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^^^ I think you made some excellent points dazzleman
Somewhere this country got off track by feeling everyone is entitled to own a house. If they can't afford it, various government and bank programs will pay for it. (that means US taxpayers)
I think everyone should be entitled to adequate housing. That is completely different. Leave ownership to those that can afford it. We may be going after that model now as many more people are content to rent.
your mortgage may be fixed but if inflation kicks up those real estate taxes may go out of control
the advantage to renting may just be that if inflation crosses a certain point the affordability of anything becomes harder ... real estate may actually drop for lack of buyers . rents may be difficult to raise too....
things dont always workout the way our wisdom tells us it should....there is always stuff not even on the radar that alters events just enough to throw us a curve ball.
Like others have said, if you have a fixed rate mortgage you know what your house payment will be next month, when you rent you have no control over this; not only that but the only deduction the average person can make anymore is the mortgage interest and property taxes they pay on their home.
Add to that we have a credit market in place now that has tightened up so much that it has forced many into the rental market because they cannot obtain traditional financing anymore.
This will only add to the pressures of the rental market and drive rental prices up even more. Bottom line is people aren't going to live in a van behind wal mart, but they can't get financing so they are forced into he rental market. I don't see the credit market loosening up anytime soon so rents are probably going to go up not down in the future.
Also when you rent you do not call the shots; meaning things like changing the paint colors, landscaping, fixtures etc, as well as having pets, extra vehicles or occupants can lead to bigger issues.
hmmmm that ole deduction,, you mean the one where you pull 3 bucks additional over and above the price of the house out of your piggy bank and the gov't gives you back 1 to put back in your piggy bank? that sounds like a good thing dont it? i paid cash for my house and have no mortgage deduction , does that mean im not ahead by not paying the bank interest? of course im ahead... the whole deduction thing is always mentioned like its a good thing to have these deductions... its great they take your money and give you back a tiny piece... its not folks... your actually spending the extra dough and getting back a piece.... remember too everyone including a renter gets the standard deduction so all calculations have to even first start after that....
better off having no deduction and keep the 3 bucks in your piggy bank.... think about what that deduction really is.
hmmmm that ole deduction,, you mean the one where you pull 3 bucks additional over and above the price of the house out of your piggy bank and the gov't gives you back 1 to put back in your piggy bank? that sounds like a good thing dont it? i paid cash for my house and have no mortgage deduction , does that mean im not ahead by not paying the bank interest? of course im ahead... the whole deduction thing is always mentioned like its a good thing to have these deductions... its great they take your money and give you back a tiny piece... its not folks... your actually spending the extra dough and getting back a piece.... remember too everyone including a renter gets the standard deduction so all calculations have to even first start after that....
better off having no deduction and keep the 3 bucks in your piggy bank.... think about what that deduction really is.
I don't have a mortgage anymore either, it's besides the point as most people do. The renter pays the same 3 bucks and doesn't get to deduct squat other than his/her standard; at least the person with the mortgage gets back "one of the 3 dollars". Besides that was only one of the many advantages of owning...
I agree with the mathjak, everybody should rent and not buy. I just closed on another duplex this week. It's going to be a good money maker. i think I'll call it Park Place
nooooo i never said that, ... buying is good too but it may not give you the best bang for the buck .. buy a home for other reasons.l..
my point about the tax deduction is the tax deduction is very mis-understood.
the mortgage interest you pay, the real estate taxes, the electric bill, your insurance, the gardner etc are all expenses.. they cost the home owner money... some of those expenses go into the general bucket called tax deductions. they get mixed in with everything else, your contributions, your allowable medical , your state and local taxes etc...
the first 12,000 bucks if your married you spent basically gets dis-carded and is replaced with the standard deduction for both renter and buyer.
so the homeowner who actually spent 12,000 bucks on real estate taxes and mortgage interest out of his savings or income has exactly the same deduction as the renter who maybe paid 3000 bucks in state and local taxes.
in reality its alot more complicated then this as there are other deductions too but lets keep it simple to follow.
the renter actually can have 3 or 4,000 more dollars in his piggy from his refund then the homeowner who actually had to spend that money from the piggy bank.. he can take that 4,000 he got back and really didnt pull out of the bank and put it towards paying his rent .
so to even it up all calculations should start after 12,000 bucks in this case.
but heres the kicker, that nice deduction for your mortgage which you thought you would get a 3rd or so back on actually becomes less and less over time until you reach the later years of your mortgage where there is almost no mortgage interest deduction and that the mortgage payment is still the same as it was only your getting less back to have to live on possibily leaving you in a cash crunch.
the biggest problem is this, since all those deductions get lumped together with all your other deductions and those nice high real estate taxes in some areas coupled with those nice high interest payments as well as the state and local income taxes you pay all add up to a whole lot
the big surprise here is if your deductions reach a certain level coupled to your income, BINGO! amt tax penalty.
all your deductions are phased out until they all go bye bye. you get nothing back at all for any of those expenses.
