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Yeah, but how much did you ACTUALLY pay for it? How much you pay for a house is not its purchase price. How much did you pay in total costs over the 30 years that you were paying your mortgage (i.e., principle, interest, property tax, maintenance, HOA, fees, closing costs, upgrades, other expenses spent on the house, etc.)? Add up all of these costs over the 30 years and I'd bet it was MORE than 4 times your initial purchase price.
So not really that big of a win, was it?
The point, which you and a couple others simply refuse to acknowledge, is that renters pay ALL OF THAT as well. It's just bundled up into something called "rent." And then you pay extra on top of that to take care of the landlord's profit.
You're paying principle. You're paying property tax. You're paying maintenance. If there's an HOA, you're paying that, too. And you're paying extra to enhance the landlord's life. And at the end of your lease, you don't have a damned thing to show for it.
The only thing you're NOT paying is interest. That's because the landlord likely paid cash for the house. But you can buy a house, pay cash, and avoid mortgage payments as well.
Yeah, but how much did you ACTUALLY pay for it? How much you pay for a house is not its purchase price. How much did you pay in total costs over the 30 years that you were paying your mortgage (i.e., principle, interest, property tax, maintenance, HOA, fees, closing costs, upgrades, other expenses spent on the house, etc.)? Add up all of these costs over the 30 years and I'd bet it was MORE than 4 times your initial purchase price.
So not really that big of a win, was it?
This is a good point. BUT...... if someone pays off his home by 55 or 60 his retirement years means no mortgage payments. That is where the person will save.
Hard to stop working ( retire ) and still pay monthly payments ( rent / mortgage ). Very hard.
That person could also sell his home at 65 and live off the value of the place if he or her doesn't not have much of a nesteg to retire on.
Yeah, but how much did you ACTUALLY pay for it? How much you pay for a house is not its purchase price. How much did you pay in total costs over the 30 years that you were paying your mortgage (i.e., principle, interest, property tax, maintenance, HOA, fees, closing costs, upgrades, other expenses spent on the house, etc.)? Add up all of these costs over the 30 years and I'd bet it was MORE than 4 times your initial purchase price.
So not really that big of a win, was it?
I bought it 1980, not 1922. LOL.
Anyway, I lived in the house for 8 years before I started renting it. About the same time I made some money in the stock market and paid off the mortgage. The renters for about 20 years have paid enough in rent as to pay all of the items you mentioned and I have completely remodelled the place at their expense.
So, the bottom line is like Brian mentioned. Buy a house and retire early.
Problem is that is that our city depends upon the world having extra money to do vacations here. Granted things have been picking up. Property values have increased. One thing I have learned from 2007 crash was that it doesn't take much for property values to decrease in Vegas. Remember, Vegas is the first to feel the ill effects of the world and the last to recover.
The point, which you and a couple others simply refuse to acknowledge, is that renters pay ALL OF THAT as well. It's just bundled up into something called "rent." And then you pay extra on top of that to take care of the landlord's profit.
You're paying principle. You're paying property tax. You're paying maintenance. If there's an HOA, you're paying that, too. And you're paying extra to enhance the landlord's life. And at the end of your lease, you don't have a damned thing to show for it.
The only thing you're NOT paying is interest. That's because the landlord likely paid cash for the house. But you can buy a house, pay cash, and avoid mortgage payments as well.
The reason others "simply refuse to acknowledge" your statements as fact is because they are not absolute facts. It may or may not work out that way long term. The numerous people that walked away over the last few years because they couldn't charge enough in rent to pay their obligations proves your statement is not always true. The buyer projects and hopes it will work out well, but home values, rent values, and expenses are subject to constant unforeseeable change. There have been numerous times in history in which there have been stretches of at least several years at a time in which owning has been a bad investment. Likewise, there have been stretches of time in which millions have been made in real estate.
Just because fair market rent may be high enough today to cover an owner's costs with enough left over to provide a little profit doesn't mean that will be the case next year or 5 years from now. You don't know for certain rents will remain at least constant and there is also no guarantee that expenses (taxes, insurance, repairs) won't go up even if rents stay stable. There is no guarantee that the renter won't lose his job or get run over by a bus and create some bad debt, vacancy, and the need for additional unbudgeted cleaning/repair in prep for a new tenant. The owner is not absolutely entitled to $xxxx in rent simply because that is what his expenses are. His rent is what the current market will bear regardless of his costs. The owner makes long term commitments with only short term knowledge of what revenues and costs will be, and thus accepts a lot of financial risks in the process that a renter does not incur.
