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My farm house is 54 years old and will need to be re-shingled ( its only been shingled twice----the originals lasted 27 years and we are on 27 years on the second)
The furnace is running great in winter------2nd furnace in 54 years.
I can't remember the last time an appliance needed replacing ( must have been 10+ years ago)
Implying that the cheap , small sq ft ranch house will be shot in 15 years is laughable.
Many times what drives up the cost of building a house is not better quality materials.
My farm house is 54 years old and will need to be re-shingled ( its only been shingled twice----the originals lasted 27 years and we are on 27 years on the second)
The furnace is running great in winter------2nd furnace in 54 years.
I can't remember the last time an appliance needed replacing ( must have been 10+ years ago)
Implying that the cheap , small sq ft ranch house will be shot in 15 years is laughable.
Many times what drives up the cost of building a house is not better quality materials.
It is sq footage and design
Referencing to an earlier point, I'm a he (not a she).
Furnaces, air conditioning units, hot water heaters, sink handles, compressors and motors on appliances are better built years ago that today. We are in a disposable society. So a 1968 freezer will still be running today while a 1998 freezer is already dead. Just ask a appliance tech.
Ask any shingle installer what is the life of a roof. He will tell you that under perfect conditions, it will last to its rating. Now if your criteria is a shingle wears out once the roof leaks, then I guess they last "for 27 years" but it will look like crap. But in reality, the gutters, vents, etc in 2009 (unless you specifically look for quality) is thin and flimsy. Believe what you want to. Your point of reference and "proof" is a 54 year old farm house. I've scene a few farm houses in my day. They usually are maintained with odds and ends (its their persona anyways). To me, it suggests that you have no idea what the quality level is in today's construction. It's superficial quality unless you pay that extra 15%-20% (that is all it takes) to get to the next level. Still, you cannot buy that 1968 freezer. They used a lot of metal and over engineered back then. In a $110K starter home, they HAD to cut corners. I diverge. MARMAC, have you scene the "quality" of those flush white FL starter cabinets?? I didn't think so.
Before you guess what it takes to maintain a home, go look in your check book. I have bought and sold 15-20 homes in the past 8 years (like McCain; I'd have to count). I can pull everything up in Quickbooks and I can simply see the results quickly. I have a couple rental properties in my day (past tense). Guess why I don't do property management anymore?? It's because newbies roll-up the numbers like our friend Mike the Realtor. And they think it cash flows (or in his case, it is cheaper to own). They lose money without knowing it and they sell it to the next uneducated person who repeats the mistakes.
So no, I am not saying that a house has a 15 year life span. I'm saying that there are a whole lot of $40 bills that add up. And intermittently, there are multi thousand dollar bills that come into play. I'm also saying that TODAY might be a smart idea to rent from a sheer economical perspective as well as for the flexibility. I'm also saying that the person who started this thread in October was dead on and people who were debating with him were wrong. If you would have bought then you would ALREADY be upside down today. If I am a betting man, there are several segments that have a ways to go especially in Mike's state and even more in his specific region which is not on water.
Now. You are welcome to twist it, ignore the numbers, think about your 54 year home as the only data point. I am talking from experience. But then again I don't need to rationalize why I believe what I believe. I'm not Realtor. I'm not a renter. I'm no longer an investor. I'm saying it is obvious in most situations that now is a great time to sit tight for a lot of reasons.
You forgot to mention the offsetting costs of maintenance. To calculate it accurately, you need to amortize remodels, furnace life cycles, etc. It's $5K per year at minimum or $400 per month. Just go look at your check book to verify the obvious. I had a $13K shingling job last year, $8K HVAC in 2008, $3K in paint in 2007, new carpet for $5K in 2006. When you add in the details it's $8K for me per year. That is reality.
Disclaimer: I own three homes. I own because I want to. But if you are going to present the honest trade-offs, you are missing a big piece of the puzzle. but if you want to sell something, you will want to forget these honest details.
--" OR $400 PER MONTH"
I doubt there would be people buying rental houses if those figures were accurate.
$400 a month fopr maintenance + real estate taxes+ insurance --------
what is left for a return on investment to pay his house payment or to give him a return on his money?
You are getting closer in your math. Thanks for eventually pointing out that it's not just PITA. You said "Small things" like landscaping costs?? Small things??? Have you priced what it takes to make a home look decent?? If you rent, you may not care about landscaping, but if you own, you better care when it comes to resale value. A $10K bill for landscaping is cheap even if you do it yourself. Sorry. That doesn't last 15 years.
You can spend $100,000 if you want to. I don't know many people that do though. This is not a neccesary cost and those on a limited budget will just water the grass they have and put in a few $2 plants when they can. I don't put alot of money in mine but keeping it trimmed keeps it looking fine.
