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Thread summary:

Home purchase not the investment once thought, market bubble, location importance, rental income, property flipping, property taxes, fixed income rental options and home buying

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Old 04-15-2007, 03:44 PM
 
Location: Pahoa Hawaii
2,082 posts, read 4,729,781 times
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I think one of the most obvious advantages to ownwership over renting is no one except a government body can evict you and you can do pretty much as you please with the property.
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Old 04-16-2007, 12:53 AM
 
1,075 posts, read 3,246,058 times
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Well since I read this darn thing now I gotta put my two cents in & wind up being up half the nite lol, I’m not about to crunch any numbers & besides they wouldn't be accurate in forty eight states anyway, but anyway own vs. rent with ownership you have the initial buyers fees, p&I, taxes, insurance, routine upkeep, remodeling if desired, etc, which is going to total x amount over lets just say thirty years.

Now with renting you have rent, no interest due, no taxes, lower insurance costs, no upkeep, no remodeling, etc for again thirty years.

The owned home has equity, but with all the other expenses of owning totaled over that thirty year period what would the actual bottom line be in profit/equity, considering that one lived only in that home for the thirty years, but most never do so there would be still additional expenses to total up due to moving into another home, no refinancing/second mortgages, if they sell at peak housing prices but yet buy at peak also they would be canceling out there actual profit in a way(I think getting late ) unless the timing of the sale of the house is just right & the buying of another house is just right which is somewhat hard to predict what the market is going to do.


Now if we look at renting, thirty years of rent totaled naturally increasing over time plus all the other expenses, put any left over disposable income if there is any, into the stock market for thirty years at say 12% annual return invested into an ira/roth which then the money can be withdrawn at retirement age or 59 to make your monthly payments plus 10,000 can be withdrawn tax free on first time ownership, or take extra out tax free if qualified & meets five year tax rule to be applied to principle, if any taxes were due you could possibly be in a lower tax bracket also, kinda tricky but possible.

There’s a lot of holes in this since we don’t have any actual numbers coming into play and a lot of if’s, but if a guy were to work it all up I just wonder what the outcome of the two would be, total home equity/profit vs. total investment earnings plus contributions, with renting I am leaning toward the renting deal since I’m trying to get someone to say nope won’t work ownership is always better because .........., or maybe someone will say hmm that renting thing just might work, I’m sure I missed several things but the basics are there to expand on or tear it down into not really feasible, but it is something to kick around.

Last edited by joee; 04-16-2007 at 01:05 AM..
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Old 04-16-2007, 08:13 AM
 
192 posts, read 798,220 times
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Joee, that was a really exhaustive analysis! I agree with you that each situtation has to be evaluated on a individual basis and I'm sure that a lot of it will have to do with the geographical area (market) pros and cons re: owning and renting.

In a much more simplified example, a friend of mine recently moved into an apartment about 5 miles from where I now live. His rent, for a 1200 sq ft 2-bedroom apartment, is $1975/mo. Utilities, which are not included in his rent, have been about $200/mo and his cable/phone/tv package is another $150 So it is costing him $2325/mo, or $27,900/yr out of pocket, none of which he can deduct from his income taxes nor can he use his apartment as equity to borrow money should he ever need to.

I own my own home outright (bought it for cash out of the proceeds of my former house sales; I've done that twice before). I currently pay almost $15K/yr in property taxes, and my total monthly bills for electricity, water, fuel oil (prorated over 12 mos), tv/phone/internet are approx $700 ($8400/yr). I do also pay about $3000/yr for homeowners insurance (my apartment dwelling friend pays a few hundred a year for renters insurance). So altogether I am paying about $26,500/yr out of pocket which is virtually the same amount as what my friend pays for his apartment. But the deduction I'm able to take for those property taxes makes a huge difference every year come April 15th. I can also borrow against my home if I ever need to. I have 1/2 acre of land as a buffer between me and my neighbours (my friend has only the thickness of a single wall). And I have about 3000 more square feet of living space than he does (in fact, he has been storing a considerable amount of his stuff in one of my spare rooms since last September because he doesn't have enough space for it all in his apartment and has been "working on getting somewhere else to store it, or maybe sell it one of these days"!).

