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I realize the OP's Q was geared to 'Financial' difference in the scenarios outlined, but I would like to throw in one other major variable [Personal security] which also can vary based upon the type of house in a development (and the community) versus multi family and it's type of development (and it's community).
As a single household this can have major ramifications depending on how often a person is 'home' versus on the road. Multi-family can sometimes provide better security in that it is born by the landlord and depending on neighbors and quantity can be more 'eyes' to protect. A single person household, depending on location and type and level of friendship / family / neighbors to provide eyes when not home can be an easier target.
The point being the financial risk of loss prevention, and security, can potentially have an impact (again, based on one's lifestyle).
You're assuming your rent cost of $950 is going to be fixed for 30 years?
Do the math again and figure inflation rate into your rent. While the home you purchase is only going up with inflation, you can and should pay off a $150K mortgage in about 15 years at $950 per month. The taxes you've calculated are about double what a home in Houston would be assessed.
my home was 169k in 1987 and if i still owned it 550k today. this is in queens in nyc.
on the other hand 169k in the fidelity insight growth model i followed as well as quite a few of us here is worth 3.4 million.
Since you talked about negating the housing expense. In comparing these two, wouldn't you just count the downpayment of 20% of 169K , $33,800 and it would have grown to $550k today?
no because we had sold our co-op and paid cash for the house. if we took a mortgage by the time we paid off a 30 year mortgage the house would have cost 2 to 3x that 169k.
no matter how you slice it a home is an expense , in fact odds are add up all the interest , expenses ,renovations ,taxes and things you do and buy for a house and odds are 30-40 years later your housing costs exceed any residual value over a life time.
sure you can buy one and sell it but he clock keeps ticking and adding up expenses.
odds are in both cases of renting or buying the numbers may end up being negative as far as housing costs go . interest alone usually has the house costing as much as 3x the purchase price,
but after it is paid for in many areas the costs of housing drops and they need less of a chunk of income to cover housing costs. renting and investing can produce higher incomes but higher housing costs to match.
right now if we stop renting and buy the co-op we are eyeing , our housing costs will all fall 6k - 7k a year but we are giving up 12k on the money we buy with .
we are hoping that over the next 10-20 years things flip and the co-op will cost less at that point and we make the difference back with lower housing costs..
Last edited by mathjak107; 04-20-2015 at 02:39 AM..
Ncole we have both seen each other’s post on these forums for a long time. And I know you to be a civil poster so I will return the favor. But you have always been extremely biased regarding the issue of buying vs. renting. For the life of me I can't figure out why. We have had this EXACT same discussion before and you refuse to see some simple concepts.
The biggest one is comparing apples to apples. That’s the basis of all my comparisons on renting vs. buying. This time I'm glad you posted your own sources buecause I don't know if you actually fully read the links you sent me, but I did. I read it just in case I could learn something new that supports your point. Well I didn't find anything but a hypothesis based on a very strict set of circumstances. If you read the links you would have noticed that page 58 of your first link literally supports everything I said about comapring apples to apples. I'll simplify it in a few words:
In most areas of the country it is almost always cheaper to buy a property over renting THE SAME property. Again to clarify I'm not talking about buying a 4/3 property vs renting another 4/3 property 5 blocks down that’s cheaper. I'm talking about buying vs renting property on the same block. Even your own "anti-buying" article is stating this. The author admitted that his studies aren't an apples to apples comperison. He further stated that doing an apples to apples comperison usually would lead to the buyer coming out ahead. You do realize that the articles above are the same articles I was talking about that spin numbers to fit their argument. However, I was impressed with the first link’s author admitting that his own study is biased because it's not comparing apples to apples.
So until you can understand this simple concept please DO NOT reply to my posts anymore. I purposely didn't reply to any of your posts in this thread because I didn't want to be dragged into a pointless debate with you. Please give me the courtesy of doing the same.
Quote:
Originally Posted by mathjak107
i already said i can give you examples of where buying is cheaper , but i can also give you examples where renting and investing elsewhere blew the doors off buying.
that is my point , you are arguing something that has many different outcomes . just figuring buying without figuring what your opportunity costs are with the money tied up in a house is flawed logic.,.
