Opting out of the American Dream - and debt. (funds, increase, lease)
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Sure, over a long enough period of time, of course you'll come out ahead buying. But it's not always such a cut and dry case as you present, especially for your 2 year example.
Let's assume you are comparing two identical places where the rent and the PITI + HOA + maintenance + break/fix, etc. costs are about the same.
Those pesky things called closing costs will eat into a short time frame of buying and selling. Depending on where you live, they can be quite a lot, particularly the transfer taxes. Realtor might be 5-6% and then you need to account for everything you paid on the buying end. You are banking (literally) on your house appreciating at least 8% in 2 years.
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Originally Posted by golfgal
You still won't come off any worse than renting, you should carry renter's insurance even if you rent and who pays a HOA??? Not us. With rent all you are doing is giving money to your landlord with no chance of breaking even or better.
The case for home ownership vs. renting is definitely not so cut and dry as most people think. There are a lot of factors one needs to consider. I think the financially disciplined renter will actually come out ahead of the home owner in the long term in most cases. It is a mistake to assume that renting is throwing money away. There are opportunity costs for both renting and home ownership. 'rent' is not the four-letter word we've been brainwashed into believing.
The case for home ownership vs. renting is definitely not so cut and dry as most people think. There are a lot of factors one needs to consider. I think the financially disciplined renter will actually come out ahead of the home owner in the long term in most cases. It is a mistake to assume that renting is throwing money away. There are opportunity costs for both renting and home ownership. 'rent' is not the four-letter word we've been brainwashed into believing.
I disagree.
I own. I rent it out. Puts a little under a grand in my pocket each month, and pays all its utilities, taxes, the 15 year mortgage etc. Plus, I still have the master bedroom and bathroom whenever I visit.
The case for home ownership vs. renting is definitely not so cut and dry as most people think. There are a lot of factors one needs to consider. I think the financially disciplined renter will actually come out ahead of the home owner in the long term in most cases. It is a mistake to assume that renting is throwing money away. There are opportunity costs for both renting and home ownership. 'rent' is not the four-letter word we've been brainwashed into believing.
If your comparing owning a house to renting a one bedroom apartment... sure. but that's not equitable.
Personally, I get rather tired of all of the generalizations as to whether it is better to buy a home or to rent. I think that it all depends on the individual circumstances.
I lived for several years with an elderly man for $100/mo and about four hours of work a month keeping up the house and making sure that there were no 'I have fallen and I can't get up" moments.
In another location, I lived in a 2 BR bungalow for $350/ mo. I was surprised at the low rent but the elderly lady needed the money to supplement her SS and pension and would rather have stable tenants than have a lot of turnover.
The last time I looked at the SoCal market for a possible relocation, I saw several homes that were in the $500k range but renting for $1300.
Sometimes renting is best, sometimes buying is best.
Yes! Where I live, even if we were given a house, the property taxes and utilities alone would still be more than our rent.
But you also have to factor the interest accrued on the mortgage. If I were to mortgage 250k (which doesn't get you much around here), by the end of a 30 year mortgage I will have paid well over 400k for principal and interest. And then there's property taxes: in a so-so district I'd probably pay about 8k in taxes this year... but those taxes go up 1-2% every year. Instead, I can pay a modest rent for 30 years, and take the money I'm not spending on the cost of ownership, save and/or invest it.
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Originally Posted by golfgal
Renting is always going to be more expensive over time. Even with the costs of homeownership, you get nothing when you walk away from an apartment or rental. If you buy a house, live there for 60 years, you are going to net out FAR more than you ever paid into the house over those 60 years, 30 of which you pay no house payment (or less than 30 even). You will always pay rent. It's really simple math. Even if you buy a house, live there for 2 years, sell it for what you paid for the house, you break even vs rent where you sunk $1000/month or whatever into rent, $24,000 over 2 years, to walk away with nothing. Put that same $1000/month into a house that you paid $200,000 for, sell it for $224,000 net and you walk away having 'paid' nothing. That's a simple example. The past 5 years is not a typical housing market and people forget that.
