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You can't compare apples to oranges. If you can rent a nice 2 bed whatever, then you could buy a comparable condo.
You might have less money coming in from the smaller invested portfolio, but once the condo is paid for, you save 100% of your rent AND still have the equity from the great place you bought. Even before then, at any point in time, you could sell and cash out your equity.
not quite .... the difference between rent and the maintenance if we bought buying is 6k a year .... assuming i even paid cash the income given up is a minimum of 12k on what will be spent ...
the fact 350-375k is now equity and tied up in an apartment does us no good being retired where we live off cash flow ... we are better off renting and have been for the last 15 years .. our money we once had tied up in a house was used to buy a share in a commercial real estate investment business ... it generated enough to buy many homes today ...
so buying is not always going to be the best financially .
you need to break it in to two components , housing costs and then the investment side of a house or alternative .
housing costs can be higher when the investment side is bringing in a lot more
It's too expensive to buy in the Bay Area. Is it okay to "rent forever" or is it money thrown out?
If you're paying for and getting decent shelter, whether buying or renting, how can your money be "thrown out"? It costs what it costs in any given market. So if you want to be in the Bay Area, you have to pay the going price.
If you are talking about real estate as an investment, that's a lot more complicated. I would point out that in places on the west coast with very high housing prices, one of the reasons for the high prices is people investing in real estate. So, assuming they are savvy investors who reap their profits, then the money certainly isn't "thrown out".
BTW, most financial advisors will tell you not to rely on your house as your primary investment. Most people do anyway, but it's not a great idea.
...housing costs can be higher when the investment side is bringing in a lot more
For the 60 and abve? Sure. But hey aren't the audience here
These folks are 30+ years from using investment income (if they have any at all) for more than drips.
Quote:
Originally Posted by jacqueg
If you're paying for and getting decent shelter, whether buying or renting,
how can your money be "thrown out"?
When that 'decent shelter' chews up too much of their net income...
meaning they can't have the other nice things they need... starting with the retirement save/invest choices.
Quote:
It costs what it costs in any given market.
So if you want to be in the Bay Area, you have to pay the going price.
The Q is whether they NEED to be. There. And/or for how long.
Don't volunteer to spend more than X% of the net income to make it work. Anywhere.
When that 'decent shelter' chews up too much of your net income...
meaning you can't have the other nice things you need... starting with retirement save/invest choices.
The Q is whether they NEED to be. There. And/or for how long.
Don't volunteer to spend more than X% of the net income to make it work. Anywhere.
All true.
But that wasn't the question.
Renting may be the best economic choice for one person, while buying is the best economic choice for another. And the best economic choice now for any given person may or may not be the best economic choice for that same person 10 years from now. And moving might well be the best economic choice of all. But in any case, you are not throwing out money when you pay for, and get, decent shelter.
For the 60 and abve? Sure. But the audience here?
These folks are 30 years from using investment income (if they have any at all) for more than drips.
When that 'decent shelter' chews up too much of your net income...
meaning you can't have the other nice things you need... starting with retirement save/invest choices.
The Q is whether they NEED to be. There. And/or for how long.
Don't volunteer to spend more than X% of the net income to make it work. Anywhere.
Logical advice is logical advice irrespective of the audience .....facts and math are what they are ...who it applies to or who it is a good idea for is a totally different issue.
100% equities has worked better or at least as well as 50/50 portfolios in retirement but that does not mean everyone should be 100% equities in retirement but the math is the math
based on facts not in evidence isn't logical or advice
It certainly is based on evidence ...you can look at all 119 30 year cycles to date and see the results if you are talking about 100% equities in retirement...we just choose to take a milder path ..
If you are talking renting and investing elsewhere , I am living evidence as well as about 3/4 of the building we live in ... many choose to own businesses , or investment properties as opposed to a home
If you take some of your investments and buy a place, you don't have the expense of rent anymore and therefore don't need as high of cash flow income.
Rent is throwing away money in terms of losing equity. Your income is your biggest wealth builder and paying rent makes it disappear forever. If you buy a place it isn't thrown away because you still have that money in equity. So after 15 years of paying rent, you either have $0 or you have $0 plus the value of all that equity. That's a BIG difference.
People are trying to ignore some very strongly supported realities by assuming certain risk tolerances, investment returns, comparing apples to oranges in terms of the home being rented vs bought, providing half the information relevant to their claims, etc. The reality is that rent is throwing away money. There are times when it makes sense, absolutely. But doing so endlessly is NOT one of those exceptions.
