Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
We rent a 3b2b mobile on 8 wooded acres and pay only $500 rent versus buying the same thing for $150-$350,000 and would need 20% as a down payment. That would leave us broke for the next 40+ years (if we even lived that long)
Not every area is the same though.
Rent here for a newer 3 bedroom 2 bath home would be around $900-$1000
You can buy a similar home for around $100-$110K on which your payment would be around $750 with an FHA loan 3.5% down. Add on taxes and insurance and you come up to around $925-$950. You would also have the benefit of the current tax credit and write offs each year.
Rent here for a newer 3 bedroom 2 bath home would be around $900-$1000
You can buy a similar home for around $100-$110K on which your payment would be around $750 with an FHA loan 3.5% down. Add on taxes and insurance and you come up to around $925-$950. You would also have the benefit of the current tax credit and write offs each year.
You forgot to mention the offsetting costs of maintenance. To calculate it accurately, you need to amortize remodels, furnace life cycles, etc. It's $5K per year at minimum or $400 per month. Just go look at your check book to verify the obvious. I had a $13K shingling job last year, $8K HVAC in 2008, $3K in paint in 2007, new carpet for $5K in 2006. When you add in the details it's $8K for me per year. That is reality.
Disclaimer: I own three homes. I own because I want to. But if you are going to present the honest trade-offs, you are missing a big piece of the puzzle. but if you want to sell something, you will want to forget these honest details.
You forgot to mention the offsetting costs of maintenance. To calculate it accurately, you need to amortize remodels, furnace life cycles, etc. It's $5K per year at minimum or $400 per month. Just go look at your check book to verify the obvious. I had a $13K shingling job last year, $8K HVAC in 2008, $3K in paint in 2007, new carpet for $5K in 2006. When you add in the details it's $8K for me per year. That is reality.
Disclaimer: I own three homes. I own because I want to. But if you are going to present the honest trade-offs, you are missing a big piece of the puzzle. but if you want to sell something, you will want to forget these honest details.
Normally newer homes do not need to worry about most of what you mentioned for years.
If someone purchases a home built in 2007 the big money item with the lowest life expectancy would probably be the water heater and that is usually good for 7-10 years down here. AC life will be about 15 years or more as will the roof. Yes some go sooner but it is not like everything is going to break down immediately upon moving into a new home.
My home was built in 2005 and I have put a grand total of about $50 in neccesary repairs into it for a relay in the a/c.
Nice try at trying to make it seem as if I wasn't honest (what I bolded in your post) but if you read my post closely you would have noticed I did say newer home.
Also if you are having to put that much into your home for upkeep I suggest a better inspector when purchasing.
If you love the home and really want it, go for it. If not and you have doubts, don't do it.
But, then don't complain how your rent is so much, you pay so much in taxes, your neighbors are the worst, you get the idea.
Owning a home is not for everyone but I just wish I had kept every home I had bought and today I would be fine.
Right now, 2009, you have low prices on homes, low interest rates and a government incentive for first time homebuyers (you are a first time homebuyer if you have not owned a home in 3 years).
No one is forcing you to buy, rent, whatever. Individual decision. Trust your gut.
Last edited by Bette; 07-29-2009 at 07:55 PM..
Reason: Spelling
Normally newer homes do not need to worry about most of what you mentioned for years.
If someone purchases a home built in 2007 the big money item with the lowest life expectancy would probably be the water heater and that is usually good for 7-10 years down here. AC life will be about 15 years or more as will the roof. Yes some go sooner but it is not like everything is going to break down immediately upon moving into a new home.
My home was built in 2005 and I have put a grand total of about $50 in neccesary repairs into it for a relay in the a/c.
Nice try at trying to make it seem as if I wasn't honest (what I bolded in your post) but if you read my post closely you would have noticed I did say newer home.
Also if you are having to put that much into your home for upkeep I suggest a better inspector when purchasing.
If you buy a 2 year old home and everything is PERFECT, you still need to amortize the price of future repairs when you compare buying versus renting. Sorry, that's the math Mike.
