Millennial Millionaires Are Renting Instead of Buying: Are They Onto Something?
There have been more millionaire renters in recent years than ever before. A RentCafe analysis found that the number of renter households with incomes of more than $1 million reached a record high of 3,381 in 2020 — three times as many as there were in 2015.
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The analysis also looked at the profiles of millionaire renters and found that the majority were male millennials, with an average age of 41, who hold management jobs and rent a three-bedroom home. While conventional financial wisdom states that it’s better to buy than rent, are these millennial millionaires onto something by choosing to forgo this typical financial rite of passage?
Here’s a look at why it may — or may not — be a better decision to rent your home, even if you can afford to buy.
Renting May Make Better Sense for Your Lifestyle
A home is a major investment, and typically it takes time for this investment to “pay off.” If you’re not planning on staying in one place for very long, renting may make better financial sense.
“Renting can be a lifestyle decision,” said Nicole Beauchamp, senior global real estate advisor at Engel & Völkers, based in New York City. “It may be about not knowing how long one may be in a particular city or country, or real estate ownership might come in the form of a vacation or second home instead of owning a primary residence. I often have clients who fit this profile, where they are not planning to be in NYC for more than three years.”
Levon L. Galstyan, a CPA with Oak View Law Group, notes that some millennial millionaires may not be in a phase in life where they want to settle down, and renting gives them more flexibility.
“Millennials feel about marriage and children very differently from how other generations felt,” he said. “While the goal used to be to get married and have kids young, millennials are putting these two major life events off until they are in their 30s. The rental market is affected by this trend. Millennials don’t have to live in a townhouse or a single-family home, which means they can choose to live in smaller spaces closer to the entertainment and services that busy downtown cores offer.”
Even if you’re not a millionaire, it’s important to take your desired lifestyle into account before committing to buying property.
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Luxury Real Estate Is More Affordable When Renting
Even millionaires may not be able to afford to buy luxury real estate, especially in major cities like New York or San Francisco.
“High real estate prices can make purchasing a home less appealing for some millionaires, leading them to opt to rent instead,” Galstyan said.
Some may simply not want the hassle.
“Some millionaires may prefer to rent a luxury property that provides a high-end lifestyle without the burden of ownership,” Galstyan said.
Although it may be worth it for you to make some sacrifices to own your home, evaluate what you really want before making that decision. You may not be living in “luxury,” but you want to make sure your home meets your basic needs.
Renting Allows for More Disposable Income
Millionaires may want to enjoy their high earnings, rather than spend it all on their housing. For the average person, it’s important to look at how much disposable income you actually have before making the decision to buy.
“Even if you can afford to buy a home, renting may be a better choice if you have very little disposable income or have a lot of debt,” Galstyan said. “In these situations, it may be prudent to pay off debts and increase disposable income while renting an apartment before purchasing a home.”
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