Most investments don't outweigh the guaranteed lower cost of living that a paid-for home provides. If they do, they're risky. Risky means it doesn't work as well for everyone. For every couple of people on here talking about their great investments and blah blah, there are more who lost or almost lost it all because of that risk. If people want to play the math game and keep the roof over their head at risk because they can probably get a slightly higher return than their interest is costing them and hope everything goes as well as it could or else it all comes crumbling down, that's their choice. But people shouldn't be giving half answers leading others to think that it's smart to pay rent for the rest of their lives.
If you take some of your investments and buy a place, you don't have the expense of rent anymore and therefore don't need as high of cash flow income.
Rent is throwing away money in terms of losing equity. Your income is your biggest wealth builder and paying rent makes it disappear forever. If you buy a place it isn't thrown away because you still have that money in equity. So after 15 years of paying rent, you either have $0 or you have $0 plus the value of all that equity. That's a BIG difference.
People are trying to ignore some very strongly supported realities by assuming certain risk tolerances, investment returns, comparing apples to oranges in terms of the home being rented vs bought, providing half the information relevant to their claims, etc. The reality is that rent is throwing away money. There are times when it makes sense, absolutely. But doing so endlessly is NOT one of those exceptions.
Most investments don't outweigh the guaranteed lower cost of living that a paid-for home provides. If they do, they're risky. Risky means it doesn't work as well for everyone. For every couple of people on here talking about their great investments and blah blah, there are more who lost or almost lost it all because of that risk. If people want to play the math game and keep the roof over their head at risk because they can probably get a slightly higher return than their interest is costing them and hope everything goes as well as it could or else it all comes crumbling down, that's their choice. But people shouldn't be giving half answers leading others to think that it's smart to pay rent for the rest of their lives.
nonsense ... i already showed how renting gives us more cash flow in our situation in retirement ... that 350-400k no longer working for us spent to buy has a huge cost in income given up . in fact a minimum of 15k a year ...saving 6k a year and giving up more in income is not a win .
you are trying to generalize with silly statements like renting is throwing out money without looking at situations where it certainly isn't .
in fact it is only the fact we rented and could deploy the money not tied up in a place in to a partnership in commercial real estate that was so lucrative we could buy multiple homes today .
so simple answers to what could be complex situations are going to be wrong answers. renters are a mixed group of very poor and very wealthy ... are the poor throwing away rent money ? possibly but they may have no choice to buy .... are others with the resources to buy who decide to buy a lucrative business instead with the money are not throwing rent money away , they are deploying that money they would have plunked down else where ,so your one size fits all statements fail.
in fact just look at the tristate area , new jersey , new york and Connecticut ... when we bought homes in long island they were 30-35k back in the 1970's .. today those mortgages are long gone and taxes are 12-18k ..
so the fact you have a paid off mortgage today added near nothing to affordability .. that mortgage payment does not even cover the utilities today .... so please , stop with generalized statements .
everyone situation is going to be different and many renters are not idiots ..renting enables them to do better things with the money. the more money someone has to work with the more options are open as to what they want to do with that money
Last edited by mathjak107; 08-06-2019 at 08:42 AM..
If you take some of your investments and buy a place, you don't have the expense of rent anymore and therefore don't need as high of cash flow income.
Rent is throwing away money in terms of losing equity. Your income is your biggest wealth builder and paying rent makes it disappear forever. If you buy a place it isn't thrown away because you still have that money in equity. So after 15 years of paying rent, you either have $0 or you have $0 plus the value of all that equity. That's a BIG difference.
People are trying to ignore some very strongly supported realities by assuming certain risk tolerances, investment returns, comparing apples to oranges in terms of the home being rented vs bought, providing half the information relevant to their claims, etc. The reality is that rent is throwing away money. There are times when it makes sense, absolutely. But doing so endlessly is NOT one of those exceptions.
Most investments don't outweigh the guaranteed lower cost of living that a paid-for home provides. If they do, they're risky. Risky means it doesn't work as well for everyone. For every couple of people on here talking about their great investments and blah blah, there are more who lost or almost lost it all because of that risk. If people want to play the math game and keep the roof over their head at risk because they can probably get a slightly higher return than their interest is costing them and hope everything goes as well as it could or else it all comes crumbling down, that's their choice. But people shouldn't be giving half answers leading others to think that it's smart to pay rent for the rest of their lives.
The bolded is false, as anyone who has ever owned a home knows.
IME, you should save approximately a third to a half of your mortgage payment every month to pay for taxes, maintenance, possible assessments, and future improvements for your dwelling. Once you account for those expenses, rent for a similar dwelling could be cheaper. Not to mention much less hassle.
No one shelters for free, even if they're living in a van down by the river. If you're relying on your home equity for your retirement, as many people do, how much money you net depends entirely on market conditions when you sell.
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