My point to you about your home being in shambles comes from the fact that there is no way in H_LL you spent 50 bucks in maintenance. Even "quality" stuff breaks out of warranty. I have a $1300 washer and dryer. The humidity sensor went out on it. Got a $250 bill on my 14 month dryer. It costs $100 for the service tech to start his car let alone labor and parts. I had some hail damage with a $500 deductible last year, I sealed my concrete for $250 (DIY), my garage door opener needed to be replaced at $290. So either your home is immune to problems because you claimed you paid a grand total of $50 in repairs or I am just the most unlucky person in the world on all three of my places. The question is what will happen not if. Or maybe it is because I looked at my checkbook log and remembered that it costs a lot more than I remember. $20 here, $50 there, and a couple hundred in another spot adds up quickly. It's the answer to "where does it all go". It "goes" $40 at a time.
As I said, rountine maintnance can eliminate the need for many repairs. My washer and dryer that I spent no where near $1300 for have had no problems. The same goes for my fridge, range, microwave, dishwasher, water heater. My rotiserrie oven went out but that is a counter top oven that was from my last house and cost me $80 to replace. If someone was in a rental this is something can can have or not have and they would have the same cost.
I don't consider filters, lightbulbs and such as part of the expense because you have those costs in a rental also.
Sorry. Not bargain basement brands??? You are saying a 2007, $110K home uses anything but junky cupboards (white washed chip board with flimsy rollouts doors that are destined to break), builder grade carpet, cheap garage doors to the bottom bidder, etc. I don't care it it cost $200K in 06, that was on a $50K piece of dirt that goes for $7K today.
You are just making assumptions but I have actually seen these homes. You don't have a clue what you are talking about
As to the tax savings. It depends on their marginal tax rate. Generally speaking, the $110K buyer will be at 15% not 28% but that is a case by case situation. I didn't hear you address the re-sale costs (renting is zero) and roll that into the cost of ownership. It seems I need to remind you what it costs to own a home. Or what happens if you are trapped in a home that won't sell because you have to relocate in a glut market like it may be in the next few years?
You say renting is zero but what about people that are forced to moved 3 or 4 times maybe more in 15 years because the rental is being sold, foreclosed? Each time it costs in security deposit, moving trucks, utility deposits.
On a $110,000 home closing costs would be around $7500 with commission. That is about $500 a year over the 15 years and while we are in a down time and prices many stay down for a few years even if the home only appreciated 1% a year for 7 of those 15 years the appreciation would cover the closing costs. I am not trying to say homes always appreciate but I think 1% for 7 of 15 years is very conservative.
You can keep coming up with what ifs but I can match your what ifs with equal what ifs.
Listen to what you are saying Mike. You are saying that for measly $110K, you can get a 2007 home with quality that lasts 15 years. Sorry. If you work the math (especially in FL) it's currently cheaper to rent. Now in three years it might be different. But we are talking now. I'm not holding my breath we are going to have a surge in real estate pricing in your neck of the woods in the next 3 years. In your market, I'd say rent because it is cheaper! But I'm guessing you won't want to be reading this to any potential buyers: you will show them your numbers.
Sorry I worked the math and overall it is not cheaper to rent here.
And no I won't be reading this to any buyers because buyers come to me when they are ready to buy. I don't work with renters except on an extremely limited basis so there is no time that I would be saying to them, "why are you renting instead of buying".
I doubt there would be people buying rental houses if those figures were accurate.
$400 a month fopr maintenance + real estate taxes+ insurance --------
what is left for a return on investment to pay his house payment or to give him a return on his money?
Fuzzy math !
Fuzzy math. MARMAC, You have no idea what you are talking about. Obviously I am guessing on the magnitude of the expenditure. It might be $275, maybe it is $325 or possibly $425 per month once ALL of the numbers are rolled-up. We got to this point because someone said they spent $50 in the entire year and positively over simplified why it is the right time to buy.
The motivation for an investor to buy property and rent SHOULD BE to bet on appreciation all the while someone else is paying for the mortgage. So "cash flow" also means taking care of P of the PITI. And when some calls a property "cash flowing" many times they are really embellishing that they are only covering PITI. From an aco****ing standpoint, they are not calculating it propertly.
If it matters, any investor who really desires cash flow knows that single dwellings are nearly impossible to make an appreciable amount of $$'s. And it is location location location. Those are left to wannabees who have been reading those "Get Rich" books. The reason to buy a single family home now and rent it out is that you are betting on a nice bump in the not so distant future. The right way to make money is to buy an 8 plex (as an example).
Single family dwellings are best served in vacation areas where you can rent biweekly and market on such sites as VRBO.com. I own two homes on VRBO. The break even point is 10% on the purchase in Mexico and 7% in Minnesota because I can do my own check in and check out process.
Fuzzy math. MARMAC, You have no idea what you are talking about. Obviously I am guessing on the magnitude of the expenditure. It might be $275, maybe it is $325 or possibly $425 per month once ALL of the numbers are rolled-up. We got to this point because someone said they spent $50 in the entire year and positively over simplified why it is the right time to buy.
The motivation for an investor to buy property and rent SHOULD BE to bet on appreciation all the while someone else is paying for the mortgage. So "cash flow" also means taking care of P of the PITI. And when some calls a property "cash flowing" many times they are really embellishing that they are only covering PITI. From an aco****ing standpoint, they are not calculating it propertly.
