Rent or Buy? How about neither?

Published in

Gypsy

7 min readApr 21, 2022

Rent drains your money. Home ownership is a headache. Is there a middle ground?

So you are at that crossroad? You’ve been renting for a while, and you feel you want to transition to home ownership. But you’re not sure if you should. Too many “what ifs”. This article is here to give you a fresh perspective. Perhaps it’ll even open new doors (pun intended).

Why buy a home? Most drivers to own a home can come from one of the following: peer-pressure, a desire to own equity, gain more independence, engage in home DIY projects, potential tax-benefits, need for more “space”, starting a family, your kids need a better school, you want to belong to a ‘community’ or — you are just plain bored.

I’ve been on either side of the fence. I’ve enjoyed (and hated) both sides. This post will be an honest and objective take on each.

Lastly, the future is neither this, nor that. With the coming of Web 3.0 and all the disruption it’ll bring, homeownership is about to be rewritten. At Gypsy, we are ushering in this change. More about this later.

#1 Renting: the good and bad

Renting means you enter a “lease” at a home of your choice, and you pledge to pay rent for the duration of such lease. Once the lease ends, you are free to pack up and move.

Myth: Renting wastes money. This is not entirely true. You are paying for a service. And no matter how you twist this, you have to pay for it one way or another.

Advantages of renting

If you have no intention of settling down in one place in the near term, renting is for you. Renting allows you to maintain locational independence.
Your rent amount is a fixed cost. Mortgage rates or inflation do not affect it. You pay a certain amount every month for the lease term, and there is comfort in that.
When you rent, you are typically not responsible for repairs/maintenance. Repairs from wear and tear are your landlord’s responsibility. Plus there is renters insurance. The only exception here is if you hosted a drunk party and your awesome guests wrecked the house. One even wanted to burn it down. But that is a different story.
If you are not mechanically inclined, renting is great. If you bring a hammer to a screw, or if you won the “worst handyman in town” award, or you generally detest building/fixing things, don’t buy a house.
If you travel a lot, be it your job or in your nature, it is probably best to rent short term all over the place.

Disadvantages of renting

You do not build equity — your landlord uses a portion of your rent money to gain equity through mortgage. Neo-feudalism at its best. Decades of renting and not much return to show for it.
Lease terms can be rigid and breaking out of a lease can incur a penalty.
Renting in upscale neighborhoods can involve brokers who charge money for doing seemingly trivial things. Brokers spend ~10 hours/rental and charge 1+month fee. Talk about entitled.
Security deposits are typical. You might not see all of it back when your lease ends. Plus it is money that sits idle without earning you any dividends.
Your landlord might decide to sell the house, and you might have to move. Most leases have clauses to protect the renter, so watch out.

#2 Buying a house (aka homeownership)

I’ll assume that this is your first house, and that you will be its primary occupant.

Myth: Homeownership is a great investment vehicle.

It is not. My broker tried to sell me hard on this idea. Let’s look at this mathematically. Most mortgage terms are for 30 years. Your home price can, at best, appreciate 2–5% every year. You also do not “own” your house until the mortgage is paid out in full. Now consider putting down a decent chunk of cash on plain old index ETFs that appreciates 10% every year. Simple math will tell you that index ETFs will outperform your home investment by a margin of 5–10x in 30 years. Not to mention your home is not really a “liquid” asset. More on this in a minute.

However, home ownership does have tangible benefits that are hard to ignore (while also bringing with it some nasty downsides). Let’s look at these closely.

Advantages

Most advantages are “intangible” by nature. You have a place to call home. You can belong to a “community” and your children will get to grow up in a cocoon, if that’s what you aimed for. If you do not plan on having children, this does not apply to you.
Most first-time homeowners move from the ‘city’ to ‘suburbs’ in search for more space. This works out fine. Suburban homes are typically larger that rentals in upscale neighborhoods. Your mortgage might even work out to be cheaper than a rental in upscale areas. So yes, you can get more space for your buck.
You are free to do to your home as you please. Don’t like that wall? Tear it down. Want to paint your home in psychedelic colors. Go ahead. Barring zoning approvals for major renovations or extensions, you really have the liberty to shape your place the way you want to. This can be exhilarating to some.
You can rent out your place if you wanted a change of scene. Again it’s your home. Do what you want with it.
You can qualify for some tax breaks by showing evidence of mortgage payments. This only applies if the mortgage is paid for a residence you are currently occupying (and not renting out).
You do gain equity. This is not overnight, and neither is it significant. Most mortgages are structured in a way that you pay the interest upfront before gaining equity (i.e., for your first 6 years you gain little/no equity).

Disadvantages

Owning is typically way more expensive than renting. The bills will pile up quick. Apart from your mortgage, you are now responsible for sewage, water, trash, property taxes, pest control, landscaping, home insurance, and flood/earthquake insurance, to name a few. It’ll take you a full year to realize these fees.
Repairs are inevitable. And downright expensive. Did you see a trickle of water from your roof? Guess what, you might have to redo the entire roofing. Most home improvements will quickly rack up $6–12k out of pocket, if not more. Expect such a surprise every year, if not every 6 months.
There’s always that argument that home renovations will increase the value of your property. This is absolutely not true. On average, you can expect 66 cents to every dollar spent in renovation. Most renovations that do increase the value are not “sexy” — a new garage door is more precious than a sparkling new kitchen.
You will have to become a bit of a handyman. Within a year or two, you will end up purchasing every repair tool (and many power tools). And you will have to learn to use them. You will be moving lawns, fixing faucets, building shelves and hauling leaves and snow. The alternative (hiring people) is expensive. So suck it up and get to work.
Your weekends are not entirely yours anymore. Home projects are a constant. Time is somewhat more precious than money — and you will have less of it. If you hate the idea of devoting so much to your house, you should seriously reconsider.
You no longer have locational freedom. This can play into your life big time. You are somehow “chained” to this location. Want to switch your career to move to the opposite coast? Not so easy. Most folks will also start to “hoard’ and fill up their home with stuff. Soon, even the thought of moving will seem like scaling mount-impossible.
Your home is not a “liquid” asset. You can’t just list it on a site and expect cash out quickly. The process can take months if not longer. Not to mention closing costs with brokers and what not. Selling is no walk in the park.
If you wanted locational and financial freedom, turns out home ownership is not really for you. If this is you, think twice.
You can pass your legacy to your children — and have them fight over their ownership shares. Is that the “legacy” you want to leave to your family?

#3 Golden Route: Can you gain locational and financial freedom?

What if you could enjoy the benefits of homeownership and renting while minimizing the downsides of either option? Is that even possible?

Picture this: what if you continued to pay one static fee — and in return, you could live anywhere in a network of homes while enjoying substantial equity of the underlying protocol that governs these homes?

At Gypsy, we are hard at work to make this the new reality.

About Gypsy

Gypsy is on a mission to help people gain locational and financial freedom. We are building the next-gen infrastructure to enable remote workers to become global citizens.

Stop living in a box. Break your lease and travel the world. Sign up for Gypsy today!

We ❤ you.