As with most people of my age, it is always a dream to own a beautiful home - to live a beautiful life, to impress myself, my family and also to impress the world around me, to give my family a comfortable and happy life. We were already staying in a relatively smaller ancestral home but the charm of having our own home, crafting it the way we wish to, and living there happily thereafter - was a dream built on lucrative advertisements and teasers. A home is a home, after all. Everyone loves to have their own. We have one of our so called 'dream homes' even today.
But today, my views have changed. Today, I feel that unless age or disease has made one immobile, it is better not to own a home. Yes, and I am going to give you some very strong reasons to start thinking in this direction. But before I give you the reasons to stay on rent, you must know that this is not a new concept at all. Its quite common to stay on rent (in spite of having the ability to buy a house) across the world. Its just catching up in India now.
Its not a new concept
Switzerland has the world’s leading population of home renters in the world. The majority of the population here prefer to rent rather than own their own homes (56% population stays on rent). Hong Kong is second at 49%. Germany comes third in the world leading percentage population of home renters at 48.1%. South Korea has a percentage home renting population of 44.8%. The other countries in which over 30% of their population rent their homes are Japan, Denmark, the United Kingdom, New Zealand, United States, France, Canada, Netherlands, Australia, Ireland etc.
Majority of the countries are experiencing a rise in population of home renters. So, what makes renting a house so lucrative?
Let me share with you 8 strong reasons why you should start pondering in this direction very seriously.
1. Enables Career Movements
When we are just into the start of our career, we anyways cannot afford to buy a home. So, the bachelors usually stay in rented and shared accommodations - flexible locations, close to their workplace. If the job involves movement across different cities, the bachelors do not have to think twice. This flexibility in movement, mostly unknowingly, becomes their big strength.
Later in life, it is again likely that their career demands movement across cities for their next progression. In many cases, the movement may be across countries. You would never want to compromise an a fantastic new job or a new role in US or Australia just because you have bought a home in India. The emotion of you having your own home may limit your career growth prospects. A rented home, in such cases, gives choices to you and your career growth. This could be an edge that you may have against your peers in the early stages of your earning life.
2. Enables movement of children
Then comes a phase in life when the parents want to have a house closer to where the children study - their schools or colleges, so that the children's commute time is reduced. Parents again do the mistake of buying a house with such transitionary criteria's, even if that means longer commute to their own workplace. They feel that though they have compromised on their own commuting distances, life is now settled. They forget that children grow pretty fast and they will move out of schools to colleges and then to jobs, much sooner than you think. And where would their jobs be? No one knows this answer in advance, especially in today's globally connected world. The emotion of your having your own home may limit your as well as your children's career growth prospects. A rented home, in such cases, gives choices to you and your children.
3. Helps get rid of useless stuff
Yes, rented home involves movement, but that's good because every time you will move, you will realize how much needless stuff you have been accumulating. This is an opportunity for you to begin the practice of giving away things. And slowly learn to consume less. The rule is to keep attics clear at all times. You will learn to save a lot from questioning your purchases keeping in mind that you could move. Your furniture will also turn minimalistic as it had to fit into every new house.
4. Strengthens your network of friends
As per one of the bestselling books, Ikigai, the Japanese have the most centenarians in the world (people who cross the age of 100), and one of the prominent reasons is their strong social network of friends.
With movement, you will not only get enriched with cultures of different regions but will also enjoy a good circle of friends. These are people who share our joys and sorrows wherever you will live. They will become part of your lives. You can still return to your ancestral houses, and meet with your friends for a meal and laugh about our times there. The wealth that a diverse group of friends can bring into one’s life is alas so underestimated. In these days of social media, it is strange we call people with whom we have no shared experiences as friends, and in real life, be actually so devoid of friends.
[Recommended Read: 26 Inspirational Lessons from the book: Ikigai]
5. Keeps your portfolio liquid
Investing a huge chunk of money for your 'own' home sucks away most of the liquidity from your portfolio, and liquidity is extremely vital for the long term success of your portfolio. It is emphasized with real examples in the book FOOPS!
Tying up money in chunky assets like a house, also leaves too little to save, invest and spend in smaller happy moments of life. That surprise pizza party, the mobile that your spouse always wanted, the trip that you all will cherish forever - these are some of the memorable moments that liquidity gave us. That little bit extra in your hands can create some of the best memories of your life.
[Recommended Read: FOOPS!]
6. Significantly enhances portfolio returns
A rented house, even with a better standard of living than the one you could own, can not only give you a blissful living, it can help you build you wealth faster, and take you to financial freedom much earlier.
The financial calculations are not difficult to understand.
Even with the best house that you take on rent, you will pay approximately 3% per annum of the cost of the house you are renting. So, in effect, instead of dumping , say 1 Cr in buying a house of your own, you can stay in a similar or better house for Rs. 3 lacs per annum or Rs. 25,000 per month rent.
That 1 Cr that you would have dumped in the house, can be wisely invested to easily earn 10% returns per annum. Even if you take out 3% from these returns as your rent, you still save 7% per annum, which is approx. 7 lacs or Rs. 60,000 per month. This extra Rs. 60,000 every month can buy you sweet memories, and can be invested to create massive wealth over a period of time. Now, that's some extra saving every month - for doing what? for staying on rent.
If you are wondering whether the capital appreciation goes to the one who owns the house, remember that you cannot count your own house as an asset. Whatever be its capital appreciation, you cannot use even a penny out of it, since you cannot liquidate the house.
7. Saves on house upgrades
Well, once you own a house, be ready to spend big chunks of money on regular basis - for house upgrades. You change, your family changes, your needs change, and the house has to keep adapting to your and your family's changing needs - almost every 5 to 7 years. If you were in a rented accommodation, it was pretty easy - just move to a new house as per your new needs. But now that you have your own house, you got to spend significant money at regular intervals to keep upgrading it. Not only that, when you own a house, be ready to shell out property tax, home insurance and other regular maintenance to keep the house in a livable state.
8. Freedom to move
Once you get financially free, you have all the freedom to move around the country, and the world, stay in places you like and move away from places you don't like. In that case, you may or may not want to live in a cramped polluted city. May be you love mountains or beaches. May be you just love the calmness and serenity of sea. If you are on rent, you always have that freedom - to choose life.
Summary
If you can get out of social constraints like your plans to gift your house to your children, if you don't bother much about showing off your possessions, and if you have control on the emotions of owning your own home, then it makes a lot of sense to ponder upon staying in a rented accommodation, than your own. It may just be the flip you need to lead a more beautiful and enriching life.
Regards
Manoj Arora
Official Website
