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There are many other reason to own a home (and other things you do in life) that do not come out financially beneficial.
In Miami, I rent a rather expensive, ocean view condo, it is not at all financially beneficial for me to do, I could rent cheaper on the other side of the same building, or I could rent much, much cheaper away from the ocean and not in a luxury condo, however, the financial issues do not concern me, I work to make money to enjoy things in life, and the condo I rent is one of them.
My dinner at the Chop House the other night was not financially beneficial either, but it tasted good and I was satisfied with it.
If you live your life according to a cost-benefit-analysis, you are going to have a boring life.
Yes OP, you can rent a very nice apartment for less than you can buy a home. Actually you can rent a home of equal quality to a home you would want to buy for less money than it will cost you even after tax benefits and such are factored in. Take the difference and invest it and you come out way ahead.
Quote:
Originally Posted by MrCurmudgeon
That is an incredibly sweeping statement considering you don't even know the home market of the OP.
Sometimes it is cheaper to rent, sometimes it's not. In my local market, it is absolutely cheaper to rent assuming you have the cash on hand needed to buy here. That doesn't automatically mean renting is a bad idea; there are just too many variables.
Agree that is far too sweeping for accuracy. And definitely not true in my market which has the fastest rising rental prices in the entire country. The next door house, similar floor plan but smaller, rents out for $600 a month more than my mortgage plus taxes plus insurance plus HOA. Brand new construction so minimal maintenance costs as this point. And that's before the additional tax benefits.
Speaking as someone in the real estate business specializing in investment property held by investors, starting in 1972 till I finally retired, I am speaking as an insider. As was proven to me in a class put on by the countries best CPA/Tax Attorney years ago, it is always cheaper to rent than to buy a home. The only exception is if you buy just before a big price runup, and sell before the market crashes. And that is a gamble.
The OP is right, in her financial analysis, no matter what some of the posters believe. My wife and I own outright a 5 acre estate with a 3,700 foot luxury home on it, as well as stables and barn. We are at this time planning on selling it, and moving into a luxury 3 bedroom apartment. The money from the sale, will be used to add to our retirement funds. We inherited the home, and would never have bought such a place. We were very happy in a nice new apartment we were living in for several years.
Yes OP, you can rent a very nice apartment for less than you can buy a home. Actually you can rent a home of equal quality to a home you would want to buy for less money than it will cost you even after tax benefits and such are factored in. Take the difference and invest it and you come out way ahead.
I think the "experts" must have left something out. If the houses at 6 Apple Rd. and 8 Apple Rd. are identical and were sold for the same price, on the same day to Miss Scarlett and Colonel Mustard we can assume, for purposes of illustration, that both were mortgaged with the same down payment and same interest rate, taxes, insurance costs and therefore the same monthly payment.
Now assume that Colonel Mustard gets called overseas for a great campaign, leaving his house vacant but his payments unchanged unless his insurance company and mortgagor get wind of his departure and adjust his expenses UPWARD because his is no longer an owner occupied property. Enter stage left, Professor Plum who has recently been awarded a position at the local university and needs a place to live. Colonel Mustard is happy to have the professor as a tenant in his house but, being out of the country and indisposed, must hire a management company to oversee the property, collect the rent, and unclog the toilet at three AM on Thanksgiving weekend. He would also like to make a bit of a profit after being able to account for the wear and tear on his residence.
So, we now have Miss Scarlett living in her own house with her payment relatively fixed and the tax benefits of living in the owner occupied house, which depending on the area may include homestead tax credits. Next door we have Professor Plum paying everything Mustard is carrying, plus the higher mortgage and insurance rates, plus the management company's fees, plus some return on investment for the Colonel who, barring that, would just cut his losses and sell. I would note at this time that Miss Scarlett, as the owner of her residence, has free reign to decorate, paint, landscape or make any other improvements to her heart's content. Professor Plum, on the other hand, must abide with the Colonel's orders regarding same and spend every waking moment looking at shades of gold and brown.
It is clear that the Phd will be paying considerably more for the same space as his owner occupant neighbor, and with less personal satisfaction. It is also clear that I left out one important factor - the lost investment value of Miss Scarlett's down payment and the opportunity that Plum has to recoup some of his deficit with prudent choices. How well he will do is anyone's guess but historically residential real estate has been a surefire source of appreciation. So, if Plum's appreciation of the ten or twenty percent down payment he did not make can outweigh the appreciation Scarlett realizes on her real estate (and $250,000 of her's will be untaxable) over the time they are neighbors enough to offset his higher expenses to cover Mustard's overhead and profit, he wins. Except for the annual tax savings he did not realize for not owning his abode.
This is Macintosh and Macintosh. I've been both an owner and a renter. Renting never paid off for me.
Last edited by kokonutty; 04-19-2015 at 12:15 AM..
