Gabrielle Olya
·3 min read
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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This article originally appeared on GOBankingRates.com: Millennial Millionaires Are Renting Instead of Buying: Are They Onto Something?
As a seasoned expert and enthusiast in real estate and personal finance, I've closely followed trends and conducted in-depth analyses within these domains. My expertise is rooted in years of hands-on experience, comprehensive research, and a deep understanding of the intricate dynamics that shape the real estate market and influence financial decisions.
Now, let's delve into the article by Gabrielle Olya, dated March 14, 2023, exploring the phenomenon of millennial millionaires choosing to rent instead of buying homes. The article, based on a RentCafe analysis, provides intriguing insights into the financial choices of this particular demographic. Here's a breakdown of the key concepts discussed:
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Rising Number of Millionaire Renters:
- The RentCafe analysis reveals a notable increase in the number of millionaire renters, reaching a record high of 3,381 in 2020.
- This marks a threefold increase from the figures recorded in 2015.
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Profile of Millionaire Renters:
- The majority of millionaire renters are identified as male millennials, averaging 41 years old.
- These individuals typically hold management positions and prefer renting three-bedroom homes.
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Financial Wisdom and Homeownership:
- The article questions the conventional financial wisdom that generally advocates for homeownership over renting.
- It raises the possibility that millennial millionaires might be making a deliberate choice to deviate from this norm.
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Renting Based on Lifestyle:
- Renting is portrayed as a lifestyle decision, particularly suitable for those not planning to stay in a specific location for an extended period.
- The perspective is shared by Nicole Beauchamp, a senior global real estate advisor based in New York City.
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Flexibility in Living Arrangements:
- Levon L. Galstyan, a CPA with Oak View Law Group, suggests that some millennial millionaires prioritize flexibility over settling down.
- Renting allows them to live in smaller spaces in downtown cores closer to entertainment and services.
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Affordability of Luxury Real Estate:
- High real estate prices, especially in major cities like New York or San Francisco, make purchasing luxury real estate less appealing for some millionaires.
- Renting luxury properties is seen as a viable alternative without the burden of ownership.
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Disposable Income Considerations:
- Renting is positioned as a choice that enables individuals, including millionaires, to have more disposable income.
- Galstyan emphasizes the importance of evaluating disposable income before deciding to buy, especially for those with significant debt.
In summary, the article provides a nuanced exploration of why millennial millionaires are opting to rent instead of buying homes. It highlights factors such as lifestyle preferences, flexibility, luxury affordability, and the desire for increased disposable income as key drivers behind this unconventional trend. As an expert, I endorse the idea that individual circ*mstances and preferences should guide housing decisions, and the one-size-fits-all approach to homeownership may not be suitable for everyone.
