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Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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Short to mid term renting makes sense,
UNLESS you:
1) can assure equity gain (I recently BOUGHT a 'retirement home' in nice location cuz I got it for 40% off the market price, thus I can sell for a gain if needed)
2) desire to STAY (long term)
3) DO NOT Have an decent place to park your equity $$ that will grow / sustain your 'rental-habit'.
Good luck, the stock market / home ownership / income investments are all changing, so you will be 'plowing-new-ground' just like the rest of us.
Where is a place for cash assets that would not be linked ??
I had not even thought of the issue of what medical providers can and cannot take..
Don't know about other people, but our investments are tied in trust and can only be released under certain conditions. They are not taxable to us and not counted toward our income or assets under any circumstances until we dip into it. I cannot tell you what kind of trust they are since the older ones was set up more than six decades ago and the newer ones are handled by our legal-minded children.
If you can rent a $300K property (including the benefits of HOA fees: water, cable, sewer, trash, insurance, etc) for $1000 per month (10-years) ... AND if the housing market and depressed interest rates stay in the doldrums for the next 10-years, renting probably makes great sense.
However, if the RE market continues upward, it will likely also drive rental rates up and/or provide a level of appreciation and tax savings equal to or greater than rental receipts. Further, you may never see interest rates this low ... giving you the flexibility to buy at not much more cost than renting, leaving you money to invest ... and also giving you appreciation.
Why not pay 20-percent down on your $300K property, leaving you $240K to 'double over the next 10-years. This will leave you the option to make money on both house appreciation and your other investment/s... plus the flexibility to 'change horses' if one option proves stronger than the other.
I am 56, single and downsizing( if my house ever sells.)
I have changed my mind in the last few years about buying a smaller house,
with yard work & outside care needed..
So that leaves me deciding between renting an apartment verses buying a townhouse it seems..
In the area I want to be 1000/month apartments are very similar to 200K Townhomes, which makes the math easier..
If I buy a Townhome I will pay for it in cash, so I am figuring the cost to rent for 10 years
verses using 200K to buy and the cost of that with lost investment earnings, insurance,taxes,HOA fees,
upkeep & maintenance(replacing ac/carpet/deckrepairs/appliances).
For investment earnings I am assuming that 200K could double in 10 years..That seems conservative to me ..HOA fees are usually 200/month around here/ taxes are high..
Renting would cost 120K for 10 years
Buying would cost almost 300K.
Equity doen't matter because the 200K is either in the bank still or in equity..
What am I missing..
We have upscale apartments around here with luxurios amenities that feel like a resort, if I ever decide
I don't like apartment living I can change my plan, an apartment keeps me more flexible about moving somewhere else although I don't see that happening..
It seems everyone works hard to own by retirement but is it the best financial plan ??
Typing this in the sun, so forgive typos..Its hard to see the screen..
Markets in other asset classes have appreciated 4 to 5x more than residential real estate for more than 70 years.
The money tied up in the house and all its costs invested elsewhere can appreciate far more than any rent increases.
Don't forget most retirees who do not have a mortgage and real estate taxes rarely hit the 12k standard deductable as a couple. Many times they get to fly the empty seats and take a 12k deduction while spending but a fraction of that amount.
They actually get money back they never spent and can apply that bonus towards
Their rent.
On the other hand mr home owner actually pulled that money out of their savings to pay that mortgage interest and real estate taxes . That is over and above the cost of the house.
It is very complex to figure out what is better financially with lots of unknowns.
Forget about the money aspect as either way has the potential to work out just fine and buy a house for only the non financial reasons.
I like renting. My rent includes utilities and yard maintenance. If something needs fixing, I call the landlord. I have a good income and I plan on spending the money I got for my house to augument that income until the house money is gone. I may need to downsize one day to live on my income only.
Housing costs in retirement are more about cash flow than net worth.
A couple that housed a family in a rented 3 bedroom apartment and now moves to a one bedroom in a lower cost area can see the same improved cash flow a homeowner does once the mortgage is paid.
Whether a home is worth a million dollars or a few hundred thousand is a moot point if you live in it. All that counts is cash flow meets your needs.
I really think it does make sense for me ,
but its hard to get comments from people that say renting is throwing away money..
Since retirement, we have alternately owned and rented and we've found that we preferred renting. We don't see it as throwing away money since we do not like to live in any location for too many years, and owning a home is only good, financially speaking, if we stayed with the same house for a much longer term than we ever wished to do.
We also travel a lot and renting afford us to simply lock the door and go at a moment notice without worrying about whether the pipes would freeze or the deck is ready for the winter. Snow shoveling and spring planting are done by maintenance staff, and if anything needs repair inside our apartment, the cost does not come out of our pockets. Property tax and special assessment are also someone else's worry, not ours.
As far as the increase in rent, ours can only be increased at the maximum of 3% a year, which is about the average COLA increase for everything and everyone around us so we have not lost any sleep over it.
Last edited by Ol' Wanderer; 05-25-2013 at 04:35 PM..
I'm with the renting people, even though we presently own our home. When we retire - have no idea where to- we will be renting. Seems like a better option to me for a variety of reasons.
I don't see an inflation factor. Rents generally increase with time.
Good point..rent increases..
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