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The thing is, the people who could be doing that, often times when they feel they're finances can do it, they will opt to go after property instead. Like I said, in some people it's a conditioning. Chances are people can lean on people immediately around them for detailed housing information as opposed to other options to do with their money.
Also there' a discipline involved when it comes to putting money away and many people will just spend the extra cash they're not pumping into a mortgage or repairs.
Growing up I wanted the homes I saw families living in on TV in the 80's. But looking back, most of those families were almost all upper class and never seemed to struggle. As I grew older and became middle class surrounded by other middle class people, I realized alot of them had homes under conditions I didn't find ideal, (suspect areas, bad commutes, Mortgage eating up a paycheck) and I searched for other options to live well, beat inflation, invest, ect...knowing I will likely never be rich. But I had to seek those options out because growing up , all anybody around me say was "buy property", because quite frankly, that's all they knew.
Yeah but that mortgage eventually goes away (granted if you don’t keep refinancing/cash out) renting never goes away
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,345 posts, read 8,557,056 times
Reputation: 16679
Quote:
Originally Posted by saibot
I must run with the wrong crowd, but I don't know any of these people who decided to rent instead of buying, invest the savings, and now, 20 or 30 years later, are worth millions. All of my friends and acquaintances who kept renting instead of buying have either a) left California for a lower COL state, or b) are counting the days until they can retire and leave California for a lower COL state.
I'm not saying people can't rent forever and come out ahead in the end. I'm just saying that in my experience, they hardly ever do.
As for rents not going up very much...the single year we rented an apartment was 1996-97. It was a one-bedroom in inland Orange County for $735. By the end of the year the rent had risen to $775. We thought that rate of increase was outrageous--ha!--and bought a house. Today the same apartment is renting for $1833. Believe me, our mortgage payment including tax and insurance is considerably less than that.
I might one of the few exceptions. A few years back I could have bought cash but decided to rent and invest instead. But I ran the numbers and made the decision. I agree most just spend as they get it. I came out so far ahead I was able to retire in a few years.
Of course now I am a homeowner now, but when I rented after a year and a half the landlord raised my rent 10 percent then sold the house forcing me out sooner than I expected. But as a renter I had no control.
I must run with the wrong crowd, but I don't know any of these people who decided to rent instead of buying, invest the savings, and now, 20 or 30 years later, are worth millions. All of my friends and acquaintances who kept renting instead of buying have either a) left California for a lower COL state, or b) are counting the days until they can retire and leave California for a lower COL state.
I'm not saying people can't rent forever and come out ahead in the end. I'm just saying that in my experience, they hardly ever do.
As for rents not going up very much...the single year we rented an apartment was 1996-97. It was a one-bedroom in inland Orange County for $735. By the end of the year the rent had risen to $775. We thought that rate of increase was outrageous--ha!--and bought a house. Today the same apartment is renting for $1833. Believe me, our mortgage payment including tax and insurance is considerably less than that.
I don't either. In fact, it's quite the opposite. Purchasing a home was the best decision I made in my lifetime, bar none.
Ironically, what I find is many in this group that rent are typically the first to gloat when the country goes into a recession, patting themselves on the back at how smart they are. I saw quite a bit of it back in 2010. They were too scared to buy thinking that the end of the world was near. Meanwhile, the smart ones bought up and reaped the reward.
There will always be risks to whatever you do in life. But with those risks, often come handsome rewards. I'm not too concerned about people screaming the sky is falling. We'll have another recession and those same people will be crowing again, only to see the economy rebound while they sit on the outside looking in once again.
Yeah but that mortgage eventually goes away (granted if you don’t keep refinancing/cash out) renting never goes away
It goes away but after a long time. The average middle/ working class person I know has a 30 year mortgage, and usually with a payment that's rather high (North of 2K). Not to mention doing repairs. The few people that seem to have a mortgage less than that have either seriously put there life on hold to save money, or received help from family. 30 years is a long time to make a heavy payment before you actually get a deed from the bank. I've been in LA over 10 years and have never paid close to 2 grand while living in some nice areas at that. And I haven't paid for a single repair. To some of us, those things are really important.
