This article is for informational purposes only. This article does not constitute legal, financial, or investing advice or recommendations. Always do your own research and seek professional financial advice when necessary.
Is renting a waste of money?
People often say that it is, believing that owning a home is financially wiser than renting one.
However, according to “I Will Teach You to Be Rich” author Ramit Sethi, buying a home is not always better than renting one, and renting a home is not always better than buying one. It all comes down to the data and goals of the individual or family, which vary depending on a variety of factors including location and demographics.
While renting a home may not contribute to a mortgage, it allows for flexibility and mobility, which are important to many, including young adults who are still experimenting with their career paths and lifestyle preferences. Given the financial commitment that a mortgage entails, it may not be wise to purchase a home until one has a reasonable degree of of employment security. Not only does this entail securing a job that allows them to afford their lifestyle choices and obligations, it also means that having an occupation that they can foresee themselves being willing and able to perform at for the long term. For those who are starting or in the midst of navigating a career change, employment security may not come naturally. Changing careers may entail temporary unemployment, or earning income through part-time or freelance work in lieu of a steady, full-time paycheque. Some people may also choose to pursue alternative lifestyles that would earn them less than their previous jobs, and in order to do so, they willingly make the tradeoff of lowering their expenses or debts.
Renting a home also avoids the significant costs of home ownership, including maintenance and repairs as well as property tax. Still, there are benefits to owning real estate—not for personal use, but for investing.
The versatility of blockchain has enabled investors to invest in real estate without traditional constraints, like the obligations of a mortgage or physical location.
As Sethi argues, Americans have “financialized” their homes, believing that their homes must serve to be more than private spaces of shelter and comfort but also as investments. Sethi further points out that purchasing rather than renting is a belief that has been around for many previous generations, widely without question.
The reason why the topic of renting versus buying is such a hot topic in personal finance is because property is often the largest purchase most people make in their lifetime. But real estate tokenization is changing that. RealT tokens can be bought and sold as fractions of a single property, the costs of which are far more affordable than a traditional down payment and mortgage.
Decentralization skips the middlemen like financial institutions so that individuals deal directly and more efficiently with each other. Moreover, the backing of blockchain technologies for tokenized real estate enables seamless and secure automations and smart contracts for distributing expenses or income among token holders.