Owning vs Renting (not real estate)

[biophase]

Yes, this is not a real estate question. I used to want to own everything, but now I just want to have access to everything. It's a whole different mentality and I think if you can wrap your head around it you will see things in a whole new perspective.

There is some sort of pleasure that comes with owning something. But having access to something 100% of the time is the same thing right?

Let's say buy a $10,000 watch. It's yours and you wear it everyday while you work. You feel the pride of ownership. Right?

Ok, how about if you and your friend buy that watch together for $5,000 each. Luckily he works nights and you work days, so there is absolutely no possibility of you both wanting to use it at the same time, ever. Let's say that it also magically jumps to his house whenever you get home from work and vice versa.

How do you feel about the watch? Is it yours? Do you feel like you own it or you are renting it or you are sharing it?

I'm interested in hearing other people's opinions about this topic. RealOG and I were discussing this a few weeks ago.

 

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[Rem]

For me personally it would depend on what it was. As for my house, I would want to own it. If it were a summer home but I only used it 2 or 3 weeks per year, then if I was able to coordinate with other people on when to use it then renting it might be better.

I think it depends on what it is and how often you need it. I understand the concept and I bet it would work in a lot of cases and save you money.

 

[maximus20895]

To the OP. In your watch example your are still owning it, but just half of it. That's a little different than renting.

So what would you like to do?

 

[PaulRobert]

Very Interesting topic Bio. It is funny that you mention a watch for $10,000, because I was looking at a Patek Calatrava for $15K. When I make my first significant deal, I will buy the Patek by myself, not with a friend nor my partner. IMO in a business, even with a partner, everyone works hard, some work harder than others. Those who work harder and smarter will be able to afford a better lifestyle. Many times, sharing things that 2 people buy may cause somewhat of a mentality that " I worked harder, so I deserve it more." This may not be the case many times though.

It also depends on the product that 2 partners, friends ect. want to own or share. If my business partner wants a Ferrari and I want to buy a Lamborghini, well we are better to buy the cars individually and then find out for ourselves which one is a keeper. Both of us will be happy with what we bought. And what is better than 2 business partners that are happy?

 

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[biophase]

To the OP. In your watch example your are still owning it, but just half of it. That's a little different than renting.

So what would you like to do?

Ok let's say that you rented the watch for $100/mo instead of paying $10,000 for it. After 10 years you would have to give the watch back. It's a 10 year lease.

How would you feel about the watch on your hand?

I would like to rent everything, because you can't take anything with you. So what does owning something really mean?

Let's look at electronics, the fancy camera you buy for $200 will be worth probably $30-$50 in 5 years. If your roommate had a camera that you could borrow for free whenever you wanted, would you still go buy your own? Most people would.

 

[MJ DeMarco]

I smell a biz-op somewhere in here...

 

[Cat Man Du]

Ok let's say that you rented the watch for $100/mo instead of paying $10,000 for it. After 10 years you would have to give the watch back. It's a 10 year lease.

How would you feel about the watch on your hand?

I would like to rent everything, because you can't take anything with you. So what does owning something really mean?

Let's look at electronics, the fancy camera you buy for $200 will be worth probably $30-$50 in 5 years. If your roommate had a camera that you could borrow for free whenever you wanted, would you still go buy your own? Most people would.

IN RED ..says it all. If you think about it.....UNLESS it's paid IN-FULL ...you are RENTING IT! :seeya:

 

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[Jonleehacker]

Depends on whether you expect the object to appreciate or not.

Camera - rent
Gold bars - own
Normal car - depends on terms, I've done lots of long term car rentals and I admit that I have no problem with it. I find it very low stress to know if anything goes wrong, I just turn it in and get a new one.

If it's an appreciating asset, then financing, depending on the terms, can give you the best of both scenarios.

 

[kurtyordy]

If you are renting items, then someone is renting it to you, and that someone is renting it at a profit.

To make that profit, they will assume a reasonable rate of return based on their investment, risk of loss, etc. Plus they will also factor in your interest span.

For example- If the typical renter would rent a camera for an average of 1 year before desiring the newer model, and the owner knows he can sell the camera after one year for 50% of the retail paid, then the owner will want to charge you the 50% plus profit during that first year.

So, to put numbers to it, the camera is $200, the owner will charge say, $10/month, and then sell for $100 after the year is up. However, you could also sell it for that same amount after the year, so you would have paid 20% or whatever the owner's profit margin is by renting rather than buying and selling once you are through with it.

 

[andviv]

I am not sure where you were going with this thread... the way I understood it is this...

