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Old 08-27-2019, 09:25 AM
 
136 posts, read 104,183 times
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Quote:
Originally Posted by 80skeys View Post
Or you can go farther out to the small towns in the western foothills of the Sierra, where property is much lower priced compared even to Tracy.
Sure he could. But I doubt that commute would be practical. Not that Tracy is much better.

 
Old 08-27-2019, 08:46 PM
 
1,203 posts, read 828,774 times
Reputation: 1391
Quote:
Originally Posted by 80skeys View Post
You throw away money on rent, but you also throw away money on interest payments on a mortgage. Let's do a quick back of the envelope calculation: you borrow $250k at 4% 30-year. Over the lifetime of the loan you pay $180k in interest and let's say $3k/year in property taxes. But you also have some interest deduction on your personal taxes due to home ownership so let's just say it pays for hte property taxes. There's also some other costs to home ownership you don't have as a renter - upkeep, maintenance - I don't know how much that would be, let's say $2k/year. so over 30 years you've "thrown away" $240k. This is equivalent to 240 months of renting at $1000/month. 240 months = 20 years.

So in this scenario 20 years is the break even point - you have to wait 20 years before you see any financial benefit from home ownership versus renting in that case.
For this scenario. Other interest rates and property taxes will affect that number.

As shown above, it's only smart and solid if there's a reasonably quick break-even point versus renting. You have a life expectancy of 78, so if you buy an average priced home at 4% in your 20s to your 30s, then you can expect to arrive at the break even with a couple decades left before your life expectancy. In this case it makes sense.

But at higher interest rates or larger property taxes or the later in life you buy the home, it makes less sense. At 8% interest it makes no sense because it is financially completely equivalent to renting. You have to wait 40 years for that break even point. If you buy in your 30s, then you are barely arriving at the break even point by the time you die.
What a ridiculous load of gibberish. Let me help you out here since you seem to be confusing the issue. And we'll use my example since that's the one you were asking about. First off, the average a person typically pays for maintenance is $1 per sf (I know people on the renter side of the equation like to embellish on this but that is the average). In our case, that was $1070 per year as our house was 1070 sf.

The best case scenario for the renter was in year one when he paid roughly $700 per month less than the price of our impounded mortgage (that figure is net of tax benefit and maintenance). So the best the renter did was $8400 in the first year. By year 8, we were already at a breakeven with the renter due to rent increases (our mortgage stayed fixed). Fast forward 25 years and that renter is paying $2500 more per month on rent than our mortgage...so $30k more per year in rent. In just 5 years, that amount will be over $4k more per month or just under $50k more in rent. Keep in mind, we refinanced twice (something a renter can't do). The fact that you think you can even make an argument for anyone that bought at the time we did vs renting is simply an exercise in futility. No, the renter didn't do better (it wasn't even close) and our home is now worth roughly 3 1/2 x more than we paid for it. The benefit we will get going forward makes this whole argument laughable.
 
Old 08-27-2019, 09:16 PM
 
136 posts, read 104,183 times
Reputation: 102
Quote:
Originally Posted by JJonesIII View Post
What a ridiculous load of gibberish. Let me help you out here since you seem to be confusing the issue. And we'll use my example since that's the one you were asking about. First off, the average a person typically pays for maintenance is $1 per sf (I know people on the renter side of the equation like to embellish on this but that is the average). In our case, that was $1070 per year as our house was 1070 sf.

The best case scenario for the renter was in year one when he paid roughly $700 per month less than the price of our impounded mortgage (that figure is net of tax benefit and maintenance). So the best the renter did was $8400 in the first year. By year 8, we were already at a breakeven with the renter due to rent increases (our mortgage stayed fixed). Fast forward 25 years and that renter is paying $2500 more per month on rent than our mortgage...so $30k more per year in rent. In just 5 years, that amount will be over $4k more per month or just under $50k more in rent. Keep in mind, we refinanced twice (something a renter can't do). The fact that you think you can even make an argument for anyone that bought at the time we did vs renting is simply an exercise in futility. No, the renter didn't do better (it wasn't even close) and our home is now worth roughly 3 1/2 x more than we paid for it. The benefit we will get going forward makes this whole argument laughable.
This is true. Mortgages are mostly fixed but rent spikes up faster than incomes here.
 
Old 08-27-2019, 09:22 PM
 
Location: Knoxville, TN
5,818 posts, read 2,639,132 times
Reputation: 5705
Quote:
Originally Posted by JJonesIII View Post
What a ridiculous load of gibberish. Let me help you out here since you seem to be confusing the issue. And we'll use my example since that's the one you were asking about. First off, the average a person typically pays for maintenance is $1 per sf (I know people on the renter side of the equation like to embellish on this but that is the average). In our case, that was $1070 per year as our house was 1070 sf.
That's a joke, and laughable. My house is 2200sq feet. I've barely spent $200 on my house in 2.5 years we've been here, let alone $2200 a year. Air filters that I forget to buy are about all I can think of. Not saying I'll never have a big repair, but yeah.
 
