Renting vs Buying a Home (Oakland: foreclosures, to rent, refinance)

[bhcompy]

Originally Posted by hsw

That said, know many rather wealthy single financiers who share a dim view of any real estate as an investment; prefer to rent new condos or houses; and move every 3-4 yrs to next latest, greatest bldg; they prefer freedom of investing their capital in other, more liquid assets and ability to enjoy a new shelter every few yrs and not face maintenance hassles/costs/wasted time of >5yo shelter

ie its not about pride of ownership, its about a roof over your head. and single people are like that. when they develop a family, they realize that that livestyle isnt conducive to a healthy family, so the those wealthy financiers buy a house in the hamptons.

[Userdavey]

In response to the OP's original argument, I think that in the LA area, it is better lots of times to rent.

Here in Colo. Spgs, CO, renting is a different story. A monkey could point out the rentals on my street. They are literally run down properties compared to the nice homes that people own.


However, from what I have seen on Realtor.com, the rental biz is much more profitable in LA, therefore the rentals are kept up much more.

I have heard of celebrities renting homes for fifty grand a month yada yada yada and I can actually see the benefit. When your lease is up, you can renew or move out. it's simple and stress free compared to trying to sell your home. Plus, if you get lucky with a good landlord, you won't have to worry about buying a new water heater etc.

It is a good thing though, if you have kids, to stay in the same house for a few years at least so the kids can stay in the same schools and have long friendships.

[JustPassinThru]

Originally Posted by Axiom

I like this calculator for a quick comparison without going to the trouble of running all the numbers myself:

http://www.nytimes.com/2007/04/10/bu..._GRAPHIC.html#

When I run the numbers for my So Cal neighborhood the result comes back that it would never be better to buy than to rent, even holding onto the house for 30 years.

Timing is everything.

When I plugged in the numbers the result was that I was better off buying after one year. I purchased a home in 2000 and sold at the end of 2005. The home had appreciated 155% and the sales commission paid was $4995. We rented for three years and recently paid cash for our present home, so there is NO INTEREST.

Two things worth mentioning. In the first place, if you rented a home in my neighborhood you would have had to pay at least 150% of my mortgage payment. There goes your savings.

Secondly, assuming that a person rents a no-frills apartment in a questionable neighborhood to save money, there is no guarantee that those funds will not be spent unwisely, rather than invested.

Life insurance with cash value, other than the almost immediate full coverage, is not a very good deal, but it is the only type of savings that some families will ever have. Owning a home also provides savings in addition to the numerous other benefits.

Sheesh, now I'm starting to sound like a homeseller.

[JohnG72]

The line is coming closer and in some areas, owning is now cheaper than renting. Perfect example would be purchasing a 2 bed/bath home in Arleta. Current market rent is $1500-1600 a month. This property can be purchased right now at $190K and will need ~15-20 in renovations to be turnkey. At this price, it becomes just about a neutral proposition(after factoring in property taxes, maintenance, writeoffs, etc). Assuming you will live there 15-20 years, the housing market will almost assuredly appreciate in that time and like wise rents should go up. So its an easy purchase if you happen to be renting in the area.

That said, there are market areas of Los Angeles that are lagging way behind in price drop. Particularly the westside which is the only non coastal place right now where I would imagine condos are getting $600K+. So in those areas, purchasing probably does not make much sense right now and due to the illogically high demand in that area, may not ever make sense.

[Axiom]

Originally Posted by JustPassinThru

Timing is everything.

Absolutely

In my area it might actually be possible to save money by buying now (over renting) but probably only if you're looking at the low end. If you're interested in higher end properties I doubt you'd find anything even close... yet.

For example I've been keeping an eye on several neighborhoods. In one of them the same model house popped up for sale and for lease awhile back. Basic tract homes, but nice little area. I toured both since I figured it was a great opportunity for comparison. They were very similar as far as condition and amenities. If anything I thought the rental was a little nicer.

asking price on the one for sale: 1,050,000
monthly rent on the one for lease: 3,500

Paying anywhere near a million dollars when you could rent a similar house for $3,500 makes absolutely no sense to me.

Of course I also think prices will continue to decline in that neighborhood. Obviously price inflation, especially of the magnitude we saw in recent years, is your friend if you're a buyer. Case in point: both houses in the above example were purchased new in 1998 for around $350,000.

[JustPassinThru]

Originally Posted by Axiom

Paying anywhere near a million dollars when you could rent a similar house for $3,500 makes absolutely no sense to me.

I purchased my present home this year for 1/3 of its original cost in 2003. Some sellers are still listing their properties at unrealistic prices. There is a home on the market in my community that hasn't sold for two years, even though offers were submitted at full price. This seller is very attached to her home and will probably never leave it.

[Jonah1979]

This discussion could only be made in states like California, NY and maybe Hawaii.

When I bought my house in Florida it only cost me $150/month more than renting so it made sense. I currently live in Pasadena in the Cal Tech area...it would cost me at a minimum $3000/month if I bought something, instead I rent in a very nice building for $1895.

The argument was made that if you saved for 7 years instead of buying you'd come out on top. I'd say that this is possible, but really if you are renting you need to invest that extra money you are saving. The stock market has an average return of 8% since the great depression...that is much higher than the 3% that housing typically rises each year. If you look at it that way, the stock market is a much better investment.

However, renting can be a pain in the A$$. If you rent a house the owners can just decide to sell it and boot you out. Your neighbor can burn an entire apartment building down, etc...

When housing prices come in line with renting a little bit, then I'll buy. If I can buy for $2,500/month in the same area and my rent is $1895 then it makes sense to buy.

[BRinSM]

Originally Posted by Jonah1979

The argument was made that if you saved for 7 years instead of buying you'd come out on top. I'd say that this is possible, but really if you are renting you need to invest that extra money you are saving. The stock market has an average return of 8% since the great depression...that is much higher than the 3% that housing typically rises each year. If you look at it that way, the stock market is a much better investment.

this goes back to the timing issues mentioned earlier. my 401k is down something like 20% over the last 3 years, as i'd imagine everyone else's is as well. however, i do get your point that as long as you're taking the difference between a mortgage and rent and at least putting it in a savings account, that you should be better off. even if you're only getting 1.5% on your savings, that is still better than the performance of the stock market and real estate market of the last 2 years.

[Jonah1979]

Originally Posted by BRinSM

this goes back to the timing issues mentioned earlier. my 401k is down something like 20% over the last 3 years, as i'd imagine everyone else's is as well. however, i do get your point that as long as you're taking the difference between a mortgage and rent and at least putting it in a savings account, that you should be better off. even if you're only getting 1.5% on your savings, that is still better than the performance of the stock market and real estate market of the last 2 years.

20%...ouch. I was fortunate that my investment advisor had me move 80% investments to bonds when the market started to tank. So the last year and half I've had a return of 5%. Not great, but not bad considering the market.

[Charles]

Originally Posted by Jonah1979

20%...ouch. I was fortunate that my investment advisor had me move 80% investments to bonds when the market started to tank. So the last year and half I've had a return of 5%. Not great, but not bad considering the market.

Which proves luck is more important than timing.