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The renting vs buying debate is one that will go on and on for years. There are many reasons that people choose to rent over buying and after owning every home I ever lived in I understand why renters might feel they are better off. I personally still prefer to own, but homeownership does not mean that you will come out ahead of the game. We lost money on the sale of DH co-op. Sold in 1997 and you could not give it away. Stunning prewar building in RVC. Still stunning today but he could not give it away back then and he had lived there for many, many, years. Sometimes renting is the better option depending upon circumstances and timing.
I’ve known folks who think they’ve made a huge profit after selling a home after 15 years and they look a little sad when I quiz them on the costs of ‘owning’ the home (purchase price, mortgage interest paid, taxes, repairs, maintenance, insurance, inflation adjustment…
Purchase Price: As an owner, you can recoup that when/if you sell. (If you rent, you never recoup those monies.)
Mortgage Interest/Taxes: You get to deduct these on your tax returns. (If you rent, you are paying the landlord's mortgage interest and taxes, with no tax benefit to you.)
Repairs/Maintenance: In condos, the HOA takes care of any repairs/maintenance of common elements, which includes big ticket items like roofs, roads, facades, landscaping, water, heat, etc.
Insurance: Condo HOAs take care of insurance on the structure. As an owner, you'd only be responsible for insuring your personal contents. (If you rent, the equivalent would be renter's insurance.)
Inflation Adjustment: Inflation affects everyone, homeowners and renters alike.
As a homeowner, you are funding your investment. As a renter, you'd be funding someone else's investment. At the end of your mortgage term, you have hundreds of thousands of dollars in equity available to you. As a renter, you have squat.
I've rented, I've owned a home, and I'm now in a townhouse style condo and I love it.
As always, Elke is a wealth of knowledge. Back in 2012, I had conversations with her regarding my own situation. I had a trusted broker but I wanted to get a so called second opinion and she supported what I had been told. Thanks for being a wonderful resource for all on CD for so many years.
Purchase Price: As an owner, you can recoup that when/if you sell. (If you rent, you never recoup those monies.)
Mortgage Interest/Taxes: You get to deduct these on your tax returns. (If you rent, you are paying the landlord's mortgage interest and taxes, with no tax benefit to you.)
Repairs/Maintenance: In condos, the HOA takes care of any repairs/maintenance of common elements, which includes big ticket items like roofs, roads, facades, landscaping, water, heat, etc.
Insurance: Condo HOAs take care of insurance on the structure. As an owner, you'd only be responsible for insuring your personal contents. (If you rent, the equivalent would be renter's insurance.)
Inflation Adjustment: Inflation affects everyone, homeowners and renters alike.
As a homeowner, you are funding your investment. As a renter, you'd be funding someone else's investment. At the end of your mortgage term, you have hundreds of thousands of dollars in equity available to you. As a renter, you have squat.
I've rented, I've owned a home, and I'm now in a townhouse style condo and I love it.
Every situation is unique. I will say that very few lose money if they choose to own (especially in the NYC metro area) but not everyone is up big at the end of the day.
The key factor is rental cost and how much money the owners dumped into "renovations". Some dump hundreds of thousands into their homes over the years and others only on necessities. Some individuals find/maintain very favorable rental rates and if they're disciplined with saving and investing, they come out ahead.
The problem is that most people aren't disciplined with saving and aren't savvy investors so home ownership is a means of forced savings for this cohort.
It IS sound advice. Renters lose 100% of their rent payments. Owners might not recoup 100% of their purchase price - but they haven't LOST anything since they've been getting tax credits and still had equity to lean on. Loss of home value over 100% rental loss? I'm in for the purchase any day.
You have to take into account rental v ownership difference and the investable return on that difference. The problem is that most people who rent aren't disciplined enough to save/invest that premium. In turn, homeownership becomes a forced savings vehicle which is a benefit unto itself.
It IS sound advice. Renters lose 100% of their rent payments. Owners might not recoup 100% of their purchase price - but they haven't LOST anything since they've been getting tax credits and still had equity to lean on. Loss of home value over 100% rental loss? I'm in for the purchase any day.
It IS sound advice. Renters lose 100% of their rent payments. Owners might not recoup 100% of their purchase price - but they haven't LOST anything since they've been getting tax credits and still had equity to lean on. Loss of home value over 100% rental loss? I'm in for the purchase any day.
Yup. Some others just arent that smart
Buying is a bit of a gamble but most of the time you come out ahead.
You will lose money 100% of the time when you rent
You have to take into account rental v ownership difference and the investable return on that difference. The problem is that most people who rent aren't disciplined enough to save/invest that premium. In turn, homeownership becomes a forced savings vehicle which is a benefit unto itself.
Your assumption is based on the rent being less than the mortgage payment.
On Long Island, that often isn't so - at least at this time. I've had a few clients who decided to buy instead of rent, because it was less costly. Plus they didn't have to worry about the landlord maybe selling, etc.
Of course individual circumstances can make a difference. If a possible move looms in the near future (less than five years), buying is probably not a good idea.
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Plus they didn't have to worry about the landlord maybe selling, etc.