When you are single and living in a 1bd/studio, it is fine to keep renting.
a) You wouldn't be itemizing so no tax benefits to buying
b) Maintenance time and hassle is done by the landlord including HVAC, appliances, carpet, lawn care
c) Most houses have two bedrooms and are larger so buying would force you to upgrade
d) Moving can help your career
e) Marriage changes your housing needs
However, more important when you rent to save your extra money and have an IRA.
If you manage to pay off the home then it's just taxes and maintenance. Taxes are deductable on your income tax. Rent all your life and you will have nothing but rent receipts.
just taxes and maintenance after 30 years can be the bulk of your bills in many areas.
when we first bought homes more than 30 years ago we paid 30-35k. the whole mortgage was under 250 bucks,
today taxes are 16k a year. that paid off mortgage is about 1/2 the utilty cost today of that house.
the point is a paid off home may be like peeing in the ocean decades later in the affordability factor.
depending on income level , very few median income home owners can itemize . itemizing is very difficult until you reach the upper incomes.
tax wise the renter has the better deal since they get to fly the empty seats. a homeowner usually pulls money out of piggy to pay mortgage interest and real estate taxes. that money that fills the standard deduction is actually spent.
most renters do not fill the standard deduction ,especially if a couple and they get money back they never spent .
your view can be quite skewed depending on location and income level.
one thing i think is important is that single women consider owning something.
women tend to not be as aggressive as men as a group when it comes to investing.
women tend to earn a bit less , they invest less aggressively , they are generally more giving with what they have and tend to give more to family members.
it all adds up to the fact that when you throw in to the mix women live longer it does not paint a rosey retirement outlook.
they need to do all they can to cut costs down the road .
i know my ex wife would never have been able to make ends meet paying the rents in the area she is in . but she lives in a co-op we had bought as an investment back in the 1980's.
when we bought maintenance was 475.00 more han 30 years ago and we rented it out for 850.00 .
i think with mortgage and maintenance we paid about 1250 a month but with depreciation it was break even.
well today maintenance is 575 , it is paid for and if she had to rent it the apartment is 1650 a month.
that represents a boatload of money she does not need now for housing costs.
cutting costs can be just as good as increasing income and savings to a point.
for some cutting costs may play a giant role in their ability to retire while saving and investing elsewhere may play a much smaller roll.
There are many other reason to own a home (and other things you do in life) that do not come out financially beneficial.
In Miami, I rent a rather expensive, ocean view condo, it is not at all financially beneficial for me to do, I could rent cheaper on the other side of the same building, or I could rent much, much cheaper away from the ocean and not in a luxury condo, however, the financial issues do not concern me, I work to make money to enjoy things in life, and the condo I rent is one of them.
My dinner at the Chop House the other night was not financially beneficial either, but it tasted good and I was satisfied with it.
If you live your life according to a cost-benefit-analysis, you are going to have a boring life.
There are many other reason to own a home (and other things you do in life) that do not come out financially beneficial.
In Miami, I rent a rather expensive, ocean view condo, it is not at all financially beneficial for me to do, I could rent cheaper on the other side of the same building, or I could rent much, much cheaper away from the ocean and not in a luxury condo, however, the financial issues do not concern me, I work to make money to enjoy things in life, and the condo I rent is one of them.
My dinner at the Chop House the other night was not financially beneficial either, but it tasted good and I was satisfied with it.
If you live your life according to a cost-benefit-analysis, you are going to have a boring life.
i have always tried to balance things out by being less frugal but a better investor making better use of what i do have.
pinching pennies can only go so far. a penny saved is a penny earned but it stays a penny forever.
we did lots of things that frugal people would say is blowing money but we more than made it up by growing those pennies.
This topic has been done to death in different variations over and over. Since this thread is specifically related to the FINANCIAL benefit; it narrows down the fringe benefits people can claim on buying vs renting. The only thing that matters is "in which scenario are you likely to come out ahead more often?" OP you have to compare apples to apples. A SF house in the same neighborhood as a 1 br condo will always cost more overall, that's just an obvious fact. So when you use that comparison to run your numbers, all you get is confirmation bias.
In almost all areas of the country you will come out ahead buying an identical property over renting it. The very few financial scenarios where renting is beneficial is:
1. If you have a high chance of being relocated by your job. Or if you plan on relocating for a new job.
2. Your planning on buying a bigger place in the near future (for whatever reason) then the place your renting. So your saving the difference for a down payment for the next few years.
Almost all other reasons for wanting to rent are emotional or irrational. If your talking about pure finances owning a property over renting the same property will almost always yield you a higher networth in the long run. Now when you throw in factors related to personality, emotion, irrationality, making stupid decisions etc. then owning vs. renting is a less clear cut choice.
By the way, I intentionally left out the math of owning vs. renting to keep my post short. I have included it in past posts but some people are just too blind to ever see the simple truth. It's like someone insisting the sky is purple even when its clear that its blue. So, I'm not going to bother with long posts involving math anymore.
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