In the past couple of years I've been switching from a mentality of Having (i.e. owning) to one of Doing (enjoying what I want to do or what I am doing).

I am finding more satisfaction in doing things I want to do, rather than owing stuff that accumulates and I have to maintain.

3 years ago I would not even consider living in a house that was not under my name. Now I think more about the benefits the house provides (i.e. location, comfort) than who owns it. I know you were not referring to RE, but the fancy watch example does not even crosses my mind as I don't care that much about that stuff.

I can relate more to the concept of a fancy car, for example. Or a jet (probably that is why NetJet has caught so much attention and seems to be a model working very well). Use it when you feel like, without having to have the item/car/jet in your posession the whole time.

That freedom is feeling very good lately.

Probably I don't need to feed my ego as much as in the recent past, so that is why taking ownership/title of stuff is not that enticing to me anymore.

 

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[biophase]

So, to put numbers to it, the camera is $200, the owner will charge say, $10/month, and then sell for $100 after the year is up. However, you could also sell it for that same amount after the year, so you would have paid 20% or whatever the owner's profit margin is by renting rather than buying and selling once you are through with it.

I guess this conversation can go in many different directions. I don't really want to talk about it in investment terms. I'm talking more about everyday use objects. What makes people want to own them?

I am talking more about the psychological feelings of owning verses having access to something. If we set aside the monetary aspect, I've found that people still want to own it. They want to say that it is theirs.

My contention is that having access to something is just like owning it. Actually my point is that owning is also time dependent. And you really only have to "own" something when you need it.

Just like the shift if people who trade time for money. Think about owning something as a similar thing. We trade money to own something a specific duration of time. The time duration is, in our minds, up until we die, up until we don't want it or up until it breaks. In all 3 cases, the object is no longer of any use to us.

 

[LondonLife]

This is very interesting to me.

Leasing and renting to me usually works out more expensive in the long run than buying 100% outright. But, using my cars as an example, I own 1 car, but lease 2 others. The only reason I even own my DB9 is because it's a fully customisable car in the sytle I want and to my needs. The other cars are more practical in purpose, and leasing allows me the flexibility of getting a replacement at short notice should something go wrong.

Leasing to me isn't a philosophical question about not being able to take something with me, it's just more practical for me.

 

[andviv]

What makes people want to own them?

I am talking more about the psychological feelings of owning verses having access to something. If we set aside the monetary aspect, I've found that people still want to own it. They want to say that it is theirs.

Yup, that is correct. It is the good feeling of saying "it is mine" and "I own XYZ".

It is the "Keeping up with the neighbor" feeling.

I own XYZ and you don't, thus I am better than you.

Simply ego-boosting.

In many cases I buy stuff just for the fear of not having access to them when I may need them (like, once or twice every couple of years).

If I had a guarantee I could use them as/when needed, I wouldn't care the renting part. For example, a lawn mower, some tools, a tuxedo, some software I bought and installed on the old computer, etc.

 

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[Russ H]

Great discussion.

This is definitely one of my middle class "hold overs"-- I like to own things.

A rich person controls things-- or uses them. Ownership is not important to them.

Take cars, for example: LondonLife leases cars not because it's cheaper, but b/c it's easier to get something different if his needs change (or if the car he has needs significant repairs).

In the US, you can expense a leased vehicle used solely for business use. OR-- if you have a cashflowing asset that kicks off, say, $1000/mo-- you could use that income stream to directly lease an exotic that you've always wanted to drive.

To me, leasing a super exotic car makes a lot of sense-- esp those clubs that let you change out your car for a different exotic every 2-3 months. The club keeps the cars (which have value), and you pay big money into the club-- but not nearly as much as owning the car outright.

And again-- the US has different tax laws for owning vs leasing. In many cases, even if it's used for personal things, leases are deducted in full for that tax year (since the lease is, by nature, defined by time-- month to month, etc.). But if you BUY a car (or anything) outright, you need to depreciate the expense over time-- so you pay WAAAAY more tax on a purchase than a lease.

*******

Here's where it gets weird:

I would rather *own* a beach house than rent one.

Yes, I could fix it up if I owned it. And I could have fun figuring out how to rent it to others, to defray the expenses.

But seriously-- if I'm only going to use a beach house for a few weeks or months a year, it's WAAAY cheaper (and expensible) to RENT the beach house vs own it.

But I still feel a "pull" to own the dang thing.

Makes no sense-- unless you take ego into account.

That's why I want it: It feeds my ego.

