U.S. CitiesCity-Data Forum Index
Covid-19 Information Page
Go Back   City-Data Forum > U.S. Forums > Florida > Tampa Bay
 [Register]
Tampa Bay Tampa - St. Petersburg - Clearwater
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 03-30-2010, 11:25 AM
 
Location: Myrtle Beach
3,380 posts, read 8,181,879 times
Reputation: 2930

Advertisements

Before you start... yes, I know buying is cheaper than renting in the long run. But looking at home prices in the Tampa area, figuring in property taxes and insurance it looks like it is a heck of a lot cheaper per month out of pocket to buy right now than it is to rent. When I owned a home in Austin it was sort of the opposite. Renting was less expensive at the time than buying but you knew eventually the rent would go up while your payment stayed the same and you developed equity (didn't work so well here in Florida...the equity part). So let me ask you guys..... or is it just me.... does it look like you can save HUNDREDS per month by buying?
Reply With Quote Quick reply to this message

 
Old 03-30-2010, 11:57 AM
 
5,453 posts, read 8,122,591 times
Reputation: 2141
AK...it is all relative...meaning it could BE cheaper IF:
Your credit is REALLY good and you get a really low interest rate on your loan
IF the house you buy is in a good area, meaning close to shopping, entertainment, good schools...
IF the house you buy doesn't need costly repairs (roof, AC unit etc)
IF you're not in a flood/sink hole zone...so your insurance goes through the roof

So, yes, in theory it could be...but then...if you want to move in a few years, you'll have to go through selling etc...so basically you'll be renting it from your mortgage company except unlike actual renting you'll be paying taxes and ins on it.....! My 0.2!
Reply With Quote Quick reply to this message
 
Old 03-30-2010, 12:23 PM
 
15,760 posts, read 32,831,300 times
Reputation: 19733
Buying has ALWAYS been cheaper for us - and we have owned a lot of homes. But then, our homes have always been fairly modest.

So, yes, buying CAN be cheaper, depending on your tastes and how "fancy" you want to live. Frankly, if you plan on being in a place for awhile, you should buy. of course things are "iffier" in this economy, but still, I am a person who has never had a "renter" mentality, and for me, owning was/is the only way to go.

Good luck whatever your do!
Reply With Quote Quick reply to this message
 
Old 03-30-2010, 12:26 PM
 
1,106 posts, read 2,034,040 times
Reputation: 954
The answer to this question is always.....it depends.

You can buy a nice condo in a resort community for $50k, and after adding in insurance, property taxes, maintenance fees, etc, it is still more expensive than renting. Had you paid $100k or more, the equation is even more skewed.

Buying is rarely cheaper than renting because of the exposure you have to big ticket items (I just spent $700 on sod today that I am installing this weekend).

That's what killed so many "investors" five years ago. They ran the numbers and found owning cheaper than buying, so they levered up. When insurance costs doubled and property taxes jumped 25% a year, they lost their shirts in a hurry.

In the end, it's a personal preference of how you want to pay for your housing expenses. Taking the bus is cheaper than owning a car, too.

You've got to stop using the "equity" term, though. It's only used by realtors that can't do math.
Reply With Quote Quick reply to this message
 
Old 03-30-2010, 12:44 PM
 
5,453 posts, read 8,122,591 times
Reputation: 2141
Thank you.........soo true!


Quote:
You've got to stop using the "equity" term, though. It's only used by realtors that can't do math.
Reply With Quote Quick reply to this message
 
Old 03-30-2010, 12:51 PM
 
2,726 posts, read 4,587,347 times
Reputation: 2341
I would say 90% of the "is buying cheaper than renting?" question is easy to answer based on economics provided that you compare apple to apple. For example, people tend to buy bigger houses than they rent and that's is not a correct comparison. You would have to also make assumptions on rent trend in an area once you know the $ now as well as how long you want to stay in the house. It is quite involving but doable even adding all those maintenance cost, taxes, insurance, tax breaks bla bla.

