[BBMW]

I'd buy in a second. If the deal pencils out that I'm better off buying, I buy. This happened back in '97, after looking at a bunch of places, I found a deal I liked and bought.

The question is, what's the proper analysis. I think your analysis of the buy side of the equation is over optimistic.

Originally Posted by ScoopLV

<snip>

And since we're dueling with straw men: If you had the same scenario, and you saw a breakdown of the rent and realized that the landlord was doing things right and making a profit, would you buy or rent?

[ragabnh]

I would buy a place to live in, but I will invest in the stock market rather than buying rental property, the return is definitely higher, and I have been doing both and in case equities investment for the past 20 years.

[ScoopLV]

Originally Posted by BBMW

I'd buy in a second. If the deal pencils out that I'm better off buying, I buy. This happened back in '97, after looking at a bunch of places, I found a deal I liked and bought.

The question is, what's the proper analysis. I think your analysis of the buy side of the equation is over optimistic.

Fair enough. But WHY is it over optimistic? I pay property taxes. If someone was renting this house, they'd pay property taxes, too. I pay for maintenance. If someone was renting this house, they'd pay for maintenance, too. In addition, any improvements tenants make often stay with the property. I know tenants in my Aunt's places who have installed hot tubs, gazebos, and similar -- and then left them behind.

I have an aversion to debt, so mortgage and interest don't really factor in. But if that was an issue, at least the interest is deductible.

The only time rent works out in the tenant's favor is if the landlord doesn't know what he or she is doing, or if the landlord is behind a financial 8-ball and needs any kind of cash flow. Otherwise the tenant pays all the landlord's bills -- all of them -- plus a little extra on top of that for ROI.

In an apples to apples comparison of renting my house compared to owning, I'd be absolutely aghast with how much I had sunk in rent in seven years -- enough money to buy two or three modest houses at today's prices, and even one decent house before the crash. And with nothing to show for it.

[BBMW]

You treat rent as 100% sunk cost. This I agree with. You treat home ownership expenses as 100% investment. This I don't agree with. There is only some parts of those that are recoverable, notably the principle reduction on the mortgage (if you have a mortgage), and the amount of actual tax savings from the deductions (mortgage interest, and property taxes.) Note that I said the actual amount of tax savings, not the amount of the deductions. The former is significantly lower. Without price appreciation, that's all you're getting back on your home ownership expenses.

There are also purchase expenses. If you paid cash for you house, you laid out six figures, possibly multiple, to buy the property. There's a HUGE opportunity cost to this. What else could you have been doing with that money in the intervening 5-6 years? As we now know in hindsight, a whole hell of a lot. Even if you had financed, you'd still be out some amount of cash. There are also all the closing expenses. These are also deductible, so you get a little of that back.

All these things need to be figured in, I don't think you do that. You just say rent is a waste, ownership is an investment, so I'll buy. You don't ask, for this particular set of properties, at this particular time, with these particular numbers for rental and purchase expenses, for your particular circumstances, which makes the more sense. Now often times, maybe the majority of the time, buy will pencil out better than rent, but far from always.

Originally Posted by ScoopLV

Fair enough. But WHY is it over optimistic? I pay property taxes. If someone was renting this house, they'd pay property taxes, too. I pay for maintenance. If someone was renting this house, they'd pay for maintenance, too. In addition, any improvements tenants make often stay with the property. I know tenants in my Aunt's places who have installed hot tubs, gazebos, and similar -- and then left them behind.

I have an aversion to debt, so mortgage and interest don't really factor in. But if that was an issue, at least the interest is deductible.

The only time rent works out in the tenant's favor is if the landlord doesn't know what he or she is doing, or if the landlord is behind a financial 8-ball and needs any kind of cash flow. Otherwise the tenant pays all the landlord's bills -- all of them -- plus a little extra on top of that for ROI.

In an apples to apples comparison of renting my house compared to owning, I'd be absolutely aghast with how much I had sunk in rent in seven years -- enough money to buy two or three modest houses at today's prices, and even one decent house before the crash. And with nothing to show for it.

[ScoopLV]

I do not consider home ownership expenses as 100% investment. I consider the fact that people need to spend money on shelter, so the question becomes whether it's better spend that money renting shelter or buying shelter. I say that question is easy to answer, and I have used real numbers (actually numbers skewed in your position's favor) to back up that answer. Others have done the same, and asked you to turn off the 20/20 hindsight.

Consider this: When we bought our house in 2007, Bear Sterns and Lehman had collapsed, there was a general panic in the financial markets. The pundits were publicly wondering how much worse 2007 was going to be than 1929. And you suggest that I should have taken all of our money and put it into a crashing market. Sure, invested correctly, that would have been a good idea (except for the fact that we STILL would have needed a place to live). But at the time, without a working crystal ball, that didn't seem particularly wise.