Sure, it would be more convenient (I could make changes, redecorate, etc)-- but when I ask myself: What is most important? My answers are: Being able to walk to the beach, see the waves crashing against the rocks (ie, the view), smell and hear the waves as I go to sleep, and spending time there w/my family.

ALL of the above can be satisfied by renting, vs owning.

And I can even satisfy an additional desire (for variety) by renting *different* beach houses over time. This is not possible when buying (unless I'm a trillionaire, or the price of beach houses drops dramatically).

***********

When all is said and done, it really comes down to this:

For people w/a middle class mentality, OWNING has more status than RENTING or just USING.

The rich (well, most of them) have gotten beyond that.

They figure out what they really want to get out of something-- and then they figure out how best to get the utility they need.

Owning is not their first choice-- unless it's the best way to go financially. OR-- (in the case of a yacht), it's the only way to go, because they would not be able to live as they want to by just leasing/renting.

Same goes for airplanes and helo's.

If someone can figure out a good system of short term leasing for high-high end luxury goods (yachts, homes, planes, helicopters, exotic cars), they will have a small, but interested market w/wealthy people.

HOWEVER-- if a wealthy person can legally expense or take a tax deduction for a luxury item, they will go that route.

For many (not all) of the rich, it's more about what makes financial sense-- NOT what feeds their egos.

-Russ H.

 

[AroundTheWorld]

Very Interesting topic. I've thought about this through the years and for me, it finally boiled down to this:

Own = Ego
Access = Quality of life.

Own = Obligation
Access = Freedom

Own = Complication
Access = Simplicity

And, what is important to each person will change over time! It seems that many people gradually move from Ego to Quality of Life.

 

[GoldenEggs]

You can rent women's designer handbags and now you can rent jewelry. I've never tried the service so I am not sure how it really works. But you pay a monthly fee (and the fees are tiered depending on which designers you are interested in) and you are mailed a bag to use and when you are done, you mail it back and you get shipped a new one.

The jewelery service makes a lot of sense for weddings or proms or other once in a lifetime events.

 

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[Russ H]

I smell a biz-op somewhere in here...

Yup.

Thing is: The rich/those who realize renting is better than owning are a relatively small demographic.

On the other hand, you have the middle/lower class. For them, renting is the only possibility (they don't save enough to buy things-- always spending, spending what they have). But they WANT to own.

So, give them a service that lets them rent-- but makes them FEEL like an owner:

Rent-A-Center Home

Only problem here is if the good is portable, they can skip town w/it and not pay rent (ie, they are not accountable/responsible).

Put some kind of lojack system into the actual circuit boards of the device (not an add-on--but something that is part of what makes the TV/DVD/whatever work, and you now have a way to track it.

Your next problem, though, is the cost of retrieval. Sending out Guido and his younger brother Vito to get the TV/DVD, sofa, etc back costs money.

So far the only way to solve this is to sell the stuff for WAY more than it's worth: Get a spankin' deal on a DVD player that retails for $300 (and only costs you $50), and you sell it for $360 w/24% interest. The added $60 is for silly charges-- loan fees, cords (that come w/the player anyway), and other misc charges.

Here's how it pencils out:

$50 Item cost
$360 selling price

24% interest rate
24 months loan term (2 years and it's paid off).

$19.56 Monthly payment

The person only has to put down $20, plus the first month's payment ($20 + $19.56 = $39.56) when they leave the store.

If you can get only ONE MORE PAYMENT (of $19.56) the item is paid for.

The rest (21 months @ $19.56) is gravy.

Stick in a lot of other nuisance charges if they default (late charges, recovery, penalties, etc), and you have a business.

Not a fun one. But it's a business that fills a need. And can make a tidy profit, if they can get people to make payments.

-Russ H.

 

[MJ DeMarco]

In general, Fastlaners want to receive rents, not pay them. But in the real world, sometimes renting makes more sense, especially if ownership steals time.

I know the title says "no real estate" but I could think of no better example than the vacation rental I just put a deposit on today.

I've been craving a "second home" now for a few years, yet, I keep telling myself "IT IS BETTER TO RENT AND HAVE THE CONVENIENCE OF ANY LOCATION" ... in other words, my vacation home can be determined on a whim wherever I want to stay.

I just booked a place for the entire month of August in Laguna Beach. Cost? $10K for the month. Steep I know, but that is the going rate for an oceanfront Laguna pad ... would buying a place be feasible? These homes start at $2M and go from there ... yet, for $10K, I get to use the place for 1 month which is really $833/month (no taxes, homeowners no insurance, no association fees, no utility bills, no hassles) -- for $833/month I get to use a multi-million dollar property for a $300K price. Had I owned the place, the monthly would be in the neighborhood of $5000/mo and the urgency to use the place increases.

