is it OK to rent "forever"? (Oakland, Daly City: real estate, 2015)

[RoadLessTraveled2015]

Is renting forever in the Bay Area throwing money away? Is there anything wrong with renting forever?

[aslowdodge]

Of course not . If it fits your budget and lifestyle then do it.

[mysticaltyger]

Nothing wrong with it. The key metric to look at is NOT renting vs. owning. The metrics to look at are: 1. total housing costs as % of income and 2. Total savings as a % of income. For renters, the housing cost is really easy to calculate. Homeowners typically underestimate how much their total housing cost is (especially the 'my house is an investment' crowd).

The problem renters have isn't that they rent per se. It's that their rent gobbles up too high a % of their income (1/3 of gross income is too high. It needs to be 25% of gross or less if you actually want to save a decent % of your income). Renters tend not to save the difference between their rent payment and what a mortgage payment and taxes would be. That's partly because they don't have as much income (in aggregate) and partly because even when they do, they still tend not to save/invest the difference.

In the Bay Area, you definitely want to rent for less than the landlord qualifies you for--generally a lot less. That's because they WILL jack up the rent, and you want to be able to easily afford those rent increases.

I highly recommend reading these blogs about financially successful renters who were able to retire in their 30s. Good salaries, living in modest rental apartments (in expensive areas like Toronto & Seattle) and then moving somewhere cheaper was part of their strategy. You don't have to be like them. But you do need to understand that real financial success is about saving money in real investable liquid savings, which owning a house is not. Rental real estate that you don't live in is a different story.

https://www.millennial-revolution.com/

https://www.gocurrycracker.com/

[anomoly]

Having to ask for permission is what I consider wrong.��

[mysticaltyger]

Originally Posted by anomoly

Having to ask for permission is what I consider wrong.��

[expatCA]

Originally Posted by RoadLessTraveled2015

Is renting forever in the Bay Area throwing money away? Is there anything wrong with renting forever?

If you do not know the answer, don't do it.

[llowllevellowll]

I rent an apartment in an older, rent-controlled building in downtown and I love it. I wouldn't purchase anything in this market right now.

However, I do recommend familiarizing yourself with other markets around the country so that you can invest in their income properties while also saving away more in your IRA/401k vehicles. If you're not doing either of the latter yet, then you need to focus on those goals in the next few years.

[Perma Bear]

Originally Posted by RoadLessTraveled2015

Is renting forever in the Bay Area throwing money away? Is there anything wrong with renting forever?

Is it not possible for you to buy an east bay condo?

[llowllevellowll]

Originally Posted by Perma Bear

Is it not possible for you to buy an east bay condo?

Short story: About 7-8 years ago, there were relatively new condos in downtown Oakland and some in Emeryville that were $99,000 - $129,000. They're now all pushing $600,000.

The question to me isn't about what's possible, it's about value. If you do buy one now, I don't have to think too creatively to imagine a scenario where you're very quickly upside down. Worse, when factoring in your PITI and HOA, you can absolutely absolutely rent for much cheaper than you can buy.

So, if we're just talking finance, it's probably a much better idea to rent locally and purchase in other markets. When the market here cool offs (if it does), then I think that philosophy could shift in the other direction.

[Perma Bear]

Originally Posted by llowllevellowll

Short story: About 7-8 years ago, there were relatively new condos in downtown Oakland and some in Emeryville that were $99,000 - $129,000. They're now all pushing $600,000.

The question to me isn't about what's possible, it's about value. If you do buy one now, I don't have to think too creatively to imagine a scenario where you're very quickly upside down. Worse, when factoring in your PITI and HOA, you can absolutely absolutely rent for much cheaper than you can buy.

So, if we're just talking finance, it's probably a much better idea to rent locally and purchase in other markets. When the market here cool offs (if it does), then I think that philosophy could shift in the other direction.

Might wait a while before it cools off and you’ll be immune to being priced out. Plus you get to share in on the appreciation.

Also you can find ones for much cheaper than that even in prime cities like fremont or Daly City/San Bruno.