There's plenty of blogs/threads where some people regretted buying a property and never want to do it again. There's a reason for that. Plenty of rich people who rent, there's a reason for that. We all want to justify our decisions and appear right, human nature. Same way men and women talk to themselves into getting involved with people with shaky reputations. People can talk themselves into anything
Last edited by jacktravern; 08-14-2019 at 09:04 PM..
Reason: Added sentence
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,345 posts, read 8,557,056 times
Reputation: 16679
Quote:
Originally Posted by jacktravern
It goes away but after a long time. The average middle/ working class person I know has a 30 year mortgage, and usually with a payment that's rather high (North of 2K). Not to mention doing repairs. The few people that seem to have a mortgage less than that have either seriously put there life on hold to save money, or received help from family. 30 years is a long time to make a heavy payment before you actually get a deed from the bank. I've been in LA over 10 years and have never paid close to 2 grand while living in some nice areas at that. And I haven't paid for a single repair. To some of us, those things are really important.
There's plenty of blogs/threads where some people regretted buying a property and never want to do it again. There's a reason for that. Plenty of rich people who rent, there's a reason for that. We all want to justify our decisions and appear right, human nature. Same way men and women talk to themselves into getting involved with people with shaky reputations. People can talk themselves into anything
In the ten years in la, how many were in your family?
Yeah but that mortgage eventually goes away (granted if you don’t keep refinancing/cash out) renting never goes away
Also, Prop 13 is like rent control for owners, i.e., it’s a major expense with restrictions on how fast it can rise. Owned your home for 30 years? That property tax is going to be pretty low and stay pretty low.
I don't either. In fact, it's quite the opposite. Purchasing a home was the best decision I made in my lifetime, bar none.
That's pretty much been the case with me also
Quote:
Originally Posted by jacktravern
It goes away but after a long time. The average middle/ working class person I know has a 30 year mortgage, and usually with a payment that's rather high (North of 2K). Not to mention doing repairs. The few people that seem to have a mortgage less than that have either seriously put there life on hold to save money, or received help from family. 30 years is a long time to make a heavy payment before you actually get a deed from the bank. I've been in LA over 10 years and have never paid close to 2 grand while living in some nice areas at that. And I haven't paid for a single repair. To some of us, those things are really important.
There's plenty of blogs/threads where some people regretted buying a property and never want to do it again. There's a reason for that. Plenty of rich people who rent, there's a reason for that. We all want to justify our decisions and appear right, human nature. Same way men and women talk to themselves into getting involved with people with shaky reputations. People can talk themselves into anything
Actually, as far as any justification, I tend to use numbers so there's no talking myself into anything. And the numbers in our case do substantiate more value in owning than renting. The typical progression I've seen with friends and family near to me (all considered in the Middle Class) is a very tight budget for the first 5 years. By that time, pretty much all of us have moved up on our jobs giving us more discretionary income. Throughout this time, we have a fixed cost on our mortgage while the renter has the variable cost of the rent increasing (except for those in rent controlled apts/homes). This is one of the most important points so I'm bolding it. And although we were paying more for our mortgage to start, inside of the first 10 years we've already hit a breakeven on the rent (btw, this was all covered in post #5).
Most estimates I've seen for maintenance call for an outlay of $1 per sf per year. We were in a home that was 1070 sf so it really isn't that much. And the other items were built into our mortgage as property tax and insurance are part of the payment (most people have impounded loans). And although a renter may not be paying any maintenance, he is also not getting any kind of principal reduction like he would if he had on a mortgage. So in the case of our home there would be roughly a $90 benefit to a renter by saving on maintenance cost while we drop our principal by hundreds. To me, the latter seems like a better way to go.