30 year shingles last 20 years in the real world while 20 year shingles last for 15 years. Appliances made in 2009 last about 5 years (refrigerators and washers) - 10 year (ovens and microwaves) . They also break more often in 2009 as things are getting more sophisticated with electronics and are made to hit a price point. Plants die every year. Landscaping will last for about 15 years max before it needs to be replaced. Let's not forget about remodeling. You can drop some real $$'s just on paint inside and out. So you are at $50 in maintenance ALL year?? Either you are missing some zero's or your home is in shambles. I own a 2 year old home and I spend $2K easy but I pay attention to the details. The real cost of ownership is a lot higher when you figure in repairs that WILL come into play. That is why condo associations build up these things called reserves: they KNOW they are coming.
So in short, if your point is that buying a home costs the same price as renting for the 1st 5 years you are still off. Then that next 5 years (10 years out) it will cost you $800 a month on average.
One more point. Are you telling me that a 2007 $110K home is actually well built to last 15 years before it needs repairs???? For $110K even in today REO market you are getting the cheapest of the cheapest. A $110K home has junk windows, flimsy faucets, cheap shingles, cheap flooring, the disposable appliances, the least expensive HVAC and more often than not, crap cupboards, and (more often than not) less than ideal craftsmanship.
Now if someone didn't present the entire story to their client, I would say they are not telling them all that they should be considering. Agreed??
The other part of the formula is the cost of money (closing costs), seller fees when you exit, tax deductions, and whether prices go up or down. If the house appreciates 5% a year, that covers $5K of maintenance. If it goes down. Well... Additionally, flexibility of renting is a big plus (as well as a big pain). I'd assume you know a person or two in FL that desperately wants out but is trapped; tell that to a renter when the give a month notice. So if you buy this gem for 5 years and move, you might dodge a lot of the maintenance but now you are paying closing costs and seller fees amortized over 5 years. Again Mike, that is significant in comparing costs of renting versus buying.
As a reminder, I own three homes. But I am not fooling myself that it is a good deal. It would be a heck of a lot smarter to rent vacation homes. If you presented to me why it is smart to buy versus rent then I would laugh at you.
I'm not saying to rent. I'm saying that renting in 2009 is less money than buying in nearly every single situation. I also predict that this trend will continue for the next few years especially in FL. And if all you tll your client is your section on why it is the same price to buy as rent, you are not telling them the whole story.
Last edited by MN-Born-n-Raised; 07-29-2009 at 11:36 PM..
If you buy a 2 year old home and everything is PERFECT, you still need to amortize the price of future repairs when you compare buying versus renting. Sorry, that's the math Mike.
30 year shingles last 20 years in the real world while 20 year shingles last for 15 years. Appliances made in 2009 last about 5 years (refrigerators and washers) - 10 year (ovens and microwaves) . They also break more often in 2009 as things are getting more sophisticated with electronics and are made to hit a price point. Plants die every year. Landscaping will last for about 15 years max before it needs to be replaced. Let's not forget about remodeling. You can drop some real $$'s just on paint inside and out. So you are at $50 in maintenance ALL year?? Either you are missing some zero's or your home is in shambles. I own a 2 year old home and I spend $2K easy but I pay attention to the details. The real cost of ownership is a lot higher when you figure in repairs that WILL come into play. That is why condo associations build up these things called reserves: they KNOW they are coming.
So in short, if your point is that buying a home costs the same price as renting for the 1st 5 years you are still off. Then that next 5 years (10 years out) it will cost you $800 a month on average.
One more point. Are you telling me that a 2007 $110K home is actually well built to last 15 years before it needs repairs???? For $110K even in today REO market you are getting the cheapest of the cheapest. A $110K home has junk windows, flimsy faucets, cheap shingles, cheap flooring, the disposable appliances, the least expensive HVAC and more often than not, crap cupboards, and (more often than not) less than ideal craftsmanship.
Now if someone didn't present the entire story to their client, I would say they are not telling them all that they should be considering. Agreed??
The other part of the formula is the cost of money (closing costs), seller fees when you exit, tax deductions, and whether prices go up or down. If the house appreciates 5% a year, that covers $5K of maintenance. If it goes down. Well... Additionally, flexibility of renting is a big plus (as well as a big pain). I'd assume you know a person or two in FL that desperately wants out but is trapped; tell that to a renter when the give a month notice. So if you buy this gem for 5 years and move, you might dodge a lot of the maintenance but now you are paying closing costs and seller fees amortized over 5 years. Again Mike, that is significant in comparing costs of renting versus buying.
