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The often cited rental problems can almost always be fixed by simply finding a better rental unit. By my experience, the best rentals are often from large managed communities. The complaints I see are usually from people trying to rent homes from individuals, smaller management companies, or from low end apartment complexes.
Rent vs buy is a red herring here I think. Large managed communities of homes don't exist so what it really comes down to is what type of housing do you want. If you like living in large high density buildings, then great rental options exist and renting is a better deal, all things considered. If you like low density housing, then rental options stink and buying is a better deal.
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I rented two apartments over seven years in a very nice apartment complex. I never had any of the problems people cite with rentals. Maintenance went through the web and we could choose when they came and whether they could enter. By corporate policy, they never force a resident to leave and always renew at market rate. And it was dirt cheap, especially for a big modern building like that. We didn't have a lot of space but that was a minor annoyance for me, as the floorplan was optimal. It was awesome and I'd love to go back to something like that.
As for "kids must be raised in proper homes", I have relatives in other countries who are happily raising their children in large condos. Private backyards and fairy tale buildings do not appear to fundamental need for child development. As far as I can tell, the kids seem not only seem to survive in such conditions but even thrive.
I dream of a world where you don't have to buy. In this world, you can always choose to pay a little more for a newer building or less for an older one or with a lower finish out. There's lots of choices so you can pick your style and you don't need to win the IPO lottery to afford something that's not the dominant choice. You can rent as little or as much space as you need and urban planners ensure an adequate supply so that rental costs are close to that of construction (that is, naturally affordable for everyone). You can easily adjust your housing as your needs change. Your mistakes cost you at worst a few thousand dollars and you can move whenever and wherever you want. While it's conceivable that both worlds could exist simultaneously, traditionalists would never tolerate it since it changes the character of their neighborhood. Urbanites don't mind if a few SFHs are scattered about but traditionalists definitely don't want big buildings in their back yards.
I have owned and rented, main reason to buy now - so my family can come as they well please, not buying over 55+ with stupid rules and, will paint and fix it like I want to. Wont have to fight for rights to my deposit... they getting to be real crooks... and know I can leave something of some value to someone.
I can just say that apartments are not only zone areas but that apartments are very changing circumstances from experience. Then leases are really hard to come by in really good areas. Owning above everything else allows you free to control the property in many ways including changes and invest in things not recoverable even if allowed. Rent or lease never goes down and it is lifetime payments which matter to a lot of people.
As long as the FED keeps the rates low the insanity will continue. The stopping point will be the affordability ceiling. Eventually it will get there. People and even investors have a stopping point.
Those underwater homeowners will sell as the prices go back up. Banks are ok with getting another on the payment hook for 15-30 years.
actually best home appreciation has been when mortgage rates were in the historical 6-7% range.
in order to get to those levels it means the economy has to be humming and people working .
that has always put upward pressure on home prices . rising mortgage rates in a decent economy put the old we better buy now before we can afford even less home pressure on prices.
i have always preferred renting and investing elsewhere as a way of growing richer. but now that i have reached retirement i no longer am interested in investing as aggressive as i did. now my benchmark is lower.
that throws a whole different picture into view. now dropping our housing costs vs generating income may be the better deal.
we are getting close to the point that buying a maintaince free co-op may be the better deal long term compared to renting and investing elsewhere.
how much you will continue to allocate to aggressive investing will be the deciding factor from a financial stand point.
had i still had my money tied up in a home i could never taken advantage of some of the investment deals we did..
but the sad fact is most americans are financially ignorant and are poor investors so cutting housing costs by buying may be the only way they can ever retire in comfort.
cutting costs up to a point can work as well as increasing income.
Last edited by mathjak107; 06-20-2014 at 01:52 AM..
In a rental, you pay and pay, but you end up with nothing.