The most difficult part of the comparison is things that are difficult to put monetory value on them: I want to do what ever I want with my house and I am not subjected to some mad land lord who may hike the rent or go to foreclosure and forced to move out, or for renters I can pack and move anytime I want (just a cost of breaking lease) without incurring a lose in the current market. Or some would say it is a forced saving because even though I can rent cheap I know I won't put the extra money into an investment consistently to realized the benefit of cheap rent.

Others also think even if renting is expensive than buying (as it seems to be for some now) that extra cost is an insurance against a sudden job loss or transfer that you won't have a headace unloading the house.

So, after all this, like others said: it depends and you need to analyse your personal situation and the risk you tolerate taking in.
Reply With Quote Quick reply to this message
 
Old 03-30-2010, 01:45 PM
 
1,500 posts, read 2,906,093 times
Reputation: 1228
So far I've picked up two houses in Tampa in an area which didn't bubble all that much but sure did crash along with the rest of'm. Had I a mortgage, at current rates, the rents on just the smaller of the two would pay almost the entire mortgage on both. Add to that another few hundred a month for maintenance, insurance & taxes before I homestead, significantly less afterwards, and I'd be paying about 1/3rd what it would cost to rent just the larger of the two without owning either.

Given today's investment environment and considering that everything's a gamble, I don't feel as if I've lost opportunity costs in buying here, as given a housemate for the bigger house, since I'm tired of living alone anyway, and renting out the smaller house, I'll be making about 5% on my money, including my extravant garden and even after paying taxes & insurance.

Looked at another way, in consideration of the price to rent ratio for 1999/2000, which probably can be used as a fundamental because for a decade before the ratio was stable and the bubble started to rise significantly in 2000/2001 (the Tampa factor is about 12.4 for that year, i.e., it took $12.4 to buy for every $1 to rent), then the price I paid for the houses is about 1/2 what the 1999/2000 ratio suggests ought to have been the fair market price today and that accounting for the rents which have also crashed. Even after I fix it up to just a very nice rentable standard, I'm still 42% ahead of that game. Though I intend to do extensive gardening (irrigation well, fencing, planting, hardscape, etc.--mine's going to make Busch Gardens look like amateurs) so I'll wind up "only" about 36% ahead of that game.

Finally, had I a 90% mortgage at 5.5% fixed rate, according to this calculator http://www.nytimes.com/interactive/business/buy-rent-calculator.html# , I'd be better of buying than renting after just the 1st year, assuming no inflation. And by year five I'd be $6k/year ahead of the game.

That calculator can be very eye opening. Because let's assume a very bad situation. Let's say that housing prices depreciate 5% per year instead of appreciating. And let's assume normal 3% inflation rate on rents (even though that's lower than normal but just to give a number). In that horrible case, then not only would I have been better off buying by the fourth year anyway, but by the sixth year I'd be ahead of the game by about $3k annually and by the 10th year by more than $7k annually, even with prices still dropping which I don't know of course but seriously doubt will be the case, considering that Tampa is already figured to be 16% below theoretical bottom (that figure shown in one of my prior posts with its source on another thread--feel free to search it).

Now if we assume some sort of bottom and housing appreciating at the normal inflation rate of about 3% annual, as well as rents going up with inflation, then not only am I better off by year one, but by the fifth year I'd be ahead of the game by $12k annually & in 10 years by $16k annually. (Note that I increased my tax rate in the calculator to account for insurance costs.)

So, um, yeah, it looked to me like it was cheaper to buy than to rent. And that's just what I did. Since buying, three area comps have sold for at least 20% more per sq ft than what I paid even while Tampa is said to still be on the decline. Woe is me.

Denudin makes some good points as to the difference of freedom to do with your own property as opposed to the freedom to leave a property. Basically I look at this similarly as I do with cars. If I was going to only hold onto a car for two or three years, then I'd lease. But if I am holding onto a car for five years or longer, I buy.