I don't gamble. And I'm not going to gamble on stock speculation (which is no different at the end of the day than sports gambling -- you can have any system you like, it's still a gamble). I did invest in the crashing market, but only in industries that tend to do well in a recession, and then very conservatively.

Point blank: I'm up owning vs. renting. Even with the associated costs of home ownership. Would I be up MORE if I had invested perfectly in 2007? Absolutely. And when you can tell me with absolute accuracy exactly where the market is going to be seven years from now in 2021, I will be very interested. But in the meantime, I'll stay diversified.

[airics]

[quote=ScoopLV;32973907]I do not consider home ownership expenses as 100% investment. I consider the fact that people need to spend money on shelter, so the question becomes whether it's better spend that money renting shelter or buying shelter. I say that question is easy to answer, and I have used real numbers (actually numbers skewed in your position's favor) to back up that answer. Others have done the same, and asked you to turn off the 20/20 hindsight.

Consider this: When we bought our house in 2007, Bear Sterns and Lehman had collapsed, there was a general panic in the financial markets. The pundits were publicly wondering how much worse 2007 was going to be than 1929. And you suggest that I should have taken all of our money and put it into a crashing market. Sure, invested correctly, that would have been a good idea (except for the fact that we STILL would have needed a place to live). But at the time, without a working crystal ball, that didn't seem particularly wise.

I don't gamble. And I'm not going to gamble on stock speculation (which is no different at the end of the day than sports gambling -- you can have any system you like, it's still a gamble). I did invest in the crashing market, but only in industries that tend to do well in a recession, and then very conservatively.

Point blank: I'm up owning vs. renting. Even with the associated costs of home ownership. Would I be up MORE if I had invested perfectly in 2007? Absolutely. And when you can tell me with absolute accuracy exactly where the market is going to be seven years from now in 2021, I will be very interested. But in the meantime, I'll stay


exactly... hindsight is 20/20.

I still want to know where BbmW has property. I'm reading it as New York...not Vegas

[BBMW]

Okay, I've had enough going around the block with this. You've convinced yourself you're ahead. I'm not going to convince you otherwise. But I can't see how you can be down 25% in equity, after putting in significant upgrades, and still say you're ahead. I'll just leave it at that.

Hopefully other people have been watching this argument and maybe learned something.

[BBMW]

Yes, NYC. I haven't moved out there yet, and I'm not buying something 2500 miles away.

[quote=airics;32974003]

Originally Posted by ScoopLV

I do not consider home ownership expenses as 100% investment. I consider the fact that people need to spend money on shelter, so the question becomes whether it's better spend that money renting shelter or buying shelter. I say that question is easy to answer, and I have used real numbers (actually numbers skewed in your position's favor) to back up that answer. Others have done the same, and asked you to turn off the 20/20 hindsight.

Consider this: When we bought our house in 2007, Bear Sterns and Lehman had collapsed, there was a general panic in the financial markets. The pundits were publicly wondering how much worse 2007 was going to be than 1929. And you suggest that I should have taken all of our money and put it into a crashing market. Sure, invested correctly, that would have been a good idea (except for the fact that we STILL would have needed a place to live). But at the time, without a working crystal ball, that didn't seem particularly wise.

I don't gamble. And I'm not going to gamble on stock speculation (which is no different at the end of the day than sports gambling -- you can have any system you like, it's still a gamble). I did invest in the crashing market, but only in industries that tend to do well in a recession, and then very conservatively.

Point blank: I'm up owning vs. renting. Even with the associated costs of home ownership. Would I be up MORE if I had invested perfectly in 2007? Absolutely. And when you can tell me with absolute accuracy exactly where the market is going to be seven years from now in 2021, I will be very interested. But in the meantime, I'll stay


exactly... hindsight is 20/20.

I still want to know where BMW has property. I'm reading it as New York...not Vegas

[airics]

Thought so...New York is a complete different animal..you aren't seeing the appreciation in real estate as we are. You are not even talking apples to apples.... I have property in Ohio also..would I invest in real estate there...no...not with the lower appreciation!

[BBMW]

You're kidding right? The NYC condo market is going nuts right now. And we never had the dropout you did (the flip side of that was there was no obvious buying opportunity.) But the numbers are MUCH bigger than yours. Want a $50,000,000 condo? They're building them. My apartment is between double and triple what I paid for it.

If you're a small investor, you're out in the ass end of the boroughs. There it's harder to get appreciation. And there are lots of regulation issues for landlords in NYC.

Originally Posted by airics

Thought so...New York is a complete different animal..you aren't seeing the appreciation in real estate as we are. You are not even talking apples to apples.... I have property in Ohio also..would I invest in real estate there...no...not with the lower appreciation!