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It is all about working the numbers. our rent goes up every year too. but an apartment like ours would run about 300k in bay terrace . just the return on that money i would have tied up pays our rent and more and it would still cost me another 1k in maintaince.
it really does not pay to buy for us.
Last edited by mathjak107; 03-08-2013 at 12:55 PM..
To be fair rent does not go up every year everywhere. I have tenants for 5 years, and have not had 1 rent increase because I like them, they don't bother me, they do what they should do, and their rent is enough to cover the bills. Can I raise their rent? Sure..but I am cool with it as-is. Maybe next year I will. Maybe.
The bottom line is that housing was never a "get rich" investment, it was always a place to live, raise a family, etc. It is only in the last 30-40 years where prices have seemingly escalated dramatically in some places, causing the whole "investment and flipping" mentality to twist a home into a profit center. You should buy a home because you want stability, can committ to at least 10 years, and for whatever sentimental and psychological reasons that come with home ownership (having your own home, a place to raise kids and memories, etc), but NOT because you think you will get rich, or that renting is throwing your money away. The money you "throw away" in rent is typically alot less than the money you "throw away" in real estate taxes, insurance, maintenance, repairs, and headaches, particularly in NYC.
As long as you live in the house it is an expense just like rent. For some it may be less and some more.
In either case money comes out of your piggy bank. Until the day comes you sell and do not put the money back into a place whether the house has a residual value of 1million dollars or 100k really does not matter.
All that matters is cash flow. You need enough cash flow for your needs and wants. How you attain it does not matter.
Being house rich and cash poor can make for a pretty miserable life.
Buying is mostly a matter of investment. From my calculations 300k roughly takes off 1k/month in the rent. So if you buy a 300k coop / condo and it would have rented to 1.5k, then your maintenance (or hoa+taxes) should come out to 500/month.
Property in manhattan have mantenance fees higher then most places in the US would charge for rent for equal sqft.
If the costs of finding a tenant were free, then there wouldn't be any difference from you owning your place vs renting a place and owning another equivalent that you rent out.
So whether you own your house or not its really just a matter of if you are the type who invests or not, unless you plan on modifying the home (especially if you can do it yourself). Otherwise you're just partaking in renting to yourself and keeping the small benefit that goes with it.
If you want free rent though, you need to own two properties.
The good thing though property appears to appreciate faster then today's mortgage rates. That also doesn't even include the investment payback you get for the "rent reduction". My calculation was 7% appreciation, and 5% payback in rent reduction. And if you can afford to pay more then the minimal mortgage payment you can pay it off really fast (say you get a 2 bedroom and rent the other room) and then you barely lose much into interest on the mortgage.
Sorry but it is never free rent even with 2 properties . The amount it will cost you is always the amount your giving up getting if you rented it to someone else.
Sorry but it is never free rent even with 2 properties . The amount it will cost you is always the amount your giving up getting if you rented it to someone else.
If you buy two 100k properties that both have 300/mo maintenance and live in the one and rent the other (for 600/mo), the profit from the second one will cover the maintenance fee of yours.
However 200k into just one property will come with a maintenance (I suspect 600/mo ?). Any property will come with some sort of monthly payment, therefor you need a second property to cover it.
One good rented property could cover your rent in a much cheaper place though.
It may cover your costs but it is still costing you the rent you are giving up.
As an example if i own a little office and rent it out for 500 bucks the rent is my profit.
But if i take the office for myself instead, now it is costing me that 500 bucks i am not getting in effect.
I could keep the rental income coming in by renting a different office for 500 bucks. Overall the effect is the same and anything we use for ourselves is really costing what we are giving up.
In the investment world anything you are not making you are loosing so to speak.
If instead of buying 2 properties with you living in one and renting one out suppose you bought one property to live in and a stock investment instead of another property.
if the stock spun off enough to cover the bills you are not living for free.
Your investment is just throwing off income which lets you pay bills.
i would rather not own a home here or anywhere else. sold them and rent like a happy little moron .
no longer do i wonder when the next expensive repair or maintaince item will show its head.
our investments made while not owning and having the money tied up in the house easily pay our rent increases and provide us with an income stream.
for us it is the best of both worlds. we have no headaches of ownership , we have total freedom to leave anytime and our investments grew 4 to 5x what the same money in a home would have grown .
to each their own, but no way is better than the other. it is a matter of choices.
Agree with you 100%. We owned for 14 years, sold our home in 2012 and fortunately at our asking price. We are now renting in a totally different neighborhood and have the ability to leave whenever we want, to whereever we want, without selling and all the stress that goes with home owning, maintenance and listing. We are not subject to neighborhood deterioration, ups and downs in the real estate market, and are way more mobile. Love it!!!
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