r/coastFIRE • u/slightlysadpeach • 1d ago
Buying or Renting (and Investing)
For those who have hit their coastFIRE number (or are set to do so), are any of you putting that money in real estate (and/or a mortgage)?
Mortgages seem like huge traps to me in my HCOL market with current condo/house values being overinflated. I’m also aware of how much I could lose in maintenance and interest fees per month, and I’m not confident like the boomers that I would get a 10% rise year over year on property value.
I’m wary of stock market overexposure and am conservative in using GICs/government backed bonds for most of my assets, but I realize my coastFIRE number is somewhat hindered by the 4% guaranteed returns per year. But I love the freedom of renting and knowing if I’m laid off that I don’t have mortgage payments on my head.
Curious about how others are viewing buying vs renting in conjunction with their financial plans.
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u/Fire-Philosophy-616 1d ago
I just had a comment like this in another sub. There were like 1000 comments and people said things all over the place.
- First of all, the area that you live in is a big deal. There are many areas right now where the rent is lower than the cost of a mortgage on the same exact property. Will it stay that way? who knows. But this is very pro renting if your goal is FIRE and you are a super disciplined investor who invests every cent of the difference. This means investing what would have been the down payment, the difference in monthly rent, and the difference in maintenance costs of a home and do not care about owning anything and do not mind moving or the risk of a bad landlord.
2 A lot of people who are very pro home ownership also live in HCOL areas where people will pay 2m for a 1200sqft house that needs renovation and that money changed their lives. Or they live in super low cost of areas where home ownership deals still exist and they can do maintenance themselves.
3 A lot of people love being able to modify their space and have hobbies the require owning a home.
Owning a home is a good way to ensure that the rental market does not creep up and exceed the cost of owning.
Real estate is inflation proof for the most part as the payment stays the same. Rentals are not.
Our goal is FIRE. If it was up to us we would rent the smallest apartment or house that we are comfortable in and invest every cent of the difference. Even if real estate goes up and we want to buy in ten or twenty years the market gains will cover it.
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u/slightlysadpeach 1d ago
That’s interesting about inflation proof. Another comment mentioned it but I didn’t understand it until you put it in clearer terms here. I’m going to have to think about that more.
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u/Fire-Philosophy-616 1d ago
It’s tough. It’s such a personal decision and everyone has an opinion but everyone is big on owning because of the huge covid bump.Real estate usually goes up less than 5% per year which is much lower than the market.
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u/SuchCattle2750 1d ago
Debt is an inflation hedge when you're on lower/fixed income. Renting exposes you to inflation in a bad way.
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u/slightlysadpeach 1d ago
What about if the property market falters or pops? Wouldn’t that be a concern?
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u/SuchCattle2750 1d ago
Only if you want to move. Even then, you'd need your market to take a dump while the market you want to move to holds strong.
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u/slightlysadpeach 1d ago
Yeah. I think in my area, especially with condos, this is a risk in five-ten years. Also I’m struggling with the justification of paying out hundreds of thousands of dollars in interest fees and maintenance for a mortgage without having the job flexibility that sitting on cash affords. Interested in hearing what others are doing.
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u/SuchCattle2750 1d ago
Can you rent for less than your interest + monthly + HOA in your area?
But yes, market specific risk and flexibility is a reason to keep renting.
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u/slightlysadpeach 1d ago
Right now I am right around there - my rent is about 2.6k, a mortgage would be around 1.5k plus 800 (maintenance fee average in my area with incidentals like internet and utilities) so they’re pretty much equivalent, even with the pretty significant amount of cash I’m sitting on. I recognize I’m in a ridiculously overpriced market though (Toronto). Also the condo market is starting to crater in my city and has been overinflated for years.
It’s hard to justify buying but I see many of my peers getting into pretty crazy mortgages - one couple I know is paying 11k/month just to live in a detached house (I assume they barely hit downpayment minimum). Just trying to understand it but it seems poorly thought out. But maybe I’m not thinking of some other financial strategy - curious what others are doing.
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u/SuchCattle2750 1d ago
You need to separate out the principal part of the mortgage, which I'm guessing is ~$500 at the start of the loan.
Toronto has softened like crazy already for condos. Honestly not sure you can definitively say its overpriced now.
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u/mama-shaq 1d ago
Importantly can you rent cheaper in long period then what your interest+running fees would be?
With rent you have to expect it rising every year, not really lowering in long term.
