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the big cost of buying is not the daily expenses of keeping it going , it is the lost opportunity cost of the money eventually tied up in the house .
if i still owned a home i could not have had the money to invest in far more lucrative real estate deals as an investor .
today i can buy multiple homes with the money i earned on the money not tied up in the house .
there are no general statements here as location , ability as an investor and even luck will play out differently for all of us .
but to think renting is losing or not the better deal for some is nonsense .
Absolutely. In our case, home ownership is probably what saved us from having no money for retirement.
We bought with a 15% carry back mortgage (owner carried a second for us) so we bought for 5% down. We used an adjustable rate mortgage. That allowed to get into a house for a little more than what we rented an apartment. Plus property taxes and insurance.
We have Prop 13, so our taxes are stable, they go up about 1.5% a year. We didn't use our house like an ATM, but we did some minor remodeling, and rolled it back into the mortgage when we refi-ed. And we almost always have had an adjustable rate mortgage. We've refi-ed a number of times, but we've had several runs with falling interest rates, so our adjustables adjusted DOWN.
I think we're at the bottom of the rate -- so we might be ready to refi again. I'm keeping my eye on the one year LIBOR....
At this point, our mortgage payment is less than 400 bucks a month. Throughout our mortgages, since we didn't take money out, live a lifestyle on the house... our mortgage payment has stayed low.
Which allowed us to stuff as much as we could away into investments, without denting the lifestyle. Although our lifestyle is somewhat frugal.
We didn't have a choice when we worked for other people, and we had to save for retirement then, so when we opened our business and started making real money... made it all the easier to save and save.
Out here, rents are wildly high and seem to be only going higher....so owning here made sense for us...BUT not having children also meant we could by in a marginal area.... that helped keep costs down
Those property taxes that go up every year are also paid by the landlord on his rental property, and those costs, like ALL costs of maintaining the building, are passed along to tenants!
Unless you think your going to die at age 35, why would you want to have a house payment in perpetuity. If my home is paid off, should I sell it and rent ? Do you rent (lease) a car for 10 years or more ?
It was easier years ago when buying this—my first home—to put a little bit more every month towards the principal, but by making those small extra payments directly to principal (I wrote on the check that the money must go to prinicpal), I shortened my mortgage significantly and paid it off 12 years early.
I advocate 30-yr. mortgages over 15-years, because one always has the option to do what I did, but the reverse is not true.
I was told by our Realtor that we'd save money on taxes and utilities by buying a house. This has not been true for us. At this point, owning a house is definitely more expensive than renting. The main compensation is privacy, though. In an apartment, we never knew when the apartment staff would come into the apartment when we weren't home. Small things disappeared often. Now, we know nobody else will be coming into the house. That's actually worth the extra money, to me. That and having a garage to keep bicycles in.
It was easier years ago when buying this—my first home—to put a little bit more every month towards the principal, but by making those small extra payments directly to principal (I wrote on the check that the money must go to prinicpal), I shortened my mortgage significantly and paid it off 12 years early.
I advocate 30-yr. mortgages over 15-years, because one always has the option to do what I did, but the reverse is not true.
This is what I did - I possibly could have made the 15 year payment, but it would have been tight. I pay extra every month but helpful to know I don't have to if I need the extra cash flow. For now, I'm track to pay off about 8 years early but I expect to increase the amount I pay as my income goes up while my mortgage remains stable.
Damn straight it does. And that's why you will have EQUITY one day, which is what renters will never, ever, never have.
While I agree that there absolutely is a lost opportunity cost to have money locked up in real estate, I also think there are probably few of us as sophisticated and knowledgeable about investing as mathjak107 is. For most of us other than a 401 retirement account our primary home is often our largest investment. In many markets that investment (if you even want to call it that) yields only modest appreciation, in others none at all or even a loss depending on when you sell, but in a few markets you can achieve some pretty substantial yields (potential) just by owning.
In our case, while I would like to declare it was a sophisticated level of knowledge and reading of the market, in reality it was simply dumb luck to just happen to buy at the right place in the right time. Less than 18 years later we have nearly $1M in equity in a place just a few years from being paid off. Just by following normal expectations of buying a house with 20% down and paying it down quickly instead of having any special knowledge of markets or investing yielded that. There are more than a few of us in select markets where this has happened so it is not so cut and dry about buying vs renting as to what may be right for any individual. There are definitely several factors to consider.
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Originally Posted by froglipz Those property taxes that go up every year are also paid by the landlord on his rental property, and those costs, like ALL costs of maintaining the building, are passed along to tenants!
Quote:
Originally Posted by 46H
You are dreaming if you think this is true.
Who do YOU think pays for Landlords taxes and expenses? Tenants ALWAYS pay! Why do landlords own rental property? It is because they make money by charging rent that exceeds the costs of the ownership! If tenants aren't paying landlords costs of the building they are renting out where do you think the money is coming from?
Quote:
Originally Posted by froglipz Those property taxes that go up every year are also paid by the landlord on his rental property, and those costs, like ALL costs of maintaining the building, are passed along to tenants!
Who do YOU think pays for Landlords taxes and expenses? Tenants ALWAYS pay! Why do landlords own rental property? It is because they make money by charging rent that exceeds the costs of the ownership! If tenants aren't paying landlords costs of the building they are renting out where do you think the money is coming from?
Landlords don't always make money on their investments. In my area it's not uncommon to rent for considerably less than the cost to own the same property. The more expensive properties generally favor the renters. I have funded a good portion of my retirement accounts over the years from rent savings. I am both a landlord and a tenant. I make money in both roles.
Landlords don't always make money on their investments. In my area it's not uncommon to rent for considerably less than the cost to own the same property. The more expensive properties generally favor the renters. I have funded a good portion of my retirement accounts over the years from rent savings. I am both a landlord and a tenant. I make money in both roles.
You may not make money but you better be covering your costs.
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