As a reminder, I own three homes. But I am not fooling myself that it is a good deal. It would be a heck of a lot smarter to rent vacation homes. If you presented to me why it is smart to buy versus rent then I would laugh at you.
I'm not saying to rent. I'm saying that renting in 2009 is less money than buying in nearly every single situation. I also predict that this trend will continue for the next few years especially in FL. And if all you tll your client is your section on why it is the same price to buy as rent, you are not telling them the whole story.
Let us take your scenario and give 15 years to the roof, 5 years to the appliances, 15 years to the a/c and 7.5 years to the water heater. We will figure in painting every 5 years also as well as new flooring.
So over 15 years we have replaced the roof and the a/c once, the appliances 3 times, the water heater 2 times, painted and replaced flooring 3 times. I think this is way higher than average but we will use these numbers anyway.
You have a total cost of $34,700 over 15 years, we will round it up to $40,000 to cover some other smaller things like landscaping and such.
That works out to $222 a month or $2664 a year. That is if all these things need to be done.
Your assumption that these homes are using the cheapest of everything is ridiculous. Most have timberline 30 year dimensional shingles, moen faucets, mohawk stain resistant carpet, rheem/carrier/trane a/c, decent appliances.
Not top of the line but certainly not bargian basement brands.
So you have an extra $2664 a year, the added tax write offs (which may just about offset the $2664), stability and your own home. Keep in mind that rent can be increased but a fixed rate mortgage does not. Even if rent only went up 2% a year you are over $1200 a month after 10 years.
Another assumption, my home is in perfect shape not a shambles as you said.
I built it right and regular maintnance that does not cost anything except my time keeps things running right. If you pull the lower element on the water heater and clean out the sediment every year you extend the life tremendously. Clean the coils on the fridge and it does not have to work as hard extending life. Keep all filters cleaned extending a/c life.
You accuse me of saying what I say to get people to buy yet you are telling people they should rent and doesn't that keep the cash flowing to you?
In my first post I said that it can vary on location as to how benficial it is to rent vs. buy. I never said every area that it was better to buy.
Let us take your scenario and give 15 years to the roof, 5 years to the appliances, 15 years to the a/c and 7.5 years to the water heater. We will figure in painting every 5 years also as well as new flooring.
So over 15 years we have replaced the roof and the a/c once, the appliances 3 times, the water heater 2 times, painted and replaced flooring 3 times. I think this is way higher than average but we will use these numbers anyway.
You have a total cost of $34,700 over 15 years, we will round it up to $40,000 to cover some other smaller things like landscaping and such.
That works out to $222 a month or $2664 a year. That is if all these things need to be done.
Your assumption that these homes are using the cheapest of everything is ridiculous. Most have timberline 30 year dimensional shingles, moen faucets, mohawk stain resistant carpet, rheem/carrier/trane a/c, decent appliances.
Not top of the line but certainly not bargian basement brands.
So you have an extra $2664 a year, the added tax write offs (which may just about offset the $2664), stability and your own home. Keep in mind that rent can be increased but a fixed rate mortgage does not. Even if rent only went up 2% a year you are over $1200 a month after 10 years.
Another assumption, my home is in perfect shape not a shambles as you said.
I built it right and regular maintnance that does not cost anything except my time keeps things running right. If you pull the lower element on the water heater and clean out the sediment every year you extend the life tremendously. Clean the coils on the fridge and it does not have to work as hard extending life. Keep all filters cleaned extending a/c life.
You accuse me of saying what I say to get people to buy yet you are telling people they should rent and doesn't that keep the cash flowing to you?
In my first post I said that it can vary on location as to how benficial it is to rent vs. buy. I never said every area that it was better to buy.
Now is a good time to buy! hahahha! They told me that last year too - I am renting for another year - in Philly suburbs the price has only dropped 10% from an all time high...they are way behind FL, AZ, CA - I'll save myself another 100K
Let us take your scenario and give 15 years to the roof, 5 years to the appliances, 15 years to the a/c and 7.5 years to the water heater. We will figure in painting every 5 years also as well as new flooring.
So over 15 years we have replaced the roof and the a/c once, the appliances 3 times, the water heater 2 times, painted and replaced flooring 3 times. I think this is way higher than average but we will use these numbers anyway.