In a purchase, you come out owning the house and building equity. Not only is it your lodging, it's equity to your name. Property really only appreciates over time, so it's a good investment.
i love it when fiolks talk about renters getting nothing.
many investors like myself made enough investing elsewhere and renting to buy many houses .
that is one big false belief about renting.
i took part in some amazing deals just because i rented and had the cash to invest.
sure you have renters that end up with nothing over a life time but you also have lots of very wealthy investors who have no interest in owning and so they choose to invest in much faster growing assets.
RENTING VS BUYING MAY BE MORE LIFE CYCLE RELATED FROM A FINANCIAL POINT
when we are starting out and have little to invest buying may be best. after a few appreciation cycles renting and investing those assets in faster and higher growing assets would be the way to go.
later in life when you are winding things down and no longer aggressively investing ,cutting housing costs by owning again may be the best deal.
what kind of spread can you see? well i bought my house in queens nyc for 169k in 1987 . today it is worth 475k. not bad right?'
the same amount in my fidelity portfolio of nothing special funds would be worth 2.4 million today.
you could subtract out decades of rent , pay the taxes and buy multiple homes today.
actually i sold the house in 2003 for 335k.
rented and invested in a partnership with one of the nations biggest real estate mogul. needless to say renting and investing that house money in the partnership was the best thing i ever did.
there are many many folks who do the same thing , they rent and they invest.
the renter pool is made up of very poor folks and very wealthy folks so it is hard to see from the outside just how well many renters are doing.
Last edited by mathjak107; 06-20-2014 at 05:44 PM..
My biggest reason is that I got tired of my landlady raising my rent 10% every year. The final straw was when I painted all the walls Navaho white, which was the color they were already, and she stopped by one Saturday while I was watching football and commented how nice the place looked.
At the end of the month, she raised my rent another $300 and this was after I had been there for over 9 years.
In the 9 years that I was there, the rent had gone up over $1,000 a month.
It was time for a fixed payment each year after that.
home ownership for the most part works on the expense side of things. hopefully over time it cuts housing expenses as what 9 out of 10 retirees say , is their home allowed them to be able to retire on less income needed.
investing and renting can yield more income but higher housing costs.
either way you can do just fine. eventually it is all about cash flow.
don't forget though a renter who had a 3 bedroom apartment can go to a one bedroom apartment at retirement when the kids are out and see the same improved cash flow.
our situation now that we are retiring is i no longer look at investing as aggressively as i did.
my reference point now is a muni bond.
i can take 300k and buy a co-op here queens ny and give up 14k in income on the money but i can reduce housing costs to about 10-12 a year instead of 18k.
a few more rent increases and it may be worth buying. had i been younger no way would it be worth giving up what i was generating on that money that will now sit in the home.
the fact is most americans suck at investing so for the most part cutting expenses with a home may be the better choice but never assume renting is throwing money away. renting can be the best wealth generator for many folks who can invest wisely elsewhere and have the pucker factor to stay the course.
You gotta live somewhere. I dont see the appeal of being a slave to a landlord for 30 years and still owning $0 in assets. At least after you bought the home, you can sell it for hundreds of thousands. If you rented for that same time period you own nothing. $0.
Also, as a renter your paying market prices. Lets say you rented 10 years ago for $400 month and now that same rent today is $1500 month. If you had a mortgage, you would still be paying $400 month, its fixed, never changes.
Interesting. I didn't know your mortgage sticks at the same price forever. Jumping in in 2017, if you're advising a upper 20s-mid30s person just curious:
1. In a big city what's one way to go about it? Should they apply the same idea that a mortgage will always be cheaper? I'm talking about your NYC, SFs and Washington DCs. If the apartment some of my friends are renting would be cheaper as a mortgage that's definitely a game changer for many of us.
2. What's the consensus on down payments? Sometimes I see real estate agents telling older renters to "stop throwing away money", basically laughing at them, and just buy whatever they can even at 0-3% down. Is 0-3% down make a significant difference on mortgage payments vs rent? Are mortgages in big cities even available for those without significant cash reserves?
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