There can be legitimate value to a renter for avoiding those commitments and risks. It's similar to the insurance industry. The renter is buying insurance against home market values dropping, property tax, homeowners insurance, and other ownership costs increasing, expensive repairs occurring, being saddled with long term obligations if his current situation changes, etc. The landlord is the insurance company providing that insurance. When everything goes smoothly, the landlord (insurance company) makes good money. When a "hurricane" hits, such as the bubble burst of a few years ago, the landlord takes the hit as the insurer. As the insurer, you can't absolutely predict when and to what degree those hits will occur. And you can't increase your premiums (rent) to cover the losses as they occur because your customers will simply walk away and refuse to pay that much if it is above fair market value.
Also a lot of people fail to admit they even incurred a loss during a given time frame simply because they didn't cash out and realize that loss. An unrealized loss (commonly called "paper loss") is still a very real loss. It is a very real hit on your net worth. Most want to ignore that and look ahead based on projections, basically hoping to "double up and catch up", and use those numbers. One can project how much better off they'll be in a few years and others can counter argue how much worse off they'll be then by using their own projections, but the truth is all that counts today is today's market value (current net worth), i.e. the investment's actual performance through today.
Also I would also argue with your comments implying a buyer has no interest cost on the purchase price if he pays cash. There is always an interest cost which is earned by whoever is supplying the money. If you need money, you borrow it from the bank and pay them interest. If you have money, the bank will borrow it from you and pay you interest. If you decide to use the money to buy real estate instead of loaning it to the bank, the use of that money is costing you what the bank would have paid you. Historically there has been typically about a 2% or so spread (low risk loans), so if you pay cash for your real estate investment, the money is costing you about 2% less than someone borrowing the money from a lending institution (assuming they aren't a sub-prime borrower), but thus there is still a cost.
All of this said, personally I think it's a good time to buy and I am doing so myself. But I will not try to convince anyone buying is absolutely better than renting moving forward no matter what. No one can predict the future with certainty, and even if one could, it's possible buying could be the correct choice for some and renting the correct choice for others at the same time, depending on individual situations.
This is a good point. BUT...... if someone pays off his home by 55 or 60 his retirement years means no mortgage payments. That is where the person will save.
Hard to stop working ( retire ) and still pay monthly payments ( rent / mortgage ). Very hard.
That person could also sell his home at 65 and live off the value of the place if he or her doesn't not have much of a nesteg to retire on.
Can't do that with renting for 30+ years.
Brian
But doesn't that depend on how much you pay in rent as compared to the total expenses of owning a house? If renting costs you half as much as owning, you could save that difference every month and put that into the stock market along with the down payment you didn't spend and at the end of 30 years, you'll have more money than your house would be worth. And you can use that money for your living expenses after you retire. Hard to access the locked in equity in your house to pay for living expenses after you retire. No bank is going to give someone without a job a home equity loan. So how are you going to pay for your property taxes, HOA, etc. and other living expenses?
Anyway, I lived in the house for 8 years before I started renting it. About the same time I made some money in the stock market and paid off the mortgage. The renters for about 20 years have paid enough in rent as to pay all of the items you mentioned and I have completely remodelled the place at their expense.
So, the bottom line is like Brian mentioned. Buy a house and retire early.
But what if you had kept that money in the stock market instead of paying off your house? Or if you had never bought that house and put your down payment along with that money into the stock market instead? You'd probably have more money now than your house is currently worth.
The reason others "simply refuse to acknowledge" your statements as fact is because they are not absolute facts. It may or may not work out that way long term. The numerous people that walked away over the last few years because they couldn't charge enough in rent to pay their obligations proves your statement is not always true. The buyer projects and hopes it will work out well, but home values, rent values, and expenses are subject to constant unforeseeable change. There have been numerous times in history in which there have been stretches of at least several years at a time in which owning has been a bad investment. Likewise, there have been stretches of time in which millions have been made in real estate.
