To Rent or Not To Rent

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One of the more common non-industry discussions about the industry has long been the renting versus owning question. Who comes out ahead over the long term? Is it the home owner who commits a huge amount of capital to home ownership and sees their house increase in value over time? Or is it the renter who rents an apartment or house for less than the home owner is paying and invests the ‘difference’ in the stock market?

As usual, while looking for something else, I came across an article which attempts to answer this question (you can download a PDF copy of the article from the link below). This article was written by a portfolio manger named Benjamin Felix of PWL Capital Inc.

One of the things I like about this article is the author’s discussion of the pressures many would-be owners are subjected to in favour of buying—the author is quite right to note that everything and everyone in our country pushes home ownership with vigour. Another thing I like is his description of home ownership as a tool for forced savings, since few owners skip mortgage payments, while stock market investors are much more likely to skip contributions to their portfolio; in other words, discipline is a factor.

The easiest criticism to level at analyses of this type is “you can prove anything if you cherry pick your assumptions.” That’s not untrue, although few who use that criticism offer their own analyses, so Hitchens’s Razor applies here as it does to so many things in life (that which can be asserted without evidence can be dismissed without evidence). Believe me, when you sit down and try to come up with your own assumptions and analysis, and grapple with the many variables that need to be taken into consideration, you quickly realize just how complex the renting versus owning question is and how challenging it is to answer. So I applaud anyone who makes a serious attempt at it, as the author of this article has done.