Single Guy Approaching Retirement--Owning v Renting (inherit, family, wife, travel)
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that same 204,000 today , put in the popular fidelity insight growth portfolios many of us use here would be worth just under 6 million, even a simple s&p 500 fund would be at about 5 million . i have been using the insight models since 1987 .
after subtracting out decades of rent and taxes you could buy a few homes today .
so never poo poo investing and renting . you can come out way way a head financially . if you buy it should be for all the other reasons owning is preferable . historically owning has not come close financially to investing elsewhere and renting and indexing has made it even easier .
so you can see that owning clearly was left behind since we are discussing what transpired to date in the above example .
with just about 1/2 of all sales cash deals the last few years many people have the lump sums to do either by retirement .
the assumption that buying in retirement is the best way to go financially is not a given nor historically the best choice from a financial aspect .
I doubt $204,000 was plopped down on the house all at once so I don't think you can use the example of the $204,000 growing to 5 million or more. Over time the mortgage was paid off as would be putting the same amount into a growth fund. A lot of high and lows and big hits in between.
read what i said . more than 1/2 the sales are all cash . so that means yes there are people with choices of buying for cash or lump sum investing .
dollar cost averaging is to variable to draw any figures on , but if you want to compare apples to apples in the past based on same dollars , there it is .
our resources vary at different times in our lives as well .
Some people are easily satisfied and are just looking for a place to lay their heads; others care about the conditions in which they live. A property owner can change the paint, the flooring, the kitchen and bath if they tire of their environment..
For OP that may be a bad thing. He may not want to deal with home projects when he retires. I know I wouldn't. He might want to use his limited time on much more enjoyable activities.
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Originally Posted by kokonutty
Of course a tenant may need to move from time to time anyway because of deteriorating conditions, raised rent, bad neighbors or a general decline of the area. I hate moving.
From previous experience, same happened with my condo. And when that happens it is a double whammy -- not only you have to move, but to add salt to the wound -- you might take a hit on your asset. I can tell you many places that have gone downhill, that I was looking to buy some time ago, but wouldn't touch with a ten foot pole now. Most of us don't have the crystal ball.
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Originally Posted by dazzleman
While you can dong. financial comparisons, the reality is that when you own vs. rent, it,is usually not the same quality place. Renting often requires compromises in location, types,if neighbors you have, etc. that can be avoided when you buy, so overall, owners generally have a better quality of life that won't be factored into numbers that are a straight comparison of two ostensibly equal options.
That depends on the market. For OP, he said he can get a very nice rental for $ 1,800/month less than buying.
I didn't see any accounting for rent increases over 30 years. Rents here in L.A. are about 10X what they were 30 years ago which could throw your numbers off.
Same thing in Fort Myers. I loved my condo rental but the rent kept going up every time I renewed the lease. When I had the chance to buy my late aunt's SFH I took it. At least I know my mortgage payments will remain stable other than tax increases but I have Homestead & Widow's exemptions. The only thing with owning is you are responsible if anything breaks but that's why you set up a savings account.
To me one of the major concerns about renting is how rates can change over time. In a mortgage, you can arrange for a known, fixed cost in that regard, but renting, you will always be at the mercy of the market in terms of how much you have to pay out each month. We've seen rents here rise a lot in recent times, in some cases doubling or tripling etc. in a decade. If that happens where you plan to retire, would it be manageable?
For OP that may be a bad thing. He may not want to deal with home projects when he retires. I know I wouldn't. He might want to use his limited time on much more enjoyable activities.
From previous experience, same happened with my condo. And when that happens it is a double whammy -- not only you have to move, but to add salt to the wound -- you might take a hit on your asset. I can tell you many places that have gone downhill, that I was looking to buy some time ago, but wouldn't touch with a ten foot pole now. Most of us don't have the crystal ball.
That depends on the market. For OP, he said he can get a very nice rental for $ 1,800/month less than buying.
we would never buy another home again that we had to maintain . i would only buy a condo or co-op in a building at this point . i hate chores and being retired , more and more has to get farmed out . my time now is spent doing what we want to do , not playing slave to a house
To me one of the major concerns about renting is how rates can change over time. In a mortgage, you can arrange for a known, fixed cost in that regard, but renting, you will always be at the mercy of the market in terms of how much you have to pay out each month. We've seen rents here rise a lot in recent times, in some cases doubling or tripling etc. in a decade. If that happens where you plan to retire, would it be manageable?
over time all your other expenses can make that paid off mortgage minuscule in comparison to how much everything else went up .
ask anyone living in the tristate area or california what that 30k or 35k mortgage from 35 years ago being paid off represents in affordability today . likely not even a utility bill
I doubt $204,000 was plopped down on the house all at once so I don't think you can use the example of the $204,000 growing to 5 million or more. Over time the mortgage was paid off as would be putting the same amount into a growth fund. A lot of high and lows and big hits in between.
Quote:
Originally Posted by mathjak107
read what i said . more than 1/2 the sales are all cash . so that means yes there are people with choices of buying for cash or lump sum investing .
dollar cost averaging is to variable to draw any figures on , but if you want to compare apples to apples in the past based on same dollars , there it is .
our resources vary at different times in our lives as well .
If the home was not purchased for cash, then the $421,000 gain should actually be reduced by the amount of interest paid on the mortgage also.
but don't forget over 30 years there has to be major renovations done or that house is pretty crappy as well as major repairs and all those dollars you spent on things for the house that you would never buy for a rental like landscaping . so there really is no way to compare except apples to apples .
investing in markets has far and away exceeded most home appreciation dollar for dollar even after subtracting taxes and rent for decades . that is about all we can compare .
If you have the verifiable cash flow you can have a hybrid of the "own or invest the money" scenario, and that is to own with a mortgage and invest the portion of the money that you don't pay for the house. Of course then, once again you'd have to reduce your market gains by the interest paid on the mortgage, and you have all those nasty repairs and maintenance, but you can modify the home and live there without fear of rent increases or being forced out.
So there's many ways to skin this cat, but each person should weigh what they value, maximum gain on their money, security of owning outright, flexibility and freedom from the cost of repairs, taxes, maintenance, etc. or some combination of these.
Someday we may go back into a rental, but if I do I would try to figure out how long I would like to live there and negotiate a lease of at least 12 months, with a maximum annual rent increase clause ( say 5% annually), and an annual renewal of 12 months lease rather than a converting to month to month as so many leases do. At least I'd have some protection from rapid rent increases or being forced to move on short notice.
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