Just because fair market rent may be high enough today to cover an owner's costs with enough left over to provide a little profit doesn't mean that will be the case next year or 5 years from now. You don't know for certain rents will remain at least constant and there is also no guarantee that expenses (taxes, insurance, repairs) won't go up even if rents stay stable. There is no guarantee that the renter won't lose his job or get run over by a bus and create some bad debt, vacancy, and the need for additional unbudgeted cleaning/repair in prep for a new tenant. The owner is not absolutely entitled to $xxxx in rent simply because that is what his expenses are. His rent is what the current market will bear regardless of his costs. The owner makes long term commitments with only short term knowledge of what revenues and costs will be, and thus accepts a lot of financial risks in the process that a renter does not incur.
There can be legitimate value to a renter for avoiding those commitments and risks. It's similar to the insurance industry. The renter is buying insurance against home market values dropping, property tax, homeowners insurance, and other ownership costs increasing, expensive repairs occurring, being saddled with long term obligations if his current situation changes, etc. The landlord is the insurance company providing that insurance. When everything goes smoothly, the landlord (insurance company) makes good money. When a "hurricane" hits, such as the bubble burst of a few years ago, the landlord takes the hit as the insurer. As the insurer, you can't absolutely predict when and to what degree those hits will occur. And you can't increase your premiums (rent) to cover the losses as they occur because your customers will simply walk away and refuse to pay that much if it is above fair market value.
Also a lot of people fail to admit they even incurred a loss during a given time frame simply because they didn't cash out and realize that loss. An unrealized loss (commonly called "paper loss") is still a very real loss. It is a very real hit on your net worth. Most want to ignore that and look ahead based on projections, basically hoping to "double up and catch up", and use those numbers. One can project how much better off they'll be in a few years and others can counter argue how much worse off they'll be then by using their own projections, but the truth is all that counts today is today's market value (current net worth), i.e. the investment's actual performance through today.
Also I would also argue with your comments implying a buyer has no interest cost on the purchase price if he pays cash. There is always an interest cost which is earned by whoever is supplying the money. If you need money, you borrow it from the bank and pay them interest. If you have money, the bank will borrow it from you and pay you interest. If you decide to use the money to buy real estate instead of loaning it to the bank, the use of that money is costing you what the bank would have paid you. Historically there has been typically about a 2% or so spread (low risk loans), so if you pay cash for your real estate investment, the money is costing you about 2% less than someone borrowing the money from a lending institution (assuming they aren't a sub-prime borrower), but thus there is still a cost.
All of this said, personally I think it's a good time to buy and I am doing so myself. But I will not try to convince anyone buying is absolutely better than renting moving forward no matter what. No one can predict the future with certainty, and even if one could, it's possible buying could be the correct choice for some and renting the correct choice for others at the same time, depending on individual situations.
If renting costs you half as much as owning, you could save that difference every month
WOW, where could you rent for half the price of owning.
Most landlords work their rent price to $100-200/mo more then their own owning mortgage costs.
I think it is the exact opposite, especially that you can now buy a not bad condo for $60k-75,000 now and that is a cheap monthly payment. Maybe $400/mo mortgage ( yes, taxes and condo fees extra ) to $800-900 /mo for rent
Renting - pay for 50-60 years
Owning 20-30 years to pay it off.
Then they could save funds to retire on.
I am 46 and paid off my condo 6-7 years ago. my payments stopped at 40 years old, if I rented I would still be paying monthly rent at 70 or 75 if I live that long! That is 30-35 years more of payments.
30 years x $10,000 a year is $300,000 extra to have when I hit 65.
$75,000 mortgage with $15,000 down
$415/mo and paid off in 15 years..... fast. and cheap!
Mortgage Calculator
Home Price: $ Down Payment: $ (20%) Loan Rate* Payments 30 year fixed % $282/mo 15 year fixed % $414/mo
Last edited by Californiapch; 04-23-2012 at 12:34 AM..
WOW, where could you rent for half the price of owning.
In California, for one. My current rent is half of what it would cost me to buy the same place. As LV2ndHome mentioned, a landlord can only charge the market rent regardless of what his actual expenses are.
In LV, the market rent is too high compared to the cost to own. In CA, it's the opposite.
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