Old 08-28-2019, 01:01 AM
 
1,203 posts, read 828,774 times
Reputation: 1391
Quote:
Originally Posted by Mister 7 View Post
That's a joke, and laughable. My house is 2200sq feet. I've barely spent $200 on my house in 2.5 years we've been here, let alone $2200 a year. Air filters that I forget to buy are about all I can think of. Not saying I'll never have a big repair, but yeah.
Keep in mind, $1 per sf is the most widely used metric if you were to do a search on home maintenance cost. The poster I was responding to is trying to claim we would have spent $50k on maintenance costs over a 25 year period. It would be interesting to see him try and justify that since no one in our area has an HVAC system. We still have the original heater and refrigerator. A roof should last you 25-30 years (so you might replace it once in a lifetime based on the estimate he's using). And you would be looking at an exterior house painting (some will do the inside, but it may not be necessary). We've replaced a washer and dryer once. Then you have some plumbing repairs and some misc repairs. But $50k?! Yeah, I don't think so. That quite an embellishment. The rest of his nonsense is not factoring in the savings on the difference between the rent and mortgage which is substantial throughout a lifetime in addition to the lack of appreciation of an asset for a renter.
 
Old 08-28-2019, 01:10 AM
 
Location: Santa Clara
240 posts, read 476,532 times
Reputation: 193
Quote:
Originally Posted by JJonesIII View Post
Keep in mind, $1 per sf is the most widely used metric if you were to do a search on home maintenance cost. The poster I was responding to is trying to claim we would have spent $50k on maintenance costs over a 25 year period. It would be interesting to see him try and justify that since no one in our area has an HVAC system. We still have the original heater and refrigerator. A roof should last you 25-30 years (so you might replace it once in a lifetime based on the estimate he's using). And you would be looking at an exterior house painting (some will do the inside, but it may not be necessary). We've replaced a washer and dryer once. Then you have some plumbing repairs and some misc repairs. But $50k?! Yeah, I don't think so. That quite an embellishment. The rest of his nonsense is not factoring in the savings on the difference between the rent and mortgage which is substantial throughout a lifetime in addition to the lack of appreciation of an asset for a renter.
In our case, we spent the first 7 years with barely any work at all. You can only defer maintenance for so long. When the roof started leaking through the kitchen we took advantage to remodel the kitchen, but had to replace to roof, starting by tearing down the three layers of roof that had been pasted on top of each other - a fourth layer would have been too heavy on the beams. Fortunately, no mold was found in the walls. After that, we had to tear down the carpets due to allergies and them being just plain dirty - installed before our time. Fortunately we could refinish the original hardwood floor that was below the carpet and the result looked like magic. When we decided to install a humidifier so we would stop having stuffy, even bleedy nose every morning in winter, turned out we had to replace the entire duct system. Fortunately, the contractor did not raise hell on the asbestos that all houses from the 50s have under their roof. So, $50k over a 25 year period is dead on in our case, but had you asked this the first 7 years, I'd have had the same reaction.
Now, of course if we'd rented, the landlord wouldn't have done any of that work. Yeah. That's why I'm happy we bought.
 
Old 08-28-2019, 01:27 AM
 
1,203 posts, read 828,774 times
Reputation: 1391
Quote:
Originally Posted by spicydreamt View Post
In our case, we spent the first 7 years with barely any work at all. You can only defer maintenance for so long. When the roof started leaking through the kitchen we took advantage to remodel the kitchen, but had to replace to roof, starting by tearing down the three layers of roof that had been pasted on top of each other - a fourth layer would have been too heavy on the beams. Fortunately, no mold was found in the walls. After that, we had to tear down the carpets due to allergies and them being just plain dirty - installed before our time. Fortunately we could refinish the original hardwood floor that was below the carpet and the result looked like magic. When we decided to install a humidifier so we would stop having stuffy, even bleedy nose every morning in winter, turned out we had to replace the entire duct system. Fortunately, the contractor did not raise hell on the asbestos that all houses from the 50s have under their roof. So, $50k over a 25 year period is dead on in our case, but had you asked this the first 7 years, I'd have had the same reaction.
Now, of course if we'd rented, the landlord wouldn't have done any of that work. Yeah. That's why I'm happy we bought.
I actually didn't say anything about "deferring" maintenance. We repaired or replaced anything that needed it in a timely manner. That estimate is used because it is the broad average that is spent by most homeowners. I'm surprised none of the repairs you mentioned weren't covered by any insurance (and a kitchen remodel is not a repair...that's a choice you made). My insurance agent has always told me that although the roof would be on the owner, the water damage caused would be covered (that's been the case with ruptured pipes also).

https://www.realtor.com/advice/home-...nd-roof-leaks/

With that said, I happen to think your situation is more the exception and not the rule.

https://www.thebalance.com/home-main...-budget-453820

The Square Foot Rule

A general rule is that you should budget $1 per square foot per year for maintenance and repair costs. If you own a 2,000-square-foot home, for example, budget $2,000 a year for maintenance and repairs.

