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Except for investment properties we have left we are 100% renters as of now.
Just the investment income on the money we would have to spend to buy our apartment easily covers the rent ,the rent increases and even gives us extra left over.
Sure rents go up but the investments in our other assets typically increase at a higher rate.
If we bought we would first have to cough up another 1k a month to cover maintaince charges so buying makes little sense.
We owned a 2nd home we sold in july. Once i figured in the interest on just a muni bond i wasnt getting on the money tied up in the house plus the 8-10 k a year in expenses the 20k a year costs made it just silly to keep going.
We thought we would retire there , cut expenses and enjoy a simple life compared to nyc where we live but after 5 years of part time rural life realized its not the klnd of life we want to retire to.
The nice thing about renting is once the rent is figured we have no other surprise housing cost popping up.
There were constant expenses all the time trying to keep up with everything in and on a house.
Im not handy at all so thats another factor. We needed a man for everything. That was a big expense .
So how much time and effort do you want to put into a house is another part of the equation.
Last edited by mathjak107; 12-10-2012 at 05:04 AM..
The nice thing about renting is once the rent is figured we have no other surprise housing cost popping up.
This is often overlooked...
Slightly off topic...
One of the physicians I work with was renting office space at the hospital. It was full service... in other words all state, local and federal requirements for the building were included with the rent as well as janitorial, utilities, security, hazardous waste disposal.. even light bulbs...
He found office space in the industrial side of town for half the square foot charge and moved.
First, there were Tenant Improvement Costs... he had underestimated the cost of construction and the Landlord credit only covered at 25%...
Then, he spent months on approvals... everything from county hazmat, medical waste, oxygen storage, x-ray, ADA modifications, etc.
Plus, now he has to have a Alarm contract, janitorial, parking lot sweeper, utility bills, etc...
He told me in retrospect... it was a nice idea... but he didn't research well and would have been far better staying put and devoting his time to seeing patients.
most people either do not stay on top of everything that needs to be done with a house until something fails or they spend huge amounts of their own time doing it.
everytime we turned around we were having someone do something for us at the pocono home.
lawn care, snow removal , gutter and leader cleaning , we had to have the deck restained every 3 years from the harsh winters.
we had a hornests nest right before we sold it that had to be removed, 3 dead trees over the 5 years we owned it.
a tree limb fell in an ice storm knocking our service off the building.
preventative bug spraying , replaced a thermostat and a whole host of other things that i wouldnt be doing if i didnt own it. the list goes on and on and quite frankly i cant remember all the things we had done or i took care of . most folks never keep tabs on all these things or their own time invested but the truth is its alot .
a home is an expense, plain and simple . it represents your housing costs. until the day comes you can sell it and dont need further housing the cash register just keeps ringing up those expenses over a lifetime.
sell one home for another? it still all keeps adding up.
in most cases that homes residual value at the end is but a fraction of what was spent over a lifetime for housing you and your family..
just mortgage interest alone requires you to get 2 to 3x the price you paid to clear that hurdle.
renting vs buying are comparing expenses not gains.
its how you offest those expenses if you rent that will alter the equation.
you may spend 25k a year to buy a home when all things are considered , i may spend 16k a year to rent and invest the difference. you may be buying a bigger house and i may rent a smaller apartment keeping my housing costs lower leaving money for other uses and investment..
its not always about taking a house and comparing renting to buying something similiar . it very ofton has to do with just how much someone wants to commit to housing and what they want.
we are very happy in our 2 bedroom 2 bathroom apartment in a high rise .
but we can not compare what we pay in rent to the typical 800k price of a home in our area. we are okay with less home so comparison is meaningless between renting an apartment vs buying a home.
i would rather live in our apartment ,sock away that dough in our investments instead of buying a bigger home.
that neither puts the renter or homeowner at an advantage or a disadvantage. its a question of lifestyle and priorities more then anything else.
Now that we reached the end of the game and will be retiring our investments we accumulated over the decades are spinning off around 6k a month in income even at these levels as well 24k a year in rental profits from investment properties
Renting forever really is not an issue when the rent is offset by the income from the alternatives.
Had we never owned a home and just kept renting our apartment during those years and kept socking away the difference we would have had far more saved then we do.
But the trade off is a 2 bedroom apartment instead of a 3 bedroom house.
The issue is the comparisons people try to make are not apples to apples.
It generally takes money to buy a house so those folks have a choice of buy or rent.
There are many renters who have no money to buy so its not a fair comparison to compare those 2 types of people.
A better comparison is those that can afford to buy or rent and how they compared over time.&
So to anwer the question do renters lose and homeowners win?
No renters can win too. Its all about their alternatives.
Last edited by mathjak107; 12-10-2012 at 01:23 PM..
I guess i have alot to say on that topic because not only have we been homeowners through the years but we are renters as well as a landlord for 25 years.
