I’m 58, my kids are all out on their own, and I rent a great little apartment. It’s a perfect setup for me because I travel quite a bit. However, I’ve had several people tell me I should really look into buying a house. I’ve saved about $450,000, I make $90,000 a year, and my rent is $1,100 a month. So, I guess I’m looking for validation. Is it okay for me to continue being a renter?
I think it depends a lot on the ratio of rent to wealth. By this, I mean if the rent isn’t much compared to the size of your income and nest egg, then I’d say keep the apartment. It’s not doing you any real financial damage, plus you still have the ability to invest in things other than a personal residence.
Now, if you’re not doing any other investing because your income is being eaten up by rent, then apartment living starts to become a bad idea pretty fast. But the only real downside, long term, is that market rents will go up eventually. If they rise faster than your income, then you could lose control of that part of your life. Or what if the current owners sell the building, and the new management jacks up the rent? Then, you’d need to look into buying something so you could regain control of all that.
Still, if I’m in your situation, with your lifestyle and having piles of cash saved up, I’d stay put. It sounds to me like you’ve got a pretty sweet situation, Alan. But if things get sassy instead of sweet, you’ll be forced to revisit this issue.
* To see where Dave is appearing live this spring, please visit daveramsey.com.