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If you have enough income/investments that it doesn't matter to you that you're throwing your money away every month, then keep renting.......... You are paying for someone else's investment every month.......... Stop throwing your money away every month!
Location: St Thomas, USVI - Seattle, WA - Gulf Coast, TX
811 posts, read 1,147,408 times
Reputation: 2322
No, I'm not a real estate agent. I've just been really happy with the way investing in real estate has served me. I totally agree with the previous poster who countered me that there are other great ways to invest, as well. Absolutely! Of course your potential for higher returns is much greater with the stock market or something else. Real Estate is a slow-and-steady investment, certainly not something to accomplish in a short term. It's illogical to think that real estate costs will increase faster than inflation, except in rare circumstances. That's the kind of thinking that caused the last crash...
I didn't choose my words very well in my previous post, but my point in encouragement of buying real estate is that you are either paying for someone else's investment in the place where you live, or you are paying into your own investment. I'd rather pay into my own investment instead of dispose of my money as rent.
I know that I've also been really lucky (or careful) to choose low maintenance homes that did not become money pits or headaches. I'm sure that makes a difference.
My personal experience with each purchase I've made has been that my monthly mortgage payment has been lower than my rent would be on the same/a similar property (and this is accounting for what needs to be saved for future maintenance, which now means I make a monthly profit as a landlord). Twice that has been my main motivation to buy: freeing up more cash each month for other investments or to just plain enjoy myself more. When I combine that experience with the tax deductions (no tax deductions for rent!) and equity that I have and continue to put away (again I've been lucky/very thoughtful about my investments, so today their values exceed even their high points of 2007. I understand that this hasn't happened everywhere in the country.), investing in real estate has been a HUGE win for me. I wanted to send that encouragement to cut through all of the horror stories.
Statistically, still today, homeownership is a better financial decision than renting. While there certainly are other great ways to invest, the statistics support that homeowners simply end up having more wealth (and increasing it faster) than all-things-equal renters. Forbes is a great source if the OP wants to do a little investigating and look at recent studies. There are some great articles and reports out there that carefully look into both sides of this fence, agreeing that there are more lucrative investments than real estate, but still coming to the conclusion that owning (depending on the area, interest rates, housing prices, and the buyer's current financial situation) is still a huge win over renting.
Personally, I've enjoyed the pride, freedom and financial success of home ownership. That's my experience. In my current travels, my husband and I rent a little temporary place and I CAN'T WAIT to have the freedom of my very own space to do with as I wish again. All the rest aside, that's the opinion and feelings about being a renter vs owner that OP was after, so there's mine!
Last edited by IslandCityGirl; 05-14-2015 at 10:23 AM..
There's so many factors for each person's financial situation and needs that it's impossible to give any blanket answers.
I've been a renter and a property owner in my life.
For me, home/property ownership has been an investment vehicle that also satisfied my need for a place to live.
All of my properties were bought "right" and have been of significant financial benefit. Suffice to say that flipping homes I've owned has paid off very well.
Now that I'm at a point in my life where wealth accumulation is no longer a need for retirement, I'm selling off my real estate portfolio for more passive commercial property real estate investments. I anticipate that someday I'll be down to my residential ranch/farm property and sell that with a residential lease-back arrangement for my retirement years. I'll reap the appreciated value of the acreage and still have use of the house/barns/workshops/outbuildings/storage areas for my purposes while investing the money from the acreage sale for passive monthly income. With that will come the freedom to travel, stay for months in other locales with sufficient monthly income to stay where we want when we want.
Our long term plan is to stay several months in Vail, some months in upper Wisconsin, some months on a boat in the Pacific NW, and some months at our ranch/farm. Having the flexibility to lease/charter as we see fit each year is achieved by not having the responsibilities of ownership anymore.
But we got to this point by owning appreciating assets in the form of our own house/properties for many decades. We couldn't have done this well by renting in all those years. But again, that's our situation ... others may have been able to rent as needed and invest in other venues to achieve their goals. We weren't able to invest in other venues very well, lost a lot of money in the stock market ... even at times when a dart thrown at the stock market report page in the newspaper probably would have selected a good investment. Suffice to say that I was given less than good advice a number of times by pro consultants/brokers through the years and I didn't learn how to avoid those losses for a long time. Stuck to what I knew best, real estate ownership has worked for me. YMMV. If you can find better rates of return in other venues while saving housing costs on rent, so be it.