It’s absolutely not flawed logic. The whole point of this thread is to ascertain which is usually superior between buying or renting. In general buyer comes out ahead. It’s a simple concept and not a blanket statement. Of course individual circumstances and local real estate market can make renting more attractive in certain scenario.
I never denied that you can give examples of both but to state that "buying or renting can be equally beneficial depending on someone’s circumstances" would be extremely inaccurate. A better statement would be "although in general buying equals more wealth building in the long run; there are certain scenarios where renting for life can be more beneficial for an individual with certain life circumstances."
Last edited by griffon652; 04-20-2015 at 02:51 AM..
each situation is going to be different , there is no "better " as a rule and you can't create one no matter how hard you try to skew the data . you are trying to take what you think and apply to everyone's situation and you can't.
the only comparison you can do is the one in your own life.
in fact if you wanted a rule the rule may be it is a life cycle thing.
when first starting out you may have little money , so you save a down payment and buy a place. after years there you may accumulate enough equity to sell , rent and plunk that money down in assets that grow at a far larger rate.
as you get closer to retiring and that portfolio has grown quite large it may pay to buy again if you are no longer going to invest that aggressively and generate the level of gains you did , that way you trade off income generation for hopefully lower housing costs.
in fact that is just the path my own life has taken.
we started out with a down payment and bought a co-op as an insider . sold it at a big profit during the co-op craze and bought a house out right.
sold the house when i got divorced. rented and plunked the money down from the house in some terrific investments . today even after paying rent and taxes we could buy multiple homes with what we made elsewhere.
but i am retiring in july so i am not interested in investing at the levels i did . so now when looking at the reduced gains and income from going more conservative buying becomes an option to cut costs eventually again.
Last edited by mathjak107; 04-20-2015 at 03:00 AM..
There are other tax advantages to real estate investors not available in stocks. Most notably, depreciation. If someone says that is not an advantage because depreciation has to be recaptured, they do not understand all there is to it.
I confess not understanding this. Please explain.
Quote:
Originally Posted by jw2
There are some tax advantages to Owner Occupied homeowners not available to renters. Most notably property tax and mortgage interest (if any) deductions. If someone says that the only gain is the amount over and above the standard deduction, they do not understand all there is to it. Oh, and one that always gives me a smile, interest is throwing away 75₵ for every dollar paid in interest (I suppose this assumes a 25% tax rate) as they don’t understand all there is to that either.
Again, I don't understand (on either count). Please explain. I'm entirely sincere in my question.
Quote:
Originally Posted by jw2
... yet you did your comparisons on two different things (rent an apt vs buy a house)? That makes as much sense as you saying a Cadillac gets better fuel mileage than a full size dump truck.
As I mentioned in an earlier post, the OP's comparison makes perfect sense to me. A set of rooms located within a larger building is rented, not bought. This is called an apartment. On the other hand, a stand-alone building designed to be occupied by a small number of individuals, typically related to one another, is bought - not rented. This is called a single-family detached house.
same here , there is a lot of nothing in those tax statements above.
there is zero advantage of any tax write off until the standard deduction is cleared , period.
in fact look at your piggy bank balance even with deductions , you are spending many bucks in expenses to get back one. if one of those expenses were to vanish your piggy bank has more money without the write off then with it..
an expense with a rebate attached which is what a deduction is may be in your scope of things better than not getting one back but in comparing to someone else's situation you can't say.
a couple with a famly renting a 3 bedroom apartment who at retirement goes to a one bedroom sees far better cash flow than you , your house and your write offs.
you can't compare to anyone's situation who is renting since it will not be comparable. the fact is they are not likely renting the exact same place in the same financial situation as you.
as a renter they may be spending very little on deducible items and fly the empty seats . they may spend 4 or 5k and get back the rest of the standard deduction and have more money in piggy . you may have actually spent that money on those expenses .
there is no depreciation you can take on a home you consume yourself to live in which is the topic being discussed . we are not talking investment property in this thread.,..
you can never take your own personal lifestyle , expenses , deductions , tax status and try to compare it to anyone else's as there are to many variables beyond the scope of what is visible to you.
you could never ever tell me i would have been better off not renting all those years. but by the same token no one can tell you that you would have done better renting .
to many folks want a rule for something where no rule really exists once all parameters are considered so they argue for it by only counting the things that skew things towards their argument .
Last edited by mathjak107; 04-20-2015 at 03:49 AM..
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