You have a total cost of $34,700 over 15 years, we will round it up to $40,000 to cover some other smaller things like landscaping and such.
That works out to $222 a month or $2664 a year. That is if all these things need to be done.
Your assumption that these homes are using the cheapest of everything is ridiculous. Most have timberline 30 year dimensional shingles, moen faucets, mohawk stain resistant carpet, rheem/carrier/trane a/c, decent appliances.
Not top of the line but certainly not bargian basement brands.
So you have an extra $2664 a year, the added tax write offs (which may just about offset the $2664), stability and your own home. Keep in mind that rent can be increased but a fixed rate mortgage does not. Even if rent only went up 2% a year you are over $1200 a month after 10 years.
Another assumption, my home is in perfect shape not a shambles as you said.
I built it right and regular maintnance that does not cost anything except my time keeps things running right. If you pull the lower element on the water heater and clean out the sediment every year you extend the life tremendously. Clean the coils on the fridge and it does not have to work as hard extending life. Keep all filters cleaned extending a/c life.
You accuse me of saying what I say to get people to buy yet you are telling people they should rent and doesn't that keep the cash flowing to you?
In my first post I said that it can vary on location as to how benficial it is to rent vs. buy. I never said every area that it was better to buy.
You are getting closer in your math. Thanks for eventually pointing out that it's not just PITA. You said "Small things" like landscaping costs?? Small things??? Have you priced what it takes to make a home look decent?? If you rent, you may not care about landscaping, but if you own, you better care when it comes to resale value. A $10K bill for landscaping is cheap even if you do it yourself. Sorry. That doesn't last 15 years.
My point to you about your home being in shambles comes from the fact that there is no way in H_LL you spent 50 bucks in maintenance. Even "quality" stuff breaks out of warranty. I have a $1300 washer and dryer. The humidity sensor went out on it. Got a $250 bill on my 14 month dryer. It costs $100 for the service tech to start his car let alone labor and parts. I had some hail damage with a $500 deductible last year, I sealed my concrete for $250 (DIY), my garage door opener needed to be replaced at $290. So either your home is immune to problems because you claimed you paid a grand total of $50 in repairs or I am just the most unlucky person in the world on all three of my places. The question is what will happen not if. Or maybe it is because I looked at my checkbook log and remembered that it costs a lot more than I remember. $20 here, $50 there, and a couple hundred in another spot adds up quickly. It's the answer to "where does it all go". It "goes" $40 at a time.
Sorry. Not bargain basement brands??? You are saying a 2007, $110K home uses anything but junky cupboards (white washed chip board with flimsy rollouts doors that are destined to break), builder grade carpet, cheap garage doors to the bottom bidder, etc. I don't care it it cost $200K in 06, that was on a $50K piece of dirt that goes for $7K today.
As to the tax savings. It depends on their marginal tax rate. Generally speaking, the $110K buyer will be at 15% not 28% but that is a case by case situation. I didn't hear you address the re-sale costs (renting is zero) and roll that into the cost of ownership. It seems I need to remind you what it costs to own a home. Or what happens if you are trapped in a home that won't sell because you have to relocate in a glut market like it may be in the next few years?
Listen to what you are saying Mike. You are saying that for measly $110K, you can get a 2007 home with quality that lasts 15 years. Sorry. If you work the math (especially in FL) it's currently cheaper to rent. Now in three years it might be different. But we are talking now. I'm not holding my breath we are going to have a surge in real estate pricing in your neck of the woods in the next 3 years. In your market, I'd say rent because it is cheaper! But I'm guessing you won't want to be reading this to any potential buyers: you will show them your numbers.
Last edited by MN-Born-n-Raised; 07-30-2009 at 09:31 AM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Buying a home
Additionally, flexibility of renting is a big plus (as well as a big pain). I'd assume you know a person or two in FL that desperately wants out but is trapped; tell that to a renter when the give a month notice. So if you buy this gem for 5 years and move, you might dodge a lot of the maintenance but now you are paying closing costs and seller fees amortized over 5 years. Again Mike, that is significant in comparing costs of renting versus buying.
Have you priced what it takes to make a home look decent?? If you rent, you may not care about landscaping, but if you own, you better care when it comes to resale value. A $10K bill for landscaping is cheap even if you do it yourself. Sorry. That doesn't last 15 years.