The distinguishing factor is that I began with home ownership 30 years ago, when I was first able to buy something small at a low price and kept "trading up" on a cash basis, whereas my friend is still trying to get to the point of being financially able to do that. At this point in time, we both probably have approximately the same amount in liquid assets (savings, CDs, investments) but the huge difference is that I also have my home as an additional asset whereas he does not.
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Old 04-16-2007, 04:42 PM
 
Location: Missouri
6,047 posts, read 21,653,691 times
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What you also need to take into consideration is that most people get married and have kids. A two bedroom apartment is a tight squeeze if you have 2-3 children. Most people would prefer a home with more space and a yard. Renting that size of a home is going to cost a lot more than renting a standard 1-2 bedroom apartment.
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Old 04-17-2007, 12:30 PM
 
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Interesting responses! Thanks.
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Old 04-17-2007, 01:15 PM
 
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If you don't pay ur taxes or mortage payment, you can be evicited, might take longer but you can live no where and not pay ur bills!
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Old 06-27-2007, 12:13 AM
 
Location: IN
98 posts, read 534,756 times
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Wow, I realize this thread is from April but still others will no doubt read it.
I bought a house and am really sorry I did. I thought I would have a good deal at tax time but H & R Block said no I couldn't take it. I thought after the first year I could.
I would rather rent. Much depends on if your raising a family and things like that. For me I'm older and live alone. I find now that lawn mowing is costing me money when I can find someone to do it. Electric is at least $150 a month, gas just to run heat and water heater runs nearly $200 a month, never use gas stove/oven, use microwave. House payment is only $500 a month but they don't take out tax and insurance so that’s another $90 a month for insurance. Have not gotten a tax bill yet, I'm holding my breath on that one. My phone bill is running $90 a month ( includes dsl) had been $75 a month until I changed plans for a cheaper rate with unlimited long distance. Notice I said a cheaper package. Some how with no logical reason from the phone company my cheaper rates are costing much more. Add water/sewer/garbage and I'm paying more than I get on my retirement. Have to work and still don't make enough to pay all the expenses. Don't have a single credit card, and no department store accounts. No cable or satellite either. Pay cash for what I need. I'm at $1200 a month just to make the basics. Upkeep is impossible as nothing left every month.
Compare that with small condo at $350 a month, highest utility bill $39.00
Condo fee $125. Which I didn't pay but landlord paid. One mile from work so low car costs. Downside, condo sold and I had to buy it or move. Should have just rented another place. So sad.
Sure if your raising kids it might be nice to own a home in a family friendly neighborhood. But on the other hand your kids are with you, maybe 18 years then they are off on their own ( one hopes ) then you have to either down size the house or bang around in a house too big for 2 people. Wait a few more years and you end up in a some kind of retirement life style. Rest Home, Assisted Living, or some such. Not everyone does of course but not everyone is able after they get older to mow the lawn, shovel snow, climb up in the attic or do a lot of the things they were able to when younger. I use to like working in the yard but now I don't. Don't have the energy for it or the interest. Never thought I would change when I got old ( gasp) but I sure did. Now I think, I'm getting older and time is not stretching out in front of me. I don't want to spend time maintaining a house. Don't want the restrictions of owning a condo either. If you’re renting an apt. you can always move if the neighborhood goes down. Or the neighbors get to noisy. Etc.
I personally find that owning a house is a burden. And also agree with the other posters, if you don't pay your taxes you'd better believe in a very short time you'll get a notice in the mail that your house is going on auction for back taxes. I know because I got a $25.00 tax bill that was from a previous owner and had maybe 3 or 4 weeks to pay it before they auctioned my house. The title company went and paid it as it should have been paid when I bought the place. Believe me though they didn't give much time between the notice and the date of sale. Not really enough time to fight over it with the title company if I would have had to.
IMHO my thoughts on equity are, so you can take a loan against your equity but don't you have a bigger monthly payment every month to pay that loan.
hmmm. Much to think about.
So you never really own your house. Like PghPaNative said if you don’t pay your taxes or mortgage you will be evicted.