This rule makes slightly more sense than the 1 Percent Rule because it's directly related to the size of the home. The more square feet you’re managing, the more you’ll need to spend. However, one drawback to this rule is that it doesn’t account for labor and material costs in your area. The market prices for contractors, labor, and building materials can vary significantly from region to region.


That comes out to closer to $26k in our case and I think that is in line with most people I know.

Regardless (as I don't want to get too caught up on this), even at $50k, it still does not change the fact that the renter did substantially worse in our situation (it would only bump up the calculation about $165 a month and the renter would still be far behind). Hard to make a case for someone currently paying $30k more in rent in route to $50k.

Last edited by JJonesIII; 08-28-2019 at 01:41 AM..
 
Old 08-28-2019, 01:52 AM
 
1,203 posts, read 828,774 times
Reputation: 1391
I might also add that this is a great example of some of the embellishment I'm talking about from renters (figure I'll nip it at the bud before someone claims this nonsense). Let's look at this chart trying to claim these are the monthly costs of a homeowner....



Property tax and insurance are already included in an impounded mortgage amount and factored into my example in post #75 (non-factor). Keep in mind that renters also pay renters insurance (so technically you could probably drop that number in half for homeowners...but I left it in my example).

PMI - We put down 20% (non-factor)

Snow removal and lawn care - We have neither (non-factor)

HOA - None (non-factor)

Utility bill - since when didn't a renter pay his own utilities? So yes, it's part of the monthly costs but you can't just escape that as a renter

So now we're left with just the repairs. They are using the 1% rule and I am using the square footage rule, which I feel is more accurate based on the statement in the previous post.
 
Old 08-28-2019, 02:12 AM
 
Location: Knoxville, TN
5,818 posts, read 2,639,132 times
Reputation: 5705
Quote:
Originally Posted by JJonesIII View Post
I might also add that this is a great example of some of the embellishment I'm talking about from renters (figure I'll nip it at the bud before someone claims this nonsense). Let's look at this chart trying to claim these are the monthly costs of a homeowner....



Property tax and insurance are already included in an impounded mortgage amount and factored into my example in post #75 (non-factor). Keep in mind that renters also pay renters insurance (so technically you could probably drop that number in half for homeowners...but I left it in my example).

PMI - We put down 20% (non-factor)

Snow removal and lawn care - We have neither (non-factor)

HOA - None (non-factor)

Utility bill - since when didn't a renter pay his own utilities? So yes, it's part of the monthly costs but you can't just escape that as a renter

So now we're left with just the repairs. They are using the 1% rule and I am using the square footage rule, which I feel is more accurate based on the statement in the previous post.

LOLLLLLLL Where did you get that? An apartment complex? I had to open a new window browser to look at it just to refute it because it's so ridiculous.

Let's see...

-I have no HOA, and would die before ever living in one. So, $0.

-Repairs, none. Not saying it won't happen and isn't a part of it, but nothing so far. Lived in my house 2.5 years. Any smart consumer would get a top dollar inspection and not buy a crappy house. Still $0

-Utility Bills? Um, renters pay that too last time I checked. My rental townhouse power bill was more than my house, bc townhouses are such POSs. But yes, my power bill is about $200. I have a $200 cable bill, too, but that's a luxury. They charged a flat water bill at said townhouse of $68, which was ridiculous. My water bill is always $45. But I'm not counting any of this because I've never NOT paid utilities as a renter. Still, we're at $0

-My home insurance is $100, but that's already factored into my mortgage payment. Doesn't count. So, still we are at $0.

-No PMI. Still $0.

-Property tax? $111/mo, but that's also factored into my mortgage. I'm not counting it. Still at $0 here.

-Lawncare and snow removal? It doesn't snow here and I spend $5 every month on gas for my mower.

So we're at a grand total of......FIVE DOLLARS! This chart is only off by $1199.

Gosh what a sucker I am, as a homeowner. I'm putting my house on the market tomorrow and renting for the rest of my life.
 
Old 08-28-2019, 02:44 AM
 
7,489 posts, read 4,895,982 times
Reputation: 8031
Quote:
Originally Posted by RoadLessTraveled2015 View Post
Is renting forever in the Bay Area throwing money away? Is there anything wrong with renting forever?
The difference between people who rent forever and those who pay the same money into a mortgage is that the latter owns something at retirement age. Don't be one of those people who calls an old friend to suggest that you stay a bit because they have a roof over their head. Plan for your future.
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