Last edited by housingcrashsurvivor; 03-30-2010 at 01:57 PM..
Reply With Quote Quick reply to this message
 
Old 03-30-2010, 01:55 PM
 
9 posts, read 17,834 times
Reputation: 10
not too sure about the buying part at least on the high end:

637 norton longboat key 637 NORTON ST LONGBOAT KEY, FL | MLS# A3920439 | SLEEPY LAGOON PARK NO 2 (http://sarasotashack.com/idx/residential/A3920439/details.html - broken link)

a newer good looking waterfront deepwater home

for sale- $1495000
for rent- $3950 per month

using the 20 to 15 ratio: whereby you take the yearly rent and divide it by the home price - if its over 20 you rent if its under 15 you buy (if you plan on staying there 7 yrs or less)

3950x12= 1495000/47500 = 31

$1495000 buying w 20% down you would have a piti of about 8-8.5k per month


so the question depends on the price range
Reply With Quote Quick reply to this message
 
Old 03-30-2010, 02:07 PM
 
1,106 posts, read 2,034,040 times
Reputation: 954
That calculator is not eye-opening. It's terrible.

I moved into a house a year ago and none of these expenses were included in that "calculator".

- transaction closing costs
- wind/fire insurance
- flood insurance
- landscaping maintenance/irrigation repairs
- painting
- hundreds of dollars in tools for ordinary maintenance
- a couple of replacement appliances
- new lighting fixtures (nobody likes the lighting in a rental)
- massive amounts of capital improvements (because you have the freedom to change whatever you want)

Plus, in case you've lived under a rock, rents are not "going up with inflation". They are dropping considerably. The investment condos I dumped a couple years ago are now getting about 25% less per month in rent (while the value of the condos themselves have fallen about 75% since then). The depressed real estate market is offering huge rental bargains. You can get rentals for a LOT less than the 12.4 own/rent ratio you quoted, even waterfront.

Your housing expenses (please, stop calling it an investment. It's an expense) is more expensive in the same way that your travel expenses are higher if you own a car instead of taking the bus. More freedom = more money.
Reply With Quote Quick reply to this message
 
Old 03-30-2010, 02:10 PM
 
1,500 posts, read 2,906,093 times
Reputation: 1228
Quote:
Originally Posted by sekrtoktb View Post
not too sure about the buying part at least on the high end:

637 norton longboat key 637 NORTON ST LONGBOAT KEY, FL | MLS# A3920439 | SLEEPY LAGOON PARK NO 2 (http://sarasotashack.com/idx/residential/A3920439/details.html - broken link)

a newer good looking waterfront deepwater home

for sale- $1495000
for rent- $3950 per month

using the 20 to 15 ratio: whereby you take the yearly rent and divide it by the home price - if its over 20 you rent if its under 15 you buy (if you plan on staying there 7 yrs or less)

3950x12= 1495000/47500 = 31

$1495000 buying w 20% down you would have a piti of about 8-8.5k per month


so the question depends on the price range
What that shows is how insane those people are to think they are still going to get their bubble prices. Your guy (in your example) is asking $409.14/sq ft. Not gonna happen today unless he finds a bigger fool to pay him.

I sold south Florida waterfront after the burst for $350/sq ft. It would have gotten about twice that at bubble peak. Since I sold, even the price I got looks bubbly as you'd might only get $2500/mth in rents were the house still there. The seller tore it down, built a minimansion and will be lucky to get the $350/sq foot he paid me.

Here's my favorite example of a deepwaterfront minimansion in south Florida. This is deepwaterfront, corner lot (two sides water) in a gated community with camera security even on the canals, easy walk to beach in one of the wealthiest towns of Florida. Asking price? $291.78/sq ft, 29% less than your Longboat Key house and nobody's buying this one either.

http://www.realtor.com/realestateandhomes-detail/5015-Blue-Heron-Wy_Boca-Raton_FL_33431_1101473195?mp=1

Last edited by housingcrashsurvivor; 03-30-2010 at 02:36 PM..
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Settings
X
Data:
Loading data...
Based on 2000-2020 data
Loading data...

123
Hide US histogram

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > U.S. Forums > Florida > Tampa Bay
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2020, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top