If it matters, any investor who really desires cash flow knows that single dwellings are nearly impossible to make an appreciable amount of $$'s. And it is location location location. Those are left to wannabees who have been reading those "Get Rich" books. The reason to buy a single family home now and rent it out is that you are betting on a nice bump in the not so distant future. The right way to make money is to buy an 8 plex (as an example).
Single family dwellings are best served in vacation areas where you can rent biweekly and market on such sites as VRBO.com. I own two homes on VRBO. The break even point is 10% on the purchase in Mexico and 7% in Minnesota because I can do my own check in and check out process.
----"Obviously I am guessing on the magnitude of expenditures. It might be $275---------"
Sounds like you're back pedaling from a previous post when you stated $400 a month would be a minimum !
Fuzzy math. MARMAC, You have no idea what you are talking about. Obviously I am guessing on the magnitude of the expenditure. It might be $275, maybe it is $325 or possibly $425 per month once ALL of the numbers are rolled-up. We got to this point because someone said they spent $50 in the entire year and positively over simplified why it is the right time to buy.
The motivation for an investor to buy property and rent SHOULD BE to bet on appreciation all the while someone else is paying for the mortgage. So "cash flow" also means taking care of P of the PITI. And when some calls a property "cash flowing" many times they are really embellishing that they are only covering PITI. From an aco****ing standpoint, they are not calculating it propertly.
If it matters, any investor who really desires cash flow knows that single dwellings are nearly impossible to make an appreciable amount of $$'s. And it is location location location. Those are left to wannabees who have been reading those "Get Rich" books. The reason to buy a single family home now and rent it out is that you are betting on a nice bump in the not so distant future. The right way to make money is to buy an 8 plex (as an example).
Single family dwellings are best served in vacation areas where you can rent biweekly and market on such sites as VRBO.com. I own two homes on VRBO. The break even point is 10% on the purchase in Mexico and 7% in Minnesota because I can do my own check in and check out process.
--" You have no idea what you are talking about"--
What a coincidence !
I was going to say the same about you after reading your posts, but I bit my tongue cuz I'm a nice guy
Here is a pic from one of the houses.
This one is $119K because it is the larger model with over 2100 living.
Those are corian counter tops and wood cabinets with tile in the kitchen and nook.
Aren't tile, corian and wood cabinets normally an upgrade?
It also has a graden tub, 30 year dimensional shingles.
What's your point??
Here are some variables that we don't know about.
1.) Is it a Short sale?
2.) Did the bank put it under market attempting to get more for it (lost leader).
3. ) Is the HVAC still present?? Did the past owners do damage?
4.) Mold (or in the North frozen pipes)??
Mike, have you ever looked at a great looking property on MLS with an aggressive price that is beat up (but looks good on paper)? Pick any town in the USA, I'll email you some jaw dropping "values". So if your picture was meant to offer proof, you would have to physically have visited that home and that specific neighborhood. I'm sure we can find some real beauties in Detroit area for $60K. So what.
Now. Maybe you live in an area like Lehigh Acres. I can show you some stunning deals for $80K. But there is a reason why no one wants to live there.
Mike. I've looked at several homes in Tampa, Venice, Punta Gorde, Naples, Fort Meyers, along the western coast. I looked in Jan of 07 for a week and in December of 08 for a few days. MY cup of tea is Naples. I'm very familiar with that white looking cabinets and so are you.
My check book is still closed. Those steals that I have looked at so far have turn into mold infested nightmares or with missing fireplaces. One nice Naples carrage home on golf courses enjoyed the "nuturing sounds of the interstate". Hey. Maybe you are right and that $119K home is typical and it is in a wonderful area. But I bet if I dig a little deeper, I'll find my reasons why this is at $119K. So go ahead and pass on that MLS #. Let's see what I find out about it.
Back to the initial dispute. You say replacing the filters resuts in dodging problems and planting $2 shrubs means quality landscaping. Now how can I debate that kind of logic? Your right. buy a 2007 home and it costs the same as renting.
--" You have no idea what you are talking about"--
What a coincidence !
I was going to say the same about you after reading your posts, but I bit my tongue cuz I'm a nice guy
I'll be nicer. I shouldn't have questioned your farm house experience when it comes to real estate. I could learn a thing or two about real estate from a guy like you. Please continue to share.
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So a 1968 freezer will still be running today while a 1998 freezer is already dead. Just ask a appliance tech. 
It's because newbies roll-up the numbers like our friend Mike the Realtor. And they think it cash flows (or in his case, it is cheaper to own).
They lose money without knowing it and they sell it to the next uneducated person who repeats the mistakes.
You said "Small things" like landscaping costs?? Small things???
The question is what will happen not if. Or maybe it is because I looked at my checkbook log and remembered that it costs a lot more than I remember. $20 here, $50 there, and a couple hundred in another spot adds up quickly. It's the answer to "where does it all go". It "goes" $40 at a time. 
