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Half my life I rented. Quite happy with the arrangement. Finally bought a house to insure the safety of my wife. She was OK with another rental, but unlike me, she didn't trust landlords. She insisted on the same landlord. And he didn't have openings. We jumped in when loan rates started to fall in the 90's. We bought half of what the bank would willingly loan us. So our stretches of unemployment didn't bury us in bills. And we refinanced when rates dropped again. So I'd say we had a pretty nice series of breaks. People who are facing inflated home prices probably aren't wise to go the route I did. You could find a topnotch professional advisor to calculate the pros and cons. DON'T make a decision based on some real estate professional. I don't know if there's a trustworthy one out there. And even my mortgage lender tempted me to get in trouble, so I don't trust them, either.
02-17-2014, 06:34 PM
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Quote:
Originally Posted by Mr_Geek
I have been reading this thread and does your argument hinge on renting being significantly cheaper than buying? If they are equal are you saying you can invest money differently (instead of dumping it into a mortgage payment) because of the added costs of home ownership (maintenance etc...)?
I just am a bit lost. If it costs $1000/month to rent or $1000/month to pay a mortgage plus all other fees (taxes, insurance etc...) then where is the extra money coming from that you are earning a greater return off of? Wouldn't you still be able to invest the same (income - expenses which includes $1000 for living expenses in either scenario)?
Perhaps I'm missing something?
The assumption is that rent < mortgage, basically. Yes, there are maintenance cost, interest deductions, etc that need to be factored in.
Maybe that's true in some markets, but where I live a 3 BR (town)house can be purchased for about $1500/month, and a good 1 BR apartment can be rented for about $1500/month. It makes zero sense to rent. People (including myself) only do it because we don't have the cash on hand for a down payment (yet).
Even if rent=mortgage it makes more sense to rent. On top of the mortgage, there is maintenance, property taxes, etc like you describe. But renting allows me to live much closer to my job--my commute is 1/3 of what it would be from where I could afford to own--I live literally across the street from the subway. I save on that expense/hassle. I also do not require a car, so I save several thousands there as well. All this money saved is money I am able to invest. I could easily afford to buy if I wanted, but I come out way ahead financially by renting.
Quote:
Originally Posted by JasonF
The assumption is that rent < mortgage, basically. Yes, there are maintenance cost, interest deductions, etc that need to be factored in.
Maybe that's true in some markets, but where I live a 3 BR (town)house can be purchased for about $1500/month, and a good 1 BR apartment can be rented for about $1500/month. It makes zero sense to rent. People (including myself) only do it because we don't have the cash on hand for a down payment (yet).
Bought my house last year. Cheaper to own than rent, plus I prefer owning much more. If I need to move to advance my career I can already make a decent profit of the home. It's all about timing.
Even if rent=mortgage it makes more sense to rent. On top of the mortgage, there is maintenance, property taxes, etc like you describe. But renting allows me to live much closer to my job--my commute is 1/3 of what it would be from where I could afford to own--I live literally across the street from the subway. I save on that expense/hassle. I also do not require a car, so I save several thousands there as well. All this money saved is money I am able to invest. I could easily afford to buy if I wanted, but I come out way ahead financially by renting.
Believe me, do NOT underestimate the costs of owning not listed in real estate ads. We searched long and hard for "move in condition" after a friend of ours experienced $1500 necessary expenses to bring his new house up to standards. We didn't sign a thing till a professional inspector listed for us "necessary repairs". Now we've gone through a fence, several shingle jobs, rusted out front step railings. Multiple appliance replacements. Seriously, it goes on and on. And very few of these things makes the house more marketable. It would be good for an objective party to come up with a dollar figure range and mean of these unlisted costs. One thing is insurance. It isn't discretionary. Your mortgage lender can insist on it and collect the payments till your stake reaches 20 percent. And it will vary according to the location of the house you buy. They may estimate it, but only a trusted insurance company can give a trustworthy figure. Property taxes do not stay constant! Ours have doubled or tripled. Again, when you get a bottom line figure for such required things, it is an ESTIMATE that may be off the first year and are totally irrelevant at two years ownership and beyond.
Which is cheaper? I think its like weather models. Different sets of assumptions lead to different answers.
I want to know the answer to this: All these people keep posting it is cheaper to own than rent. Where do you people live???? Seriously....DC is absurd. I pay $2500 for a 2bd/2ba, nothing special apartment. A crappy townhome would be $3000 or more. Even factoring in the LARGE D/P required and tax deduction/principal reduction-still nothing good. And for $3K a month-the TH isn't nice-very low end. You need $3500 or more for anything nice.
Varies widely from one place to the next. No one can generalize an answer. Even neighborhoods are different, so the answer depends on the exact location you are talking about. But guess what. EVERYONE in real estate will sing this song, and lots of people have illusions that make them receptive.
I want to know the answer to this: All these people keep posting it is cheaper to own than rent. Where do you people live???? Seriously....DC is absurd. I pay $2500 for a 2bd/2ba, nothing special apartment. A crappy townhome would be $3000 or more. Even factoring in the LARGE D/P required and tax deduction/principal reduction-still nothing good. And for $3K a month-the TH isn't nice-very low end. You need $3500 or more for anything nice.
usually the more desirable the area the bigger the spread between renting and buying.some may buck that but usuallly unless you bought a fixer upper or special situation the cost of buying is years away from breaking even compared to renting.
In my area, buying becomes a better proposition if you are interested in the better school districts. Rental homes in the desirable school districts are far more expensive than the mortgage payments, and there are very few apartments. Most of the municipalities have building codes that keep the school populations affluent and relatively constant, the property taxes low, and renting a property a losing financial transaction for both parties.
In less desirable school districts it may vary on a case by case basis.
I've done both. Sometimes it made more sense to rent, other times to buy, depending on the circumstances. The last time I rented was 2006-9 after a long-distance relocation. The rental was a newer SFH, not an apartment, and affordable. It was a very comfortable house, although it was obvious after a year or so that the location was not ideal. I currently own a SFH.
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Seriously....DC is absurd. I pay $2500 for a 2bd/2ba, nothing special apartment. A crappy townhome would be $3000 or more. Even factoring in the LARGE D/P required and tax deduction/principal reduction-still nothing good. And for $3K a month-the TH isn't nice-very low end. You need $3500 or more for anything nice.