No, I'm not a real estate agent. I've just been really happy with the way investing in real estate has served me. I totally agree with the previous poster who countered me that there are other great ways to invest, as well. Absolutely! Of course your potential for higher returns is much greater with the stock market or something else. Real Estate is a slow-and-steady investment, certainly not something to accomplish in a short term. It's illogical to think that real estate costs will increase faster than inflation, except in rare circumstances. That's the kind of thinking that caused the last crash...
I didn't choose my words very well in my previous post, but my point in encouragement of buying real estate is that you are either paying for someone else's investment in the place where you live, or you are paying into your own investment. I'd rather pay into my own investment instead of dispose of my money as rent.
I know that I've also been really lucky (or careful) to choose low maintenance homes that did not become money pits or headaches. I'm sure that makes a difference.
My personal experience with each purchase I've made has been that my monthly mortgage payment has been lower than my rent would be on the same/a similar property (and this is accounting for what needs to be saved for future maintenance, which now means I make a monthly profit as a landlord). Twice that has been my main motivation to buy: freeing up more cash each month for other investments or to just plain enjoy myself more. When I combine that experience with the tax deductions (no tax deductions for rent!) and equity that I have and continue to put away (again I've been lucky/very thoughtful about my investments, so today their values exceed even their high points of 2007. I understand that this hasn't happened everywhere in the country.), investing in real estate has been a HUGE win for me. I wanted to send that encouragement to cut through all of the horror stories.
Statistically, still today, homeownership is a better financial decision than renting. While there certainly are other great ways to invest, the statistics support that homeowners simply end up having more wealth (and increasing it faster) than all-things-equal renters. Forbes is a great source if the OP wants to do a little investigating and look at recent studies. There are some great articles and reports out there that carefully look into both sides of this fence, agreeing that there are more lucrative investments than real estate, but still coming to the conclusion that owning (depending on the area, interest rates, housing prices, and the buyer's current financial situation) is still a huge win over renting.
Personally, I've enjoyed the pride, freedom and financial success of home ownership. That's my experience. In my current travels, my husband and I rent a little temporary place and I CAN'T WAIT to have the freedom of my very own space to do with as I wish again. All the rest aside, that's the opinion and feelings about being a renter vs owner that OP was after, so there's mine!
you have it backwards , of course home owners are a wealthier group , that is why they can afford to be homeowners.
renters are a mixed bag ranging from very wealthy to very poor.
homeowners are wealthier and that is why they own homes , not that owning homes made them wealthier.
i made lots of money in investment real estate so i do like real estate . but i liked renting too . it let me take that money that would be tied up in a relatively small growth investment and deploy that money in much better investments.
the house we lived in back in 1987 cost us 169k and today about 500k .
the same 169k in a diversified mix of funds like the fidelity insight growth model i followed ,which is nothing special fidelity funds is worth 4 million today. even just an index fund would be 3.4 million.
that would be enough to pay decades of rent , taxes and still buy 2 or 3 homes.
there are two sides to an equation , there is the income side and the expense side.
you are looking only at the expense side when you say renting is more than buying . the other side of the coin is what the money tied up in the house is not doing and that is a big factor.
yeah i get it , not everyone has the discipline to invest or pucker factor to stay the course , or even have the resources to invest as many renters who should have had money to invest just rent a more expensive apartment .
so general statements do not hold , as each case will be different..
now that i am retiring we may buy a co-op here in nyc since long term the co-op should cost less than renting . BUT , we are only doing it because i am no longer interested in being the aggressive investor i was so the equation shifts in favor of buying eventually.
but even so , if we buy we will give up 12k conservatively on the money we will buy with. our yearly housing costs will fall by 6k. so renting is still the better deal when both sides of the coin are looked at. you are only looking at the cost fallng on housing and not the income side in your view above.
but i am hoping down the road that renting would go up more than our ownership costs do . usually rent ends up being more by a lot. but we still have to account for the fact we will see a 6k loss of income in our owning costs if we buy .
we owned a 2nd home in the pocono's in pa. while it cost us 10k a year to keep the house going the reality was even if we bought a muni bond with the money tied up in the house we were giving up another 10k a year in income so our actual cost was not 10k but that house cost us 20k a year .
we could have stayed at the hottest resort every time we went and not hit 20k in a year so eventually we sold it.
Last edited by mathjak107; 05-15-2015 at 03:39 AM..
My parents ( depression era kids) came from families who lost their homes. My father's family lived in their car for awhile. Both parents were ownership adverse. We rented and moved every single year , chasing affordable rent. At the end of a lifetime of renting they had shoeboxes of receipts and cancelled checks.
If the goal is ROI, the stock market has historically outperformed housing, over time. Unfortunately, we cannot live in a stock portfolio.