The only alternative "Fastlane" is to buy the place with the intent to rent it as a vacation rental, and subsidize my vacation in the whole process.

Would have buying a place be better especially when my use would typically be just a few months per year? Doubtful. As a renter, next year I can spend a month in Tahoe and the next in Chicago. It gives me flexibility without the hassles of ownership.

THE CONUNDRUM!!

As for the psychological implications, I suppose it has to do with "freedom" -- if I owned the place (or any place) I have the freedom to visit ANYTIME, on a whim, with no one to answer. Ownership provides a greater level of FREEDOM, yet, ownership takes time (so it also steals freedom!)

Howz that for a conundrum?

 

[max momo]

Great post.

For me the decision comes down to point of use. How well do I need the object to perform/how long must it perform in that condition/what condition must it remain.

For a car, makes sense to lease in certain conditions - not for me. I treat my car only as a transportation vehicle and need it to be there - in the condition I left it - three days a week.

Under any other conditions I will rent a vehicle.

Make sense?

For a rental house - I am willing to rent a timeshare from someone else b.c. I prefer flexibility over the condition of the condo. Would rather be able to make a decision with a group of my buddies to rent a place anywhere just a few weeks in advance rather than be locked into maintenance/management of a particular condo.

Problem with shared ownership is TRAGDY OF THE COMMONS. That is, if everyone owns something then NOBODY owns anything (and hence won't take care of it). Those that don't mind a messy place that needs deferred maintenance preferse the arrangement vs. those that want to properly maintain their property.

So, generally prefer to OWN cheaper items that require no maintenance b.c. repeated rental of such is a time sink. Let the professionals maintain the more expensive vehicle or property.

From EXPERIENCE there is ONE type of property that MUST be owned - recreational and Safety equipment.

Do NOT rent a safety harness/climbing rope/shoes. NEVER trust your life to a leased piece of safety equipment.

Do NOT rent skis. (I re-learned this lesson again last month on my ski trip to Colorado). Day one the skis rented were outstanding and I had a blast on the mountain. Next day the skis/boots/bindings were junk - I could barely control myself and the entire effort was one in frustration

In sum, DON'T rent a hammer that you use every other day - it must perfectly suit your hand.

DO rent a cemen't truck that you will need once a year.

that's been my lesson...

 

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[RealOG]

Very Interesting topic. I've thought about this too, through the years and for me, it finally boiled down to this:

Own = Ego
Access = Quality of life.

Own = Obligation
Access = Freedom

Own = Complication
Access = Simplicity

And, what is important to each person will change over time! It seems that many people gradually move from Ego to Quality of Life.

The most concise and spot on response in this thread.

I find that I typically want to OWN things I cannot afford yet, but once I have the means to own it, it is less alluring. Cars, motorcycles, homes, cabins, jewelry, purses, hot bottle rats, etc.

The crazy thing is I find that having the means to be able to purchase something is MUCH more satisfying than actually purchasing it.

 

[Jonleehacker]

hot bottle rats

please do explain, I don't recall this from the Doodads in Cashflow 101 ?

 

[Russ H]

I find that I typically want to OWN things I cannot afford yet, but once I have the means to own it, it is less alluring. Cars, motorcycles, homes, cabins, jewelry, purses, hot bottle rats, etc.

The crazy thing is I find that having the means to be able to purchase something is MUCH more satisfying than actually purchasing it.

TOTALLY agree.

I wanted a new Mercedes vert, until I could actually afford to pay cash for it.

At that point, I thought, "What a waste of money-- I could use my cash to buy something that cashflows and gives me tax deductions, and be much happier!"

As Spock said in the episode Amok time (when he goes in heat over a woman, and kills Kirk in hand to hand combat): "Sometimes wanting is better than having".

[ame=http://www.youtube.com/watch?v=YlI3zZk5UGI]YouTube - Star Trek "Amok Time" Spock's words to Ston[/ame]

-Russ H.

 

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[EastWind]

My problem in the past was that I wanted to OWN ALOT/MORE things, I thought the more things I had, the better off I was. I imagined myself with 8houses, 20 cars, 1 turboprop and jet, boat, yatch, etc.

LOL, that was a while ago. Not any more!

I still like to OWN things, but I like to OWN LESS and OWN things that I use. After a lot of thinking, I told myself, that I will never own more than 2 houses or 2 cars at the same time. It doesn't make sense. When I have something and I don't use it, it irritates me, so I have been slowly getting rid of the things that I don't use often.

