Domicile-Rent vs. Buy

[Gotadimple]

HaHa,
Good decision -- as we discussed before. While condo values (whether apartment flat-style or townhouse-style) have dropped slightly in Seattle, most are holding their value, so finding a good buy downtown isn't likely (unless of course that $400mm is now selling for $360mm).

I suspect that when the housing market stabilizes, condo prices may hold steady while home values go up. It's a nice way to live, but not necessarily the least expensive way to live. There have been other threads about the own/rent question. There are many sides to the question, but the short answer is that even with owning a condo you still have interior maintenance to worry about.

While I own a townhouse and plan on living here for several more years, at some point I will want to sell it and use the proceeds to pay for apartment living until I can no longer live by myself. When you buy a place you are tying up $ that are not very liquid (at least not as liquid as investments) AND you have opportunity to make constant improvements, just as in a home.

-- Rita

 

[Darryl]

Youbet., moemg, erd50 captured it bettter than I ever could. For god's sake wake up man. Thank to bestwifeeever for the first picture and ha you are a renter for now please repost Jan 2010.

 

[haha]

These are all realy helpful posts. Thanks! I guess every now and then I just get an urge to complicate my life.

Ha

 

[chinaco]

Ha,

I have ask myself the same question several times with regard to retirement. Rent or own a primary residence. We have come to the conclusion that we should own (for lifestyle reasons).

If I were single, my decision would likely be different.


Here is a helpful article: http://www.nytimes.com/2008/05/28/business/28leonhardt.html
Here is a simple calculator that may be of some use from the money perspective: http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

 

[brewer12345]

Let's face it: if I did not have a wife and kids, I would not own a house

What, wife and kids can't live in a nice rented home? I would love to live in our house for only $2500.00 per month (tenant paid utilities), which is what we were able to rent it for while overseas. And not have to lift a finger!
My husband's parents never owned a home, nor did my grandparents. They all lived good lives and raised good kids who did well.

Or, did you mean you would not live in a typical "house," but a smaller dwelling? Micro Homes Tiny Houses
I love these, they make me think of the refrigerator and washing machine boxes I had fun making "houses" out of when I was little

Perhaps we are old fashioned or just "special," but DW