My personal goal has always been to live " rent free". Thus far, I have managed to do so and then some. I take the long view.
Renting versus owning is a personal decision based on many factors. I bought 30 and sold 29 homes before becoming a broker. My job is to help my clients achieve their real estate objectives. I am not a financial advisor.
Location: St Thomas, USVI - Seattle, WA - Gulf Coast, TX
811 posts, read 1,147,408 times
Reputation: 2322
Quote:
Originally Posted by mathjak107
you have it backwards , of course home owners are a wealthier group , that is why they can afford to be homeowners.
renters are a mixed bag ranging from very wealthy to very poor.
homeowners are wealthier and that is why they own homes , not that owning homes made them wealthier.
i made lots of money in investment real estate so i do like real estate . but i liked renting too . it let me take that money that would be tied up in a relatively small growth investment and deploy that money in much better investments.
the house we lived in back in 1987 cost us 169k and today about 500k .
the same 169k in a diversified mix of funds like the fidelity insight growth model i followed ,which is nothing special fidelity funds is worth 4 million today. even just an index fund would be 3.4 million.
that would be enough to pay decades of rent , taxes and still buy 2 or 3 homes.
there are two sides to an equation , there is the income side and the expense side.
you are looking only at the expense side when you say renting is more than buying . the other side of the coin is what the money tied up in the house is not doing and that is a big factor.
yeah i get it , not everyone has the discipline to invest or pucker factor to stay the course , or even have the resources to invest as many renters who should have had money to invest just rent a more expensive apartment .
so general statements do not hold , as each case will be different..
now that i am retiring we may buy a co-op here in nyc since long term the co-op should cost less than renting . BUT , we are only doing it because i am no longer interested in being the aggressive investor i was so the equation shifts in favor of buying eventually.
but even so , if we buy we will give up 12k conservatively on the money we will buy with. our yearly housing costs will fall by 6k. so renting is still the better deal when both sides of the coin are looked at. you are only looking at the cost fallng on housing and not the income side in your view above.
but i am hoping down the road that renting would go up more than our ownership costs do . usually rent ends up being more by a lot. but we still have to account for the fact we will see a 6k loss of income in our owning costs if we buy .
we owned a 2nd home in the pocono's in pa. while it cost us 10k a year to keep the house going the reality was even if we bought a muni bond with the money tied up in the house we were giving up another 10k a year in income so our actual cost was not 10k but that house cost us 20k a year .
we could have stayed at the hottest resort every time we went and not hit 20k in a year so eventually we sold it.
So you made money by investing in real estate, but you have to be wealthy to invest in real estate? I'm confused.
For me, real estate has been a primary source of successful investing. Maybe that makes me a dummy and I could be making more money in other ways. I should look into that. I was a 21-yr-old kid with very little cash, finishing up college (which was also an expense) as a grocery store employee when an opportunity came to me to buy my first house. Not wealthy at all, trust me. I LOVED living in and owning that house, and now I love the monthly income it brings me as well as the equity it holds and continues to build for my future. My husband bought his first house on a college stipend salary (nothing to brag about, trust me). Also a great investment, with no initial wealth to speak of going into it. Both situations built equity and saved on monthly bills with very little initial investment. Obviously we're not talking about buying mansions here. My guess is that the OP, as a single individual, is not looking to invest in a mansion either, meaning the initial cash investment will be far less than the long term gain in equity and [hopefully] monthly savings. We don't know though! All we can do is share our personal experiences as reference points. Even today, you can still get good loans with as little as 5% down (not tying up a lot of cash). Interest rates are also still fantastic. Especially if this additionally saves you on monthly bills, it is really not tying up much $ when you look at the gain, long term. However you swing it, month to month, money is either paying into someone else's investment (rent) or your own (mortgage). However big or small the initial investment is (which of course should be considered as a major factor!), that fact does not change.
Some harder numbers for the OP that can be found in Forbes, Money Magazine, and the like: Buying is smarter than renting investment-wise UNLESS: you plan to be in/own the property for less than 3-5 years, housing prices in the area are dropping or appear to be at the top of the market for one reason or another (short-lived industry boom, etc. - DEFINITELY researching your market's stability is a big, big deal), in your area you will pay at least 35% less in rent on a monthly basis than for your house (including mortgage, taxes, and any other fees like HOA). Apparently the "official" math is even more lenient than mine regarding monthly expenses, when thinking about the investment in longer terms! Even I would have thought that far less than 35% in monthly savings would be a huge reason to rent!