Many of the other expenses of renting vs owning are the same. If you're a family with kids, you don't get some reduction on day care or private schools just because you're a renter. So that's a wash (as are most things).
My wife and I actually doubled down about year 15 and used some equity to buy a rental property. We had a good property manager, and never missed a beat on rent since 2006 and received cash flow. We just sold it and are about to buy a beautiful new home in the Austin area using the proceeds of the house (downpayment will be about 50%). We are also renting out our home in the Bay Area and getting substantial cash flow now.
I'm glad your situation has worked out for you. I do think, rather than use ancecdotes, the easiest way to prove out the situation (to take the emotions out of the equation) is simply to run the numbers involved in home ownership (especially taking into account the historically low interest rates we've had over the last 10 years, which tends to be a neutralizer on the income part of the equation). I personally find it hard to believe when one is just talking about the large metropolitan areas of CA (SF, LA, San Diego), that renting has been better as a whole. Again, I'm not talking about your personal situation, I'm talking about running the general numbers available that capture the masses.
I think it's easy enough and the numbers are available for those that choose to do the exercise. Ultimately it doesn't matter much to me because I've done it so all the debating in the world on an internet forum isn't going to change that. And I will say, the last thing I want to be doing in my retirement years is pay rent.
Last edited by ClydeAJones; 08-15-2019 at 04:45 AM..
Well, thanks to Prop 13, the rate can be lower. And the amount one pays can be quite low if you've owned your property for a long, long time.
But the amount of prop tax paid is going to vary depending on when you bought it.
Its not that low. I’ve bought property in the 90s and my property taxes aren’t that low 25 years later. In fact if someone bought in 08-15 their property taxes would be lower than mine for a like property.
Quote:
Originally Posted by jacktravern
It goes away but after a long time. The average middle/ working class person I know has a 30 year mortgage, and usually with a payment that's rather high (North of 2K). Not to mention doing repairs. The few people that seem to have a mortgage less than that have either seriously put there life on hold to save money, or received help from family. 30 years is a long time to make a heavy payment before you actually get a deed from the bank. I've been in LA over 10 years and have never paid close to 2 grand while living in some nice areas at that. And I haven't paid for a single repair. To some of us, those things are really important.
Yeah but it dies go away. Renting for 30 years isn’t any different. You're still paying. And with a mortgage you can AKWAYS accelerate payments. See the thing is that your income SHOULD go up as you advance in life. The mortgage stays the same. People put their life on hold....to buy a house is supposed to be tough. Look what happens when they gave loans to every loser out there. If not “putting your life on hold” and “not paying for repairs” is important to you then rent for the rest of your life. And a lot of repairs are easily done by a homeowner. If you choose to have everything done for you yeah it’s gonna be expensive, as far as renting and not paying for repairs...you couldn’t be more wrong
There's plenty of blogs/threads where some people regretted buying a property and never want to do it again. There's a reason for that. Plenty of rich people who rent, there's a reason for that. We all want to justify our decisions and appear right, human nature. Same way men and women talk to themselves into getting involved with people with shaky reputations. People can talk themselves into anything
I’ll be sure to let my wallet and bank accounts know I made a mistake in investing in real estate. And on another thought there are plenty of blogs where people make a crap ton of money in real estate.
All those people who regretted buying houses....they made wrong decisions. Maybe they overbought, or bought something thinking it’s gonna be cheap to repair, or wrong time to buy or sell...plenty of people do bad financial investments. Here is what I can tell you. I have paid off houses well before 30 years. I’m not saying I’m 100% right, but for me owning has been a great financial tool.
Quote:
Originally Posted by Mr. Zero
Also, Prop 13 is like rent control for owners, i.e., it’s a major expense with restrictions on how fast it can rise. Owned your home for 30 years? That property tax is going to be pretty low and stay pretty low.
It’s not that low. After 30 years that property tax is pretty good. And it doesn’t stop either. And you’re most likely retired and your retirement income is nowhere near what wages are. Prop 13 is not rent control.
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