I own a property and I rent. I would not purchase a property unless you plan on hanging on to it for at least 10 years. Owning a home is a lot of work and the maintenance is expensive. I like being able to call maintenance to address repairs and not having to cut a check.
I do not think purchasing a property will benefit you now. People usually buy homes to plant roots. You are still in the exploration phase. I would focus on eliminating all of your debt and saving. Good luck!
The case for home ownership vs. renting is definitely not so cut and dry as most people think. There are a lot of factors one needs to consider. I think the financially disciplined renter will actually come out ahead of the home owner in the long term in most cases. It is a mistake to assume that renting is throwing money away. There are opportunity costs for both renting and home ownership. 'rent' is not the four-letter word we've been brainwashed into believing.
It pretty much is cut and dried. Given that the op is talking long-term, never buying, rent is throwing money away and no, they will never come out ahead. No one said rent was a 4 letter word but the OP asked about the financial end of never owning a house and fact is, renting will always be more long term.
It pretty much is cut and dried. Given that the op is talking long-term, never buying, rent is throwing money away and no, they will never come out ahead. No one said rent was a 4 letter word but the OP asked about the financial end of never owning a house and fact is, renting will always be more long term.
This just isn't true. If you factor in ALL the costs of homeownership to include interest on mortgage, maintenence, insurance, taxes, etc., it is a huge opportunity cost to own a home. A financially disciplined renter could very well come out ahead in the long run by investing that money in other sectors.
In addition, renting offers far greater mobility--which in today's economy is more important than ever--a renter is much more easily able to change cities, states, even countries in order to pursue better job opportunities.
This isn't a one-size-fits-all issue. There are numerous factors that come into play, so for some people, home ownership makes better economic sense, for others, renting does.
This just isn't true. If you factor in ALL the costs of homeownership to include interest on mortgage, maintenence, insurance, taxes, etc., it is a huge opportunity cost to own a home. A financially disciplined renter could very well come out ahead in the long run by investing that money in other sectors.
In addition, renting offers far greater mobility--which in today's economy is more important than ever--a renter is much more easily able to change cities, states, even countries in order to pursue better job opportunities.
This isn't a one-size-fits-all issue. There are numerous factors that come into play, so for some people, home ownership makes better economic sense, for others, renting does.
This si something I need explained:
Baring rent controled NYC, and the occasional, temporary place where properties are more avalable than renters, and therefore potentially cheaper... WHAT MONEY!
Owner: Pays a monthly amount (Usually cheaper than rent... if it's not he screwed up and should have rented for a short time till he finds the right deal/financial climate.
10, 15, 30 years later... his payments stop. There are SOME expenses, but they are minimal it it's built well, and not abandoned repair, and his payments did not go up like rent did. Also, taxes are little if (Like me) he chose a low tax area... and he has equity.
The renter pays money every month. And every month and every month. he does not get to stop after 10, 15, 20 years.... but keeps paying. there's no 'extra' money he has month after month to invest. (In most situations) Heck, just knowing people, seeing what they pay, he's usually MORE out of pocket.
So where the homeowner pays a number based on the year he bought... he MAY have extra, and he WILL when it's paid off... WHAT MONEY the renter could invest?
He has to pay every month to stay?
Also, taxes are little if (Like me) he chose a low tax area... and he has equity.
This is a big problem though...most of the areas that are highly desirable (i.e. beach living near San Diego) have very high property taxes. Also, I would still be stuck in one area of the country, when having the flexibility to up and move anywhere within a short time is usually not doable when you own property. I have spent a good portion of my life making decisions that make economic/financial sense...and now I feel I played it too safe.
I am 33 and bored in the area I am located in. In order to move, now I have to sell my home, and am going to be very gun-shy about purchasing another one.
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