I'm not looking for an argument. Your argument is correct: There are lots of different ways to invest. There are other places to grow your money and definitely faster, better ways than real estate. I'm simply sharing what has been a rewarding, successful venture for me. One that has not held up any substantial amounts of cash that could or should have been invested elsewhere. The point that I'll take from you is now that I HAVE gained wealth in real estate WITHOUT having wealth initially, perhaps I should now look into selling and taking that money somewhere else to invest at higher returns. Had I never invested in the real estate, I'm apparently not smart enough to have likely taken that meager initial cash investment and invested it more intelligently elsewhere. So I'm glad I did what I did.
The OP is looking for opinions and experiences from people who have rented and owned. I've experienced both situations as a single person, as the OP is, and I'm doing both right now. I enjoy being a homeowner for my aforementioned reasons: freedom to do as I wish with the property, the satisfaction that it's "mine", and the money it has and does make me, both in equity and monthly cash in-hand. My experience has also been that owning a home is not something that has "tied me down." This is something that I wanted to share with the OP, as they expressed some concern about that possibility. Now the OP can also see the "official" recommendation is that a 3-5 year commitment is all that is required to make buying a wise choice in an average, stable market. As a renter, where I sit at this moment, I dislike having to defer to my landlord to fix every little thing or change any little thing, I dislike feeling like I'm in someone else's place, and I dislike my monthly rent going up in smoke. That's how it is for me, personally. Others will feel differently, of course.
That's all I've got! I'm happy for you that you've found success on a different path, truly mathjak! There are lots of successful paths out there; that doesn't mean that my logic is off.
if there are many successful paths then yes it does mean your logic for making a general statement is off. first off are you talking about investment properties or the home you live in ? they are not the same thing.
i made a lot of money in investment real estate , but that is not the same thing as a home you consume to live in.
i was not wealthy , i borrowed money to buy real estate to live in and when i had enough equity to invest we sold ,rented and invested elsewhere surpassing anything ownership of a home instead of renting would have done..
i would never say one is better than the other . i am much to smart for that . not everyone can be an investor and home ownership may be the consolation prize for them. but you insist ownership is the better choice and while that may be true for some it is not a true statement as a blanket statement.
in fact a family renting a 3 bedroom apartment who at retirement goes to a one bedroom since the kids are out likely sees better cash flow then you do owning a house with all the maintenance , taxes, insurance , renovations ,repairs and utility costs so there is another twist.
the improved cash flow in that example can surpass most home ownership in a given area.
as i said there are two parts to evaluate , the expense side of things where home ownership resides if you live in it and the income side where investments can be made with the money not tied up in the house.
some may only be able to do one side but that does not change the equation if you are trying to make an evaluation it is all about costs vs income or the potential income. .
ownership may give you lower housing costs but less income generation potential since eventually that money is in the house . renting can have higher costs but higher income potential.
different stages of life can produce different results at different times.
in the beginning someone may have no money to invest so they buy a home instead , my daughter did that since renting in our area bay terrace was as much as buying in howard beach another area so they just bought .. after a bunch of years of appreciation , then selling and investing that dough elsewhere may be best. later on in life when you are not as aggressive buying again may be better.
it may be a lifecycle thing financially too.
Last edited by mathjak107; 05-15-2015 at 12:22 PM..
I will never own taxhog again. Ownership implies taxation/seizure/insurance/ to protect the owner from potential insurgents. Never.again.
I owned a farmette in Texas. The property was homesteaded. A new law was passed by the state legislature in approximately yr. 2000 allowing small self-incorporated municipalities to forcibly annex adjacent property if certain criteria were present. Mine was, and it was forcibly annexed against my will and without my consent. The city then told me what I could do with my land, how I could live there, sent me a bill, and raised the taxes sky high. I sold it.
Then I moved to a different state. I bought a bigger place zoned agricultural, with a 100 year old house and barn and a lovely water well, and set up for happily ever after. Until the county planning and zoning commission rezoned my property without my consent and against my will -again- to some land use they made up, called 'urban reserve'. After that they defined what I could do with my property and how I could use it, raised the taxes sky high, and sent me a bill. This state had no homestead law *protections*. I sold it months later. Buh-bye money pit.
Now I live in a cheap schitzy apartment I do not own. I have no homeowners or renter insurance. If the landlord raises the rent, I'll move. I own nothing that needs to be insured, taxed, or can be seized or rezoned by money hungry government. I'm done allowing my property to be confiscated by these thieving bureaucrats.
We.own.nothing. Not even a car - no car insurance either. Done.
Ownership in America = liability. I own nothing. Tax that azzhats.
I find this inspiring for some reason.
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