want to know how easy it can be. we sold an investment property... i got slammed in that year with the amt tax because of income level.
i had to pay a ton of taxes to new york state and new york city on the gains.
following year again, the big deduction for the state and local taxes i payed now tripped it again, not on income but on deductions... got screwed 2 years in a row,,,
now because of the amt tax ill pay more again in state and local taxes and bingo maybe next year again ill get hit with it if deductions are to high.
now you see why i say juggle the numbers without figuring a deduction as you just may not get one... always look at those deductions as the bills they are and not as some good benefit which they are not... ....
as you see its not as easy as pay in 3 get back 1, you can pay in 3 and get back none too.
theres alot of thinking and calculations that have to go into that ole deduction everone loves to count as a gain instead of a bill
Last edited by mathjak107; 10-25-2009 at 03:20 AM..
i want to point out also that you cant compare renting to buying as if the costs are absorbed by the renter.
what i mean by that is homeowners like to assume everything goes up proportionatly for everyone.l if my real estate taxes doubled ill get the good ole tax deduction (you know the one from the thread above) and ill get something back but the renter will get his rent raised double and get nothing.
sorry folks but while having common parents the rental market and the cost to buy dont track each other very well in most areas.
in alot of areas the cost to buy a home is based on certain criteria .
the rental market has different criteria , the biggest which is the supply and demand of rentals.
as an example if i bought my house 10 years ago what i need to cover my taxes and mortgage is very different then someone who bought at the peak or someone who even buys today.
the rental market basically marches to its own drum, it dosnt care that your expenses of buying at the peak may be double your neighbors who bought 10 years ago. the rental market seeks its own level just like water .. oh you can try to get double the going rent in the area because your expenses are higher and more power to you if you can.
alot of areas have rent stabilization laws too. maybe your real estate taxes or expenses doubled.. sorry guys 3% is the maximum increase you can get your told by the city.
here in nyc it took me a solid decade on my first investment property to reach the break even point..
case in point, 2 weeks after we bought the stock market crashed in 1987 , i saw the value of my investment co-op i just bought fall from 77,000 to 59,000 over the next few years.... the rental market didnt care what i paid, i had trouble getting tenants every time i tried to raise the rent above a certain point and so it took me ten years to go from the 900.00 rent to 1200.00 which is what it cost me.
the people here in long island saw their real estate taxes go fro 2-3,000 to an average of 12-15,000 today.. the rental market isnt even close to reflecting a fraction of the jump in taxes and mortgages .....
never assume a blanket statement like renters pay and get nothing for their money... alot of times its what renters arent spending for the privilage of ownership that is their gain.
every area is different, if your area right out of the box has rentals even steven except for the down payment , then its a no brainer buy but for alot of america its not so easy..
like i said my tenents had they invested the down payment money and the 300 bucks a month for a decade they saved compared to what i was paying and merely threw it in an index fund they could kick my butt with their pile of money vs my pile from the sale of that property and that would be figuring in all the rent they paid all those years.
in our central park apartments we have tenents who are rent stabilized, they pay 2500-3,000 a month for apartments worth 1-2 million.... we had 9 apartments when we started and payed 7 out of the 9 as much 50,000 to 100,000 bucks to give up their leases so we could sell the apartments. we got 2 left who so far arent going anywhere yet.. they got the best deal in the city.. for the rent they pay they are on the same block as lincoln center over looking central park.
Last edited by mathjak107; 10-25-2009 at 03:45 AM..
The problem with most renters is they come out behind the eight ball because they spend the extra dough they are not spending as owners and they dont invest in other assets so they have a reputation of walking away at the end of the game with nothing. at least the homeowner has kind of a forced savings going on even if its hard or expensive to tap that equity..owning something of value beats nothing of nothing all the time if the renter has no other assets of equal or greater value......
the other issue is most homeowners are homeowners because they have the money to be homeowners (at least the ones that will be left any way)...
renters i think on the average dont, most rent not from the fact they can pay the rent and get higher returns elsewhere but they rent because they dont have the money or income avail to have a choice and so they rent.
there are exceptions such as those that dont want to be tied down , or the maintaince of a home or they want the ammenities of a luxury rental but for the most part i think more ofton then not its just a lack of funds to own.
[quote=mathjak107;11335849] renters i think on the average dont, most rent not from the fact they can pay the rent and get higher returns elsewhere but they rent because they dont have the money or income avail to have a choice and so they rent.
Completely agree with this... Add to that they can't get the financing so they are forced into the rental market like so many have been these days due to the credit tightening.
Since I own a property management company I see hundreds of renters every year. I would say that less than 5% of these renters rent because they have calculated that it will make more financial sense for them to do so, rather they rent because of the above referenced items.
Also; take an investor who wants rental property (which is very hot these days by the way). Say they can stroke a decent down payment and get a 15 year loan. They rent the place for 15 years and guess what, the renter has paid their house off free and clear. They now have an asset that they can keep in their rental pool for cash flow, sell for the cash, or pass on to their kids.
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