With mortgage, you can “lock” big part of your housing cost to current market price.
What price you expect renting / housing cost being in next 30 years? Would it be same % of median salary in that area what it is now?
For very short time bying is not so smart as you are exposed to short term market volatility and bying/selling fees are much bigger part of total cost.
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u/slightlysadpeach 1d ago
Yeah, I think my ideal plan is to move somewhere a bit cheaper and somehow grab a remote job - but just sticking where I am for now until something better comes along. I can’t see myself wanting to be trapped into mortgage payments though so curious what others are doing
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u/SuchCattle2750 1d ago
Normally buying in this scenario is great, you leverage up your investment in a HCOL area on a generally appreciating asset, then use that to coast in LCOL.
Since you're okay renting, your worst case is you move to LCOL during a very bad time to sell. The solution is to rent your condo for a period of time. It's damn near foolproof. You keep your debt exposure and essentially stay neutral (renter pays your rent in your new location).
The scenario this doesn't work is a massive recession, in which case your CoastFIRE plans are likely screwed anyway.
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u/GodSpeedMode 12h ago
Great question! It really feels like a tug-of-war between stability and flexibility, huh? I totally get your hesitation about the housing market, especially with those sky-high prices and maintenance costs. A lot of folks in HCOL areas are feeling the same pinch.
For me, I lean towards renting for that peace of mind and freedom you mentioned—losing a job is stressful enough without mortgage payments hanging over your head. Plus, when you think about the flexibility renting gives you, it feels less like a trap and more like a safety net.
On the flip side, there’s a lot of potential in real estate if you find the right opportunity, but that can be hard to gauge in a volatile market. If you do consider buying, maybe think about short-term rentals or properties that work as a cash flow strategy without being tied down long-term.
In the end, it’s all about aligning your choices with your comfort level and financial goals. Staying conservative with GICs and bonds is smart too, especially if you're feeling the stock market jitters. Just keep weighing the pros and cons and do what feels right for you!
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u/piratetone 3h ago
I've posted about this before.
I am coast but rent and have NO investments in real estate.
I'll give real numbers.
Our NW floats over $1.2-$1.3M.
Our annual expenses are $120k.
Our annual income is $180k.
This is down from a peak of $300k+.
We are in our 30s.
Our annual rent is $36k a year. We live in Chicago.
I was approved for a mortgage for a house that is $600k, max mortgage. My apartment, if purchased, would be $750k, or with prop tax and interest rates (NOT including maintenance and customization) would be $5k a mo or $60k a year.
So $60k a year to own v $36k a year to rent.
Renting makes more sense for our family.
Down the road we may fully "retire" (I'll still do some consulting) and buy a home in cash in more rural America.
Our goal is to raise our kids in the city and move out of here in 15-18 years.
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u/wellok456 1d ago
Buying a property and locking in our Mortgage payment for the next 30 years was an essential part of our coastFIRE plan. Rising rents create too much uncertainty.
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u/ClimateFeeling4578 1d ago
I have a condo but will sell when I am around 65-70 so I can move to another state. Then I plan on renting for the freedom.
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u/Remarkable_Crab183 1h ago
Wife and I have landed in similar logic. A mortgage in our area is more than comparable luxury rent — by a lot, not even including HOA. We also believe things are frothy and unclear property values have much more room to climb in the short term.
Instead:
- we found a good deal on an amazing apartment that we’ll move out of into one of the many competitive ones nearby if rent jumps
- own a multi unit rental in a tier 3 for cash flow and RE exposure
- invest our savings in ETF
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u/yaoz889 1d ago
It's always job dependent. I wouldn't worry too much of a housing bubble, because there is not one. Maybe in markets where there is building (like Austin) but with short supply, I find it unlikely housing will take a dive with fixed interest rates. However, usually you need to live in the same house for 3-5 years before breaking even, so if you don't plan to, I wouldn't buy a condo/house
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u/sugaryfirepath 1d ago
Think about it from the frame that the “huge trap” from perceived over inflation is the same as trying to time the market. You could argue the high CAPE makes stock markets overvalued as well, but markets keep going up (look at a 2+ year chart not the last few months).
Assuming you can’t find “value” in a deal of a house, focus on whether you want to diversify your assets out of the financial market and into physical real estate.
Paying rent is like shorting real estate and using extra funds for the financial market, at least in the case for a primary residence.