On houses. I like to "own" my house. In US, you really own the house, but rent the land for life, so that kind of sucks. Hence my reason for not being a fan of owning too many properties. On cars. I have always kept cars for long, but that's because I'm not rich. If I was rich, I do probably trade em in every 4-5yrs. Having thought of exotic cars tho, and knowing that most people don't drive them often, I have settled on the idea of joining an exotics car club and renting em when I feel like it.

On the idea of watches, I wouldn't rent a watch. I wouldn't pay $100 a month to rent a $10k watch for 10yrs. I would rather spend $500 and get a decent watch. It will keep time just as good and look just as stylish. I mean, at what point do you stop renting? Are you going to rent shoes and suits too? Rent your furniture and electronics too? Come on.

 

[RealOG]

Eastwind - I think what the real focus here is not alternative ways of saving money or purchasing alternative. Rather it is about the emotional attachment of owning vs. complete freedom of use.

Biophase talks about the only difference in either model is whether you technically "own" it. From a purely behaviouralist standpoint, the only difference is cost since you have free access in either model.

Once you can get over your emotional attachment to owning, a world of opportunity exists.

On a side note, I used my conversation with Bio to trap him into leaving his SL500 with me next time he decides to climb a mountain. That should be good for at least three bottle rats!

Definition of Bottle Rat - Follow the link (it's a tad racy)

 

[CactusWren]

This thread reminded me of a book I read years ago:

Peter Mayle's Acquired Tastes

It has "short stories" on different items, and IMO, the condensed summary looks a lot like ATW's list. But he is a fun writer and he did make a case for hand made shoes and suits, if I remember correctly.

Might help when facing the conundrum...

 

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[Jonleehacker]

Definition of Bottle Rat

Reading that definition and considering the topic of this thread, I can't help think of the parallel concept of dating vs. marriage.

 

[Rawr]

Have a friend with a boat and a plane so you don't have to. Have one with a great place downtown, have people with access, etc.

Makes sense.

 

[EastWind]

Eastwind - I think what the real focus here is not alternative ways of saving money or purchasing alternative. Rather it is about the emotional attachment of owning vs. complete freedom of use.

Biophase talks about the only difference in either model is whether you technically "own" it. From a purely behaviouralist standpoint, the only difference is cost since you have free access in either model.

Once you can get over your emotional attachment to owning, a world of opportunity exists.

On a side note, I used my conversation with Bio to trap him into leaving his SL500 with me next time he decides to climb a mountain. That should be good for at least three bottle rats!

Definition of Bottle Rat - Follow the link (it's a tad racy)

I was not talking about alternative ways of saving money or alternative ways of purchasing. I'm talking about. USAGE. I stopped defining myself by the things I own, and realize that I don't need to own a lot. However, for the things that I use often, I like to own. The things I don't. I will rather rent. Let's talk about cars for instance. Some people like to lease, good for them. I like to own, that way I can do whatever to it. I may not like the exhaust note and want to change the exhaust system or I might want to tint it, or do something to it. I can't do that to a leased car. For something I drive almost everyday, I gotta have it comfortable. Same reason, why I gotta own my main home. so I can have it as it needs to be, if I want to repartition a wall, I can do it, I'm not limited by constraints. Renting never has complete freedom of use. For example, someone mentioned an example of renting a $10,000 watch for $100 a month for 10yrs. My question is, what if you do that, then on the 9th year while you are renting it, you lose it. Are you going to be liable for that $10k? Anywayz, like I stated earlier. I have formed the new mindset of owning less, but owning those things that I will use more, use often and enjoy, and renting those that I want once in a while.

 

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[AroundTheWorld]

As for the psychological implications, I suppose it has to do with "freedom" -- if I owned the place (or any place) I have the freedom to visit ANYTIME, on a whim, with no one to answer.

Howz that for a conundrum?

Funny.

My thinking is exactly the opposite.

If I owned the place, I would almost feel obligated to make that one of my primary vacation spots, year after year. I own it. I pay money for it... taxes... insurance... I should at least go and enjoy it. I should at least pop my head in and make sure the place is still standing, etc. etc.

If I rent, then I have the freedom to choose a new destination year after year.

 

[Russ H]

On houses. I like to "own" my house. In US, you really own the house, but rent the land for life, so that kind of sucks.

Huh?

Care to clarify?

Are you talking "owning" in Hawaii, or Manhattan? Or on an Indian reservation? :shruggie:

-Russ H.