Buying vs renting (creditor, lawsuits, stock, residence)

[golfgod]

Interesting words above about Seattle because just this morning I heard a long form radio report, possibly on NPR about the Seattle market. Rents fell 14% in 2009 and are expected to fall another 9 or 10% this year. They talked about some condos that were expected to sell in the $700K range fetching $400K at auction.

I realize this is not the entire Seattle market.

One thing to consider is that the price of the AVERAGE home can only appreciate as fast as the increase in the AVERAGE wage. Wages have been falling in the US for about 30 years now.

Right now in many, if not most parts of the US you can rent cheaper than you can own. There is a house just 8 doors from our that just rented for $1300/month, including utilities. It would bring approximately $300K in a sale today. That is an owner who is LOSING money and a new tenant who is thrilled at his deal as he's on a job transfer.

[Lincolnian]

I am currently renting while building a new home I designed to be energy efficient. I personally do not like to rent as it, in my opinion, is not a home. You also often have little control over your environment. My current rental is an energy hog using $600 of oil a month this past winter just to maintain 60 degrees.

Fortunately it is only for 1 year as my family and I hate it. There aren't any other options in the area so we are thankful that we found this rental but definitely look forward to moving into a home of our own.

We don't view our home as purely a financial decision but as one for our overall well being and a comfortable environment that puts us in the best position to go to work each day, raise our children, and enjoy all that life has to offer.

Life is short. It's not all a out amassing wealth.

[cdelena]

In my experience buying gives you a better selection of homes and certainly more control to change the home to suit you needs, but is not always the cheapest housing choice.

I have owned five homes and when considering all costs know for sure that renting would have been cheaper. When I consider taxes, insurance, repairs, the costs to purchase and sell the purchased home was not an overwhelming great deal. Appreciation was good in a couple of cases but not a windfall; depreciation in my current home wiped out gains on all previous homes.

But I do value control of my environment so I buy rather than rent.

[CTR36]

Originally Posted by ALINOH

Great points.



Thanks for the great post. But even if a home value could beat putting money in the market wouldn't that issue become moot if you plan on staying in a home for as long as you can since you can't really gain cash without selling it? I think your point of the personal side of home ownership and the quality of life issue is truly the key whether to buy or not.



Thanks. May I ask why you're leaning towards buying if you prefer renting?

We MAY buy this house in the future because we really like it here. But we will continue renting until and if the LL wants to sell or something else happens where they have to sell the house. This way we get some good bargaining power. I know it sounds underhanded but we think that he will want to sell in a couple of years and the way things are looking economically we can get a great deal (that plus we know him personally). Anyway, until then we will continue to rent. I've already stated why I like to rent in my earlier post but if it came down to renting or buying NOW, we'll rent.

[dazzleman]

I don't view homes as an investment. So I wouldn't suggest buying a home as an investment, with the investment component being the advantage.

However, one thing that owning a home offers you, if you play your cards right, is the ability to live in a house without payments after the mortgage is paid off. Renting never offers this. Renting is also subject to inflation, while owning is not, since the price you paid is locked in.

I don't think owning is for everybody. But I think that for a lot of people, it is better over the long run if you play your cards right (which many people in the USA have not in recent years).

It's also a qualitative decision. You can't put a price fully on the ability to do what you want with your home, not having to worry about being evicted, etc. Also, housing in owner-occupied neighborhoods is generally nicer and higher quality than rental housing.

[GregTraub]

If you ONLY want to analyze the financial site of owning vs. renting, this is the best calculator by far that I've come across (from the NY Times). Takes into account closing costs, holding costs including mortgage, maintenance, renovation, taxes, etc. Also takes into account Rental costs (deposits, insurance), and even takes into account opportunity costs of investing the money you would have used to purchase the house.

Be sure to adjust all the numbers you want based on your local regional costs, and based on how much or how little you think housing appreciation and rental inflation will be.

Is It Better to Buy or Rent? - Interactive Graphic - NYTimes.com

[dspguy]

From my own experience, speaking purely financially... if I don't stay in my home long enough, renting would be better. A decent apartment in my area was $700/mo (no utilities included). My mortgage for a foreclosed house that I've been fixing up is about $1700/mo. Let me not start on my home improvement costs...

All I know is that when I tack on taxes, insurance, standard maintenance... just those add up to my old rent.

However, aside from the financial aspect, I love owning.

[Iamthere]

owning is good if your roots are good. If you are going to be in that city for the next 30 years, buy it. The taxes on the property must be cheap enough to stay. IF you have no children at the nest, renting is much better. It all depends on your needs, how many in the house? do you have animals? multi cars? everybody has different requirements

[Cav Scout wife]

Originally Posted by eskercurve

From a financial standpoint, if the cost to own is sufficiently high enough to not justify buying vs. renting, then by all means rent. Seattle is a good market for this type of analysis. A 1250 sq. ft. house in Seattle these days will run you around $400k. To put 80k down and get a typical 5.5% mortgage, you would be paying around $1450 a month. Throw in taxes, maintenance, and utilities, it's more like $2100 a month. If you rent, you could probably get the same house for something like $1400 a month, no taxes, and maybe cut a deal with the homeowner saying you'll upkeep the place if you get a discount. You can save about $400 a month this way.

For your area, I absolutely agree 100%!

For my area however, the opposite is true.

Houses are rock bottom cheap, with no less than 45-60 each month being auctioned off at the Sheriff's monthly sale, and 200+ bi-yearly at the PVA tax sale, for pennies on the dollar. (I mean 500K+ homes selling for less than 100K)

Which is why we decided to purchase recently. It's a tiny home, not at all what we wanted (except for the general area, and yard size), basically bare min for our family. But the kicker is that we are saving literally THOUSANDS a year due to such a cheap mortgage, vs what we would have paid in rent.

I'm not ashamed of the numbers, so I'll throw them out there, lol. (mind you they are VERY low!)

We bought for a bit over $10,000 for this home at the Sheriff's sale. It appraises at a bit over $45,000. We took a 10yr mortgage and our payments are less than $200/month. Plus $600/year in home insurance, and yearly property taxes are right at $300/year.

So basically we pay $200/mortgage, then $50/insurance, and $25/taxes each month. Less than $300 for our home.

Our last rental property was also a 2 bed/1bath, and we paid $400 a month in rent; and the one before was $800/month (in a good area right outside Louisville, close to Knox where we were stationed.

For someone like me, the benefits of purchase were MUCH greater than renting, not to mention the cost was much more affordable.

To the OP, you have to take cost into account foremost IMO.

We got tired of paying more than our apt was worth (prices spiked when everyone got foreclosed on), so buying was the right thing for us.

[Nor'Eastah]

Originally Posted by dazzleman

However, one thing that owning a home offers you, if you play your cards right, is the ability to live in a house without payments after the mortgage is paid off. Renting never offers this.

BINGO! In most people's minds, owning a house means paying a mortgage. It wasn't always this way. And within our lifetimes, it may not be this way, again. If I were young again, I'd buy some land I could afford, move a camper on it, and build my own house, from scratch. Can't do that in the cities, so if that's where you have to be, either it won't work, or you'll need to commute.

Our home is not selling and that's where most of our cash is tied up, from many, many working years. We'll take the cash we have and, although I'm no longer a young man, will buy 40 acres or so in a rural area, set up a 30' camper, and start all over again. May take 3 years worth of good weather to finish it, but we will have NO mortgage, very low taxes, and no insurance if we decide not to.

I shoulda done this 30 years ago!