRITE OFF?!?! First of all, you still have to pay those things. Second, the property tax isn’t deductible for me, and it’s likely not for you either. The state/property tax deduction was capped at $10,000 in 2020. I paid over $70K in state income tax, so my property taxes were irrelevant. (I verified this with my CPA).

Remember the two rules.

-Jeremy

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