Sorry to be so long.
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Old 06-27-2007, 12:20 PM
 
Location: The great state of New Hampshire
792 posts, read 2,903,581 times
Reputation: 430
Quote:
Originally Posted by asassyvic View Post
Wow, I realize this thread is from April but still others will no doubt read it.
I bought a house and am really sorry I did. I thought I would have a good deal at tax time but H & R Block said no I couldn't take it. I thought after the first year I could.
I would rather rent. Much depends on if your raising a family and things like that. For me I'm older and live alone. I find now that lawn mowing is costing me money when I can find someone to do it. Electric is at least $150 a month, gas just to run heat and water heater runs nearly $200 a month, never use gas stove/oven, use microwave. House payment is only $500 a month but they don't take out tax and insurance so that’s another $90 a month for insurance. Have not gotten a tax bill yet, I'm holding my breath on that one. My phone bill is running $90 a month ( includes dsl) had been $75 a month until I changed plans for a cheaper rate with unlimited long distance. Notice I said a cheaper package. Some how with no logical reason from the phone company my cheaper rates are costing much more. Add water/sewer/garbage and I'm paying more than I get on my retirement. Have to work and still don't make enough to pay all the expenses. Don't have a single credit card, and no department store accounts. No cable or satellite either. Pay cash for what I need. I'm at $1200 a month just to make the basics. Upkeep is impossible as nothing left every month.
Compare that with small condo at $350 a month, highest utility bill $39.00
Condo fee $125. Which I didn't pay but landlord paid. One mile from work so low car costs. Downside, condo sold and I had to buy it or move. Should have just rented another place. So sad.
Sure if your raising kids it might be nice to own a home in a family friendly neighborhood. But on the other hand your kids are with you, maybe 18 years then they are off on their own ( one hopes ) then you have to either down size the house or bang around in a house too big for 2 people. Wait a few more years and you end up in a some kind of retirement life style. Rest Home, Assisted Living, or some such. Not everyone does of course but not everyone is able after they get older to mow the lawn, shovel snow, climb up in the attic or do a lot of the things they were able to when younger. I use to like working in the yard but now I don't. Don't have the energy for it or the interest. Never thought I would change when I got old ( gasp) but I sure did. Now I think, I'm getting older and time is not stretching out in front of me. I don't want to spend time maintaining a house. Don't want the restrictions of owning a condo either. If you’re renting an apt. you can always move if the neighborhood goes down. Or the neighbors get to noisy. Etc.
I personally find that owning a house is a burden. And also agree with the other posters, if you don't pay your taxes you'd better believe in a very short time you'll get a notice in the mail that your house is going on auction for back taxes. I know because I got a $25.00 tax bill that was from a previous owner and had maybe 3 or 4 weeks to pay it before they auctioned my house. The title company went and paid it as it should have been paid when I bought the place. Believe me though they didn't give much time between the notice and the date of sale. Not really enough time to fight over it with the title company if I would have had to.
IMHO my thoughts on equity are, so you can take a loan against your equity but don't you have a bigger monthly payment every month to pay that loan.
hmmm. Much to think about.
So you never really own your house. Like PghPaNative said if you don’t pay your taxes or mortgage you will be evicted.

Sorry to be so long.

I think you summed it up well. Home ownership, at least in the modern day era, is one of the very worst investments. The idea that one "throws away" money on rent is nonsense. I understand many's desire to owning a house, but the whole idea you throw much more money away on a desirable rental, is seriously flawed. Besides, the definiton of "ownership" is so loosely construed today. Miss a mortgage payment? One will quickly see who really owns that home (just like a car). Property taxes never go away and they only go up, often times drastically and you still pay even if you don't have children utilizing the public school system, just as one of many examples. To boot, I can't even fathom how not being able to build something so much as a shed on your own property can be controlled by a governing body and survive a constitutional litmus test.
And oh yes, condos are a complete rip-off. Condo fees plus taxes will make you wonder why you didn't hold out and work towards that $300,000 home rather than settling on that $200,000 condo. Better yet, stick to renting and use that money left over to invest in stocks. Your return thru the years will be far more substantial than the return on your house from this point forward.
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