So what are the benefits of buying a house again?

[DowntownVentura]

Originally Posted by FelixTheCat

LOL at your vacation home. That's so 2004. Frivoulous spending on a vacation home is not an investment. Good luck with that Mr Savy Investor.

Any house or condo around me would cost about double to buy in monthly cost than to rent. But if you want to "invest" in a house in my area and pay the extra $1,000-2,000 a month that rent won't cover, then go ahead and knock yourself out. By the way, you need to come over and fix my toilet on Sunday morning, it's clogged again..enjoy!

Felix, I am pretty confident that most investors have worked the numbers and have come to different conclusions than you. Not every property will work as a rental, not every property will work as a vacation home, and not every property will work as an owner occupied home. But many do.

Your arguments have a lot of holes in them and all I will really say is I do not think home ownership is for you. You are free to rent and I hope you do very well. Many do in that role.

I will comment on the maintenance of a rental that you think overburdens landlords. For a non-emergency repair (such as a clogged toilet, particularly if there is another toilet), it gets scheduled. Nobody drops what they are doing to run over and fix these non-emergency issues. I think this puts the tenant at a disadvantage as they have to accept the service provided by the landlord. As an example, if a garbage disposal breaks, it may be a week before it is fixed whereas if you owned the property you could fix it or schedule to get it fixed right away.

Additionally, I use a property manager and I don't even hear about these issues until the statement comes.

I think you should realize that for every rental, somebody owns the property. For the vast majority, it is a profitable venture. If it wasn't, there would be no market. This is not new, I think it would have dawned on us that we have been losing money if your arguments were valid.

I will repeat that I think renting is the best thing for you. I will have as much success talking you into buying that you would talking me into renting.

[MikeJaquish]

Why try to sell someone on owning?
I don't see the point.
People make their own decisions and base those decisions on their own situations.

Trying to tell a renter they should own when they do not want to own is a waste of everyone's time.
I work with buyers who have already determined they will be owners.

[Doing It]

Oh, I forgot to mention that with the first house we purchased, we bought it for $81,900 and sold it 1 1/2 years later for $150,000. We were then able to purchase a much nicer house and although we only intended to live there for 2 years, ended up staying for 20 years. Again, we doubled our money in the sale and paid off a huge chunk of the mortgage (forced savings). I would hate to think of all that money being thrown down the drain paying off someone else's mortgage! As for our vacation home, when we purchased it we weren't sure what we would do with it: move to it? rent it out? use it as a cottage? As it turns out, we love the place too much to rent out (although that is always an option). But now we are considering purchasing a house down south and using our vacation home to live in the summer, and either selling or renting out our current home. Ahhhhh - life is good when you are making money which gives you options!

[Doing It]

Oh, and our renters are responsible for anything under $500...so a plugged toilet is their problem!

[PokerMunkee]

Here is my math (just bought a house) on why buying a home is better:

1. Buy home for $241,000
- 5.25% interest rate / 30 years
- 5% ($12,050) down
- Taxes $1700/year
- PMI $140/year
- Insurance $650/year

Total Monthly Mortgage $1,600 (rounded up a few bucks)

Lets say I live in this house for 10 years. Now lets calculate how much it cost me to live in this house for 10 years. I am going to add $2,000/year for maintenance and upgrades, so that's $20,000 in maintenance/upgrades for the 10 years. Could be lower, could be higher, but I think this is a good estimate.

So, $1,600 x 120 months (10 years) is $192,000. Add the $12,050 downpayment and the $20,000 in maintenance/upgrades, the total cost is $224,050, but we'll round up to $225,000. So the grand total of living in my house for 10 years is $225,000, yikes! After 120 months of making payments, the prinicpal balance on my loan is $187,620, but we'll round up to $188,000. Sweet.

Now let's say I sold the house for what I bought for it 10 years later (highly not likely, but let's just assume). Sold price $241,000 - $188,000 (what I owe on the house) = $53,000 in my pocket. So it cost me $225,000 - $53,000 = $172,000 to live there for 120 months, or $1433/month. Not bad for a 2700 sq. ft house that was mine. Now lets say I sold the house for $300,000 with a $59,000 appreciation in 10 years. $300,000 - $188,000 = $112,000 in my pocket. Even better. So it cost me $225,000 - $112,000 = $113,000 to live there for 120 months, or $941/month. I could probably at this point buy a condo for $112,000 somewhere in the good o'l USA for cash if I didn't want to carry a mortgage anymore, or at least put 60% down on a nice pad.

These calculations don't include tax savings but also don't include realtor fees/property taxes/insurance increasing. Definitely some margin for error, but it's still very close.

So my conculsion is that it will always cost you money no matter if you rent or buy. The goal is however to pay off the mortgage completely or make enough money in selling to buy a cheaper house in cash, which is how you win. But I think you can work the numbers out to show that buying will ultimately cost the same or even less than renting, so why not?

[almost3am]

[quote=FelixTheCat;10683602]I know owning a home is the American Dream, but why? From a purely unemotional view, I don't see the benefits.

1. It cost about 10% of a homes value to sell...

sometimes. I guess a smaller house it would be 10%, but a more expensive house it is probably ~7-8%. Also, thousands are relocated annualy (like I was) and there are low cost options from some agents, if you so desire

2. Due to 30 yr mortgages and low down FHA loans, most people can't afford to own a house...

The bank is the landlord, i guess, but the landlord gives you the home at the end and also allows you to gain/lose from selling it. He also lets you change whatever you want in the house, and if it adds value you get the value...so you can replace those gross, old sinks if you'd like. One apartment i was in in California, a guy upgraded the kitchen then moved a few years later and he had to bring the kitchen back to the way it looked originally...now THAT is a waste of money.

The people I know can afford their homes, as far as i know. My brother is looking to move into a rental from his house now, since he has changed his lifestyle and I agree that is the right thing for him. he can afford his house, but a smaller rental would be less of a burden for him than his 150 year old victorian. It is an emotional decision for him, though, as he loves his house.

3. You could eventually pay off the loan in 30 years, but most people move every 5 years. See above #1.

I have moved 2x in 5 years and have gone from a 2% down payment to a 25% downpayment...on a more expensive house. We buy houses that need some work, but not too much, and my wife loves decorating and I enjoy working on the house...to a point.

4. Prices could go up 20% in 5 years...

then sell and rent and pocket the profit, or sell and get a different house, if you can handle the payments, or don't sell and as you income rises your mortgage won't.

5. Tax deduction...

A few years ago i wouldnt have been able to itemize without the townhouse we had, so it put me over the standard deduction and allowed me to bring in more things for deductions. Not sure how much I made from this, but I know it made a differece in the first year.

6. I want to be in a good school district for my kids. Rentals are available in every school district.

True


Last, there are also many non-financial reasons why I buy, but you aren't interested in those so I will leave it at that.