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You are making assumptions that are simply not valid. Joe Banker doesn't care if Susie Landlord's investment pays off for her, just that she pays her loan on time, which is why he checks her credit and then requires a down payment. If he wanted to own rental property, he would not be in banking but be a landlord himself.
If we are going to discuss personal preferences rather than the bottom line, then OK.
Quote:
Originally Posted by Linda_d
BTW, your example is flawed because this top is about an individual renting a house/apartment vs buying a house/apartment. Your example was about investment real estate.
How does this undermine the point? The profitability of being a landlord is directly related to the sensibility of owning your residence compared to renting, so what is true of one says something about the other. To be fair, though, there are differences, for example there is no depreciation deduction on owner-occupied housing, and imputed rent is not taxable.
No more disingenuous than other scenarios. The poster was straight forward about it.
I bought my house with 0% 12+ years ago, too, although I had to pay $20/month for PMI for a while. Big deal. Even with PMI, my mortgage payment in 2003 was < $70 more than my rent on a decent apartment. Now, I couldn't rent a house or a decent apartment here for what I pay for my mortgage.
The assumption that whatever somebody saves by renting goes into saving and investing is what is really disingenuous because that actually seldom happens. That "extra" money gets spent on entertainment, on vacations, on better cars, and on moving expenses when tenants exercise their "freedom".
renters are a mixed bag of very poor and very wealthy . there really is no way to draw any conclusion about what renters do with their money.
it is highly individualized and each situation will be different.
most americans though are pretty lousy investors over all ,homeowner or renter . which is why debating whether to keep a mortgage and invest or pay it off may be a poor idea arguing in the general..
it is going to be an individual case by case . arguing in the general is useless.
a retired couple who rented a 3 bedroom apartment when the family lived there and now rents a 1 bedroom can see better improvement in cash flow than any homeowner still supporting a house .
it is just a silly argument with endless variables to try to say what is better.
renting and investing the money not tied up in the house was the best thing i could have ever done.
buying the co-op my ex wife lives in is the best thing she could have done and now saves more than 1k a month in difference in rent .
two different people , two different results right in the same geographic location.
Last edited by mathjak107; 04-19-2015 at 02:51 AM..
We're glad we're currently renting. Our lives are in a state of transition, and we appreciate the flexibility.
We decided it would be best to downsize for now and perhaps the next 1-2 years. All we had to do was give notice, pack and move! We will continue to rent for the next 1-2 years, until we decide where to retire.
It just all depends on your situation, of course. If you envision yourself being in the same area 5+ years, it probably would make more sense to buy. Do realize, though, that moving is a very expensive procedure. The proceeds from real estate sales don't always support the expenses, regardless of what financial gurus might advise. They fail to take into consideration the real estate agent commission, moving expenses, and overlapping house payments. We're just renting, and moving within the same city, but we took out a one-month overlap on properties. Trust me, you will need that extra time! Unless you're a college kid, who can load up a uhaul in a day!
For a single guy like me, renting a reasonably priced 1-Br out in the suburbs. I have gone through the buy vs. rent calculators and it favors renting. I set the "return on invested savings" at 8%, which is what you could expect in the long run investing your money in a decent mutual fund. That's renting a 1-Br apartment vs. buying a house.
The buy vs. rent calculations break even or favor buying when I stick in figures for condos, but there are just way too many risks with condos that I won't consider them. You can get a crazy condo association that jacks up maintenance fees through the roof, they can decide to remodel the building and smack you with a huge assessment, there can be damages that you can be assessed for, and you can also be forced to sell your unit at a loss if the condo. association dissolves.
I'll just keep renting. Plus, I can leave tomorrow if I find a job in a different city.
I think renting is cheaper, but this is my personal assumption and my personal lifestyle. I've also never owned a home, so my thought is pretty biased.
Yes, your rent is going nowhere, but you don't have any extra maintenance cost. If the fridge breaks, land lord replaces it, no extra cost from your pocket. There is no roofing damages that I have to worry about. I don't have to spend money on a lawn/garden. I don't have to put money aside for property taxes or waste fee.
For those who says that the money you're giving is not going anywhere, that is correct, but, are you really "making" money when you own a house? You have a mortgage, you're paying off interest, yes, you may sell the house at $450 when you got it for $300. You think $150 is a big amount? Have you considered the inflation through out the years? There is a reason why you can sell it for a higher cost. At the same time, have you considered all the cost you have put in for maintaining your house, plus the cost you are putting in to make your house to sell at that price point? Have you taken into account the time you spend on fixing things because you do not want to hire a repair man to save money? My parents right now is looking into selling the house and they're buying this and that, running around just to make the house presentable and increase its value. How much is your time worth?
With my rent, since I'm paying less than having a mortgage and I am able to put more money in the bank to save. My money saved is invested and my interest alone is making me a lot of money since I'm able to put away more money than a person who is tied to bills and mortgage.
So in terms of being "frugal"... I believe renting is cheaper. But, it also depends on where/how much your rent is and what you are comparing it to.
The rent in my area averages for $1,500 and houses cost about half a million or even million each. The houses are small, but it's the location. My current rent is $800, but in my area, that is non-existent so to me specifically, renting is way cheaper than owning a house. My location is walking distance to my work. That is also something to consider when renting vs. buying. Also, I only pay electricity (some renters have no other bills at all), while buying a house costs more in insurance and other bills.
If you're renting a condo, you have maintenance fee that keeps going up and will have bursts of fees out of nowhere that you are forced to pay, while with owning a house, you may be able to delay work that needs to get done. That should also be considered.
I mean, you can rent a place downtown and spend way more a month than someone living in the middle of nowhere, where a house is only $100,000. On that note, even though I think renting is cheaper, there are definitely more things to take into account to when looking renting vs. buying.
It's not as cut and dry as there are many factors to consider to figure out which is cheaper.
I think renting is cheaper, but this is my personal assumption and my personal lifestyle. I've also never owned a home, so my thought is pretty biased.
Yes, your rent is going nowhere, but you don't have any extra maintenance cost. If the fridge breaks, land lord replaces it, no extra cost from your pocket. There is no roofing damages that I have to worry about. I don't have to spend money on a lawn/garden. I don't have to put money aside for property taxes or waste fee.
For those who says that the money you're giving is not going anywhere, that is correct, but, are you really "making" money when you own a house? You have a mortgage, you're paying off interest, yes, you may sell the house at $450 when you got it for $300. You think $150 is a big amount? Have you considered the inflation through out the years? There is a reason why you can sell it for a higher cost. At the same time, have you considered all the cost you have put in for maintaining your house, plus the cost you are putting in to make your house to sell at that price point? Have you taken into account the time you spend on fixing things because you do not want to hire a repair man to save money? My parents right now is looking into selling the house and they're buying this and that, running around just to make the house presentable and increase its value. How much is your time worth?
With my rent, since I'm paying less than having a mortgage and I am able to put more money in the bank to save. My money saved is invested and my interest alone is making me a lot of money since I'm able to put away more money than a person who is tied to bills and mortgage.
So in terms of being "frugal"... I believe renting is cheaper. But, it also depends on where/how much your rent is and what you are comparing it to.
The rent in my area averages for $1,500 and houses cost about half a million or even million each. The houses are small, but it's the location. My current rent is $800, but in my area, that is non-existent so to me specifically, renting is way cheaper than owning a house. My location is walking distance to my work. That is also something to consider when renting vs. buying. Also, I only pay electricity (some renters have no other bills at all), while buying a house costs more in insurance and other bills.
If you're renting a condo, you have maintenance fee that keeps going up and will have bursts of fees out of nowhere that you are forced to pay, while with owning a house, you may be able to delay work that needs to get done. That should also be considered.
I mean, you can rent a place downtown and spend way more a month than someone living in the middle of nowhere, where a house is only $100,000. On that note, even though I think renting is cheaper, there are definitely more things to take into account to when looking renting vs. buying.
It's not as cut and dry as there are many factors to consider to figure out which is cheaper.
Compared to the $0 you get when renting? Yeah, then $150K is a big deal.
Maintenance costs are not THAT expensive in the grand scheme of home ownership to the point they overshadow the equity, appreciation, and tax benefits you will realize in most situations. (There are always exceptions).
Compared to the $0 you get when renting? Yeah, then $150K is a big deal.
Maintenance costs are not THAT expensive in the grand scheme of home ownership to the point they overshadow the equity, appreciation, and tax benefits you will realize in most situations. (There are always exceptions).
$150 is a big amount, but my point after that is, is it really still $150 as its entirety?
I personally know, in proper investment (well in Canada at least) tax-free saving on mutual investment account can get $10k/year. Since I'm not paying mortgage and other cost, as mentioned, it gives me the ability to put more money away.
So, let's say $10k in 10 years, tax-free, is it the same equivalent with a house appreciating to $100k in 10 years? Minus the inflation, the appliances replacement cost, the time and all the other costs put in the house.
Yes, rent goes up, but so does people's salary (one could hope), so in a way, it's not really going up. The same applies with the house being sold at $150 more than original purchase, you're not getting rich off of it, you're evening out, plus some. (which again, is comparable gain if money is properly invested in other ways)
There are so many factors to look into to compare, so I don't think there is a blanket statement that owning or renting is the more frugal way to go. I was just describing that there are many aspects to know when buying a house, that getting $150 isn't really getting $150 and other ways to earn money while just renting.
There's a reason why rich people get richer by investing, not by playing monopoly in real life and buying/selling houses (which I'm sure some rich people do as well, buy and sell for profit, but not a common trend).
I came to a kind of epiphany yesterday. Typical Americans have lots of stuff. A lot of this stuff we only use occasionally, but we have big houses to store the stuff, and the reality is we don't need the space to live in. Maybe a wiser strategy is to build a large storage shed in the yard or rent a storage space, and just own a small house or apartment.
Part of the reason many folks end up in big houses, is that first, they want to live in certain areas because the schools are better. So they plan to move to town A. Unfortunately, town A has very large expensive homes, and even if you build, the subdivisions requiring you to build a certain size house and a certain size lot, which you may, in fact, not need at all. Don't get caught in this trap. Find another solution. Many times I've heard of people who bought a big house, but did use all the rooms, or may not have even had the money to furnish all the rooms. Don't do this, its a huge waste of money.
I came to a kind of epiphany yesterday. Typical Americans have lots of stuff. A lot of this stuff we only use occasionally, but we have big houses to store the stuff, and the reality is we don't need the space to live in. Maybe a wiser strategy is to build a large storage shed in the yard or rent a storage space, and just own a small house or apartment.
Part of the reason many folks end up in big houses, is that first, they want to live in certain areas because the schools are better. So they plan to move to town A. Unfortunately, town A has very large expensive homes, and even if you build, the subdivisions requiring you to build a certain size house and a certain size lot, which you may, in fact, not need at all. Don't get caught in this trap. Find another solution. Many times I've heard of people who bought a big house, but did use all the rooms, or may not have even had the money to furnish all the rooms. Don't do this, its a huge waste of money.
Or they buy a house when they are young and are starting to have children. They get a house that the children will be comfortable in because it is large enough for each to have a little privacy and has a large yard for them to play in. They figure they will live and die owning that piece of property, and live with the memories of raising their children there. Fast forward 25 years later. The kids are grown and gone, and now the extra bedrooms are filled with furniture you never use. Every once in a while you buy something you like for the house and find yourself moving something else into one of those spare rooms because you have to put it somewhere. Maybe you start to realize that you would be better off downsizing at this point, so you could take some of the equity and do whatever you want with it. That's fine, but consider this:
If you had just bought a small house in the first place you would have saved a lot of money and probably wouldn't have filled it up with so much stuff that you now hate to part with, even though you never use it anymore. Many decades earlier, people lived in much smaller houses, even putting more than one child in the same bedroom. Guess what? The kids survived, and probably learned a lot more about life and how to live with other people. People stayed in their homes much longer back then as well. Mainly because when the kids moved away, they didn't have all that wasted space.
People need to get over the need to coddle their children so much. The children need to learn to do for themselves, and not expect so much. Not just for the economics of life, either.
Cruzincat: Couldn't agree more with your post. I had a midlife career change, and went back to school, so we had to downsized to a 2 bedroom apartment, 1000 sq. Ft. We got rid of a lot of stuff we didn't need, but did just fine for 3 years in that town house. Our two boys shared a room and got along just fine. Maybe we should have stayed with that arrangement, but the society makes it difficult. Most houses are at least 3 bedrooms. If you only build two there is the concern that you can't sell it again. And that does force a lot of folks to buy housing they really don't want.
Take a retired couple. They want to buy a house in a certain part of town, but they only need a small place. Good luck finding it. This is why I gave up on suburban living and am in the process of getting out. Too much of being forced to live a certain lifestyle and in a certain house etc.
We've also made the permanent decision to repent of the typical lifestyle of Americans, buy, buy, buy and buy some more.
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