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the part everyone misses is they can only compare against their own unique situation.
all comparisons are based on only you no one else.
there is rarely even an example you can compare to where you are renting the exact place you can buy . different properties are different , period.
i live in a rent stabilized apartment in queens ,nyc. being an aggressive investor all my life i could do better living here and investing elsewhere.
now i am retiring , no longer do the deals i did and my bench mark is different. buying a co-op and cutting costs may be the better deal now then renting and getting that income on that investment .
that is only unique to me.
others will have their own unique issues. there can be no answer that one is better or not. each case is on its own merit. what stage of life you are in can heavily influence that choice as well . what was thew better deal at one age may no longer be the better deal.
I think we both agree it very much hinges on the individual and the needs and habits of that individual.
What's the rent on that house now or a comparable rental? What's the buy in now vs 40 years ago? There are still variables in your post. Deductions over the years, ability to hold and rent for cashflow later. We're still just generalizing. For me owning works better than renting. It's far cheaper for me to own than rent. My nut on my house is about $1500. That's payment, property tax HOA and insurance. And in 2-3 years ( depending on how agressive I want to be) the mortgage payment will be gone. That frees up even more money to invest. To rent the equivalent size/type in my area will run me 25-2800 bucks. To rent at equivalent price I would be downsizing to a one bed apartment. With no deductions. And and get walking papers or rent raise every year.
Sure but you are putting off the investing to pay for the house, thus losing out on that gain. If you rented, you'd be investing from Day 1 - no need to even save for so much as a down payment.
I think it depends upon your stage of life and whether or not you will be moving around a lot. If you are a young person who will stay in the same place your whole life, I'd say buy a modest house in a nice neighborhood, pay it off and live mortgage free at pre inflation prices. I sure wish I still lived in my new $34,000 first house, because I'd be a millionaire now.
Conversely, we have retired friends who found a luxury gated community in which they are long term renters. They pay $1500. a month, which is barely enough to cover the HOA and property taxes if they were owners. They chose to save their capital to earn interest and I think in their case it makes sense.
Basically, moving is expensive, and real estate does not necessarily appreciate quickly anymore, so you have to do the numbers. If inflation is 2% a year, any less return than that is not even staying even.
Sure but you are putting off the investing to pay for the house, thus losing out on that gain. If you rented, you'd be investing from Day 1 - no need to even save for so much as a down payment.
however at different parts of our lives the same choices may or may not be possible.
my daughter just got married . they could have rented in our area but would have had zero to invest except for some down payment money since rents would be higher ..
on the other hand they bought a co-op for the same amount in a different area. in either case they would have little to invest going forward.
however by buying first hopefully in a few years appreciation will give them some equity.
now selling and renting and investing elsewhere perhaps in a real estate deal like we had would pay off big time.
after they make that money investing ,go back to buying and hopefully cut costs and the cycle made the impossible possible.
just renting day one would have done little for them as they would have had nothing to invest from that point on. . .
Last edited by mathjak107; 03-14-2015 at 01:02 PM..
however at different parts of our lives the same choices may or may not be possible.
my daughter just got married . they could have rented in our area but would have had zero to invest except for some down payment money since rents would be higher ..
on the other hand they bought a co-op for the same amount in a different area. in either case they would have little to invest going forward.
however by buying first hopefully in a few years appreciation will give them some equity.
now selling and renting and investing elsewhere perhaps in a real estate deal like we had would pay off big time.
after they make that money investing ,go back to buying and hopefully cut costs and the cycle made the impossible possible.
just renting day one would have done little for them as they would have had nothing to invest from that point on. . .
Sure but I was responding to a poster who is paying for the house in 2-3 more years. I can't imagine that the cash flow to do that would be less than rent unless it is some run-down neighborhood in Detroit or Flint that even most Michiganders could not imagine living in! And even then you have to factor in paying off the tax liens and doing the repairs that the house would likely require.
I'm really interested in the whole tiny house movement, however its not as easy as drop 20k on a tiny home, you then are looking at eithe rspending the rest of your days in rv parks or paying someone 300 or 400 a month to park in your backyard. maybe still cheaper than a traditional apt or home but imho not worth the sacrafice of space and uncertainty of where your home will sit juts to save a couple hundo
A big problem with the tiny house movement is such homes are zoned out of existence. I think they would be better than trailer parks, myself.
If you rent but invest the difference you would be making on home payment or simply invest, you can get ahead financially. Most renters simply don't. Some do but it's not the majority.
This is the crux of the problem for renters. There's a tendency to spend 30% or more of income on rent, which leaves little room for financial emergencies, let alone investing.
Highly dependent upon your situation. Too many variables to make any one blanket statement. There are a variety of situations where renting is going to be the choice that makes more economic sense than buying, and vice versa.
I think it depends upon your stage of life and whether or not you will be moving around a lot. If you are a young person who will stay in the same place your whole life, I'd say buy a modest house in a nice neighborhood, pay it off and live mortgage free at pre inflation prices. I sure wish I still lived in my new $34,000 first house, because I'd be a millionaire now.
Conversely, we have retired friends who found a luxury gated community in which they are long term renters. They pay $1500. a month, which is barely enough to cover the HOA and property taxes if they were owners. They chose to save their capital to earn interest and I think in their case it makes sense.
Basically, moving is expensive, and real estate does not necessarily appreciate quickly anymore, so you have to do the numbers. If inflation is 2% a year, any less return than that is not even staying even.
Why do this if prices are so high that it simply doesn't make sense to buy?
For us, buying for sure and in most situations I would think buying is best. Our mortgage on a decent size home is much less then rent would be. We also have not have many repairs/issues in the years we have owned. Plus, our house is worth about 20k more now then when we purchased 3 years ago.
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