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Personally, I don't think real estate is a good investment.
I've bought and sold 3 houses so far and barely broke even on all three of them (economically depressed locations). Property taxes and utilities were high in the north. When I consider the time and money spent on maintaining those houses, there is no way we did not lose money on those transactions.
Did you make any bad decisions on those purchases? Pay to much for the house? Put too much money INTO the house? Buy in the wrong neighborhood? Sell in too short a time?
Even without those factors, sure, a person CAN lose money on a house. But if a person makes bad decisions that person sure hurts their own chances of breaking even, let alone making money.
This past recession sure taught a lot of people about how and when NOT to buy real estate. The considerations about buying real estate always have been the same. But people got spoiled about decades of 'good times' and rolled the dice when they shouldn't have.
For example It NEVER did make sense to buy a house if you were only going to be there 3-5 years. BUT, look how many military people will buy houses, KNOWING they're going to move in 2-3 years. (Maybe they get some gov bene to help them if they lose money on it , or help them sell it. Even still I wouldn't buy for that short a time). Non-mil people do it too....but, uh not anymore!
Look at how many people ABSOLUTELY DO NOT figure in ownership costs BESIDES mortgage payments and utilities. The MIGHT add in a guess about maintenance costs.
IMO people buy houses much too lightly. I rented until I was 43. I drove my friends CRAZY with the YEARS of back-and forth should I buy or stay in an apartment.
My rent is $2,000/month in Chicago, but to buy I would spend more than $2,000/month. The closest comparable condo is listed between $400K-$500K.
$400,000 @ 4% = $2387.Month
($400,000 * 1.5%)/12 = $500/month
Hoa fees = Let's assume at least $300/month
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$1187 more each month so I can say I "own". There are alot of reasons to buy, but the financials aren't usually a reason. Incidentally, I am looking to buy property, but not in Chicago and for other reasons than purely financial.
Your numbers do not look that bad , I live at the end of the earth in upper Michigan and while I was building my house ( 2 years) I rented a new townhouse 2 bedroom w/loft , my rent was 2100.00 a month.
As everyone else said, it depends on your circumstance. For me, the biggest is how long will you live there. You have to remember that every time you move from one owned house to another owned house, you're going to pay around 10% of the value of the houses in closing costs and commissions (less when you first buy, but of course you have to deal with the down payment then), plus moving expenses. If your house is $200k, that's $20k-(ish) in expenses every time you buy/sell. So you have to stay put for quite a while to make that worthwhile. If you are going to move more often than 5 years (10 is better), you are better off just renting.
In my personal case, I pay less for the home I own than I would pay in rent. Monthly payment is $750. Similar houses to mine in my neighborhood currently rent for around $975 (I know because I work for the company that owns/manages them and collects that rent.) So that is a huge savings, even once you average in some maintenance. My taxes/insurance are only around $1500/year (and are included in that $750 payment). So once my house pays off, even if my taxes/insurance triple from where they are now, I'll still only be paying $375 a month, while my rent would then likely be $1500-2000 a month. Oh, and I'll have that mortgage paid off by the time I'm 45, at the latest. I've lived here for 10 years already and plan to stay a lot longer. So it was an EXCELLENT and easy decision for me.
As for maintenance, my house was new when I moved in, so my average maintenance costs so far have been very low (I'd say less than $25 a month average). But again, even if that were to go up in the future to an average of $300/month, I'd still be paying less than half what rent would cost after the mortgage is paid off.
Utilities in my area are no different for owner/tenant. Owners pay power, gas, sewer, water and trash. Tenants pay the same. So that isn't a factor here. Unless you rent an apartment, but that would be apples and oranges.
Rental property can also be worth it, but is better if you have several, so the income/expenses even out more. My grandma owned 8 rental properties outright for the last decade of her life, and her rent income, after maintenance expenses, paid for her long term care center, with money left over to help with other expenses. When she died, her net worth was actually higher than it had been a decade earlier. I've actually lost track of the number of rentals my parents own. My best guess is around 20.
Yes, the right of every individual to own property has been the centerpiece of societies' evolution out of despotism and Monarchy. Millions have died to protect this right, so you are wise to take advantage of it.
After owning homes for most of our lives, we decided that the downside of home maintenance, repair, upkeep, etc. was not something we enjoyed. YET, we still wanted the advantages of owning: investment appreciation, privacy, sense of ownership, etc. ... without the downsides of renting (less influence over property, neighbors, location, environment).
The solution for us was to move-into upscale, beach-side condos. The 'upscale' part is important, because they are much better built (quiet, privacy) and the 'neighbors' generally have a similar interest in maintaining a higher value in the property, --- and one can achieve a far better location than with a private home (oceanfront cost). PLUS, someone else takes care of all the repairs, maintenance, etc. - Also, if renters are allowed, there are built-in limitations and protections for other owners and residents.
After 12-years in condos, I still see far more upsides than downsides ... and don't expect we will ever go back to a single-family home. We still have little interest in renting vs owning.
I can see doing what you did,. I can see a nice high rise condo with amenities, no maintaince issues .
It wouldn't be a financial choice if we did that but a lifestyle one.
Yes, the right of every individual to own property has been the centerpiece of societies' evolution out of despotism and Monarchy. Millions have died to protect this right, so you are wise to take advantage of it.
You own nothing as long as the government, and some HOA's (if applicable) have the power to seize it from you.
You own nothing as long as the government, and some HOA's (if applicable) have the power to seize it from you.
That's why maybe the best way to go is your home on wheels. Don't like bring told what todo? And how much you pay for what you get ? ...hitch up your trailer an leave , your choice , sounds good doesn't it ?
they can repo it as well as take your drivers license.
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Let's assume at least $300/month
There are alot of reasons to buy, but the financials aren't usually a reason. Incidentally, I am looking to buy property, but not in Chicago and for other reasons than purely financial.