We live life on all sides so its not surprising i have many views on the subject.
most people either do not stay on top of everything that needs to be done with a house until something fails or they spend huge amounts of their own time doing it.
everytime we turned around we were having someone do something for us at the pocono home.
lawn care, snow removal , gutter and leader cleaning , we had to have the deck restained every 3 years from the harsh winters.
we had a hornests nest right before we sold it that had to be removed, 3 dead trees over the 5 years we owned it.
a tree limb fell in an ice storm knocking our service off the building.
preventative bug spraying , replaced a thermostat and a whole host of other things that i wouldnt be doing if i didnt own it. the list goes on and on and quite frankly i cant remember all the things we had done or i took care of . most folks never keep tabs on all these things or their own time invested but the truth is its alot .
a home is an expense, plain and simple . it represents your housing costs. until the day comes you can sell it and dont need further housing the cash register just keeps ringing up those expenses over a lifetime.
sell one home for another? it still all keeps adding up.
in most cases that homes residual value at the end is but a fraction of what was spent over a lifetime for housing you and your family..
just mortgage interest alone requires you to get 2 to 3x the price you paid to clear that hurdle.
renting vs buying are comparing expenses not gains.
its how you offest those expenses if you rent that will alter the equation.
you may spend 25k a year to buy a home when all things are considered , i may spend 16k a year to rent and invest the difference. you may be buying a bigger house and i may rent a smaller apartment keeping my housing costs lower leaving money for other uses and investment..
its not always about taking a house and comparing renting to buying something similiar . it very ofton has to do with just how much someone wants to commit to housing and what they want.
we are very happy in our 2 bedroom 2 bathroom apartment in a high rise .
but we can not compare what we pay in rent to the typical 800k price of a home in our area. we are okay with less home so comparison is meaningless between renting an apartment vs buying a home.
i would rather live in our apartment ,sock away that dough in our investments instead of buying a bigger home.
that neither puts the renter or homeowner at an advantage or a disadvantage. its a question of lifestyle and priorities more then anything else.
Now that we reached the end of the game and will be retiring our investments we accumulated over the decades are spinning off around 6k a month in income even at these levels as well 24k a year in rental profits from investment properties
Renting forever really is not an issue when the rent is offset by the income from the alternatives.
Had we never owned a home and just kept renting our apartment during those years and kept socking away the difference we would have had far more saved then we do.
But the trade off is a 2 bedroom apartment instead of a 3 bedroom house.
The issue is the comparisons people try to make are not apples to apples.
It generally takes money to buy a house so those folks have a choice of buy or rent.
There are many renters who have no money to buy so its not a fair comparison to compare those 2 types of people.
A better comparison is those that can afford to buy or rent and how they compared over time.&
So to anwer the question do renters lose and homeowners win?
No renters can win too. Its all about their alternatives.
Can involuntary renters - those who don't have the option of buying - win too? I don't see it happening for the people I know and work with.
at the rate im going with hubby, we should be ok. House will be paid off by time i retire, which is in 20 years time and already have 1.5M in cash/assets now at 36 years old. Will have property in another country within 10 years, which can be rented out at a tune of 2-4K a month.
Originally Posted by shaker281 Do you think that is the norm for the majority of Americans? I live on approximately 30% of my gross too. I bring my lunch to work and wear everyday clothes. When I retire, I will save money on gas for my commute and stop funding my 401K. That is the most i can reasonably expect to save. But our situation does not apply to the majority of Americans. I would suspect most people spend everything they earn (maybe save 5-10% annually). After retirement they will save on commuting costs and no longer fund their 401K. What else might they cut out of their budget?.
Quote:
Originally Posted by hartford_renter
Well if they are paying property tax in your example they could save on a mortgage.
Usually a mortgage is about 30% of someone's spending. So drop your 80% down to 50%!
That 30% you are quoting is the maximum recommended and includes property tax and insurance, not what the "usual" mortgage amount is. When I had a mortgage the actual loan portion was only 10% of my gross.
You somehow glossed over the entire point (in red).
What about the added expenses associated with aging and health care"? Just ignoring that too?
It would be completely irresponsible to tell people who barely manage on their current income that they will only need half as much in retirement. Much better to tell them to to save more, just in case.
Last edited by shaker281; 12-11-2012 at 02:56 AM..
thats why there are so many failed retirements. they are planned like the story of the little engine that could. i think i can ... i think i can i think i can...
telling folks they can go an unknown retirement time frame with no inflation protection either is a poor recommendation as well .
a life expectancy chart does not mean you will be dead at a certain age. its only the mid point as to who died and who goes on . a coin toss isnt good odds that both me and my spouse will be gone early on.
there is to much shooting from the hip and not enough working with facts ,real numbers, research and cushions for that what if im wrong.
they dont really understand the numbers behind the basis thats used for planning so they dream up their own and continue to attack that which they dont even understand..
like i said what your income was has no bearing on what you need once your not working. only your expenses will determine that.
i intend to go part time before i actually pull the plug , which salary shall i use?
many folks wind things down over years, which salary do they use?
if your leaving the area and state what good are your old expenses as far as calculating to see it you have enough as a percentage of income.
if its a low cost area maybe you need to achieve way less than 85%.
arguing what percentage of some income someone needs to retire is just plain dumb unless they are making no changes in their lives and will do only free things with all their extra time .. then you can compare .
Last edited by mathjak107; 12-11-2012 at 02:56 AM..
Anyone paying 2% in fees on their nest egg should have the word "sucker" tattooed onto their forehead.
The funny thing is I know several guys who took early retirement and rolled their pension lump sum and 401K balances to an investment firm. They pay $2500 annually, plus fees and expenses. I estimate it has cost them close to $60K so far. I have asked a few of them what they have gotten as an annual rate or return since signing up (14 years ago). They have no idea! These same guys would spend days risking life and limb replacing a roof to save a couple thousand, but refuse to learn how to manage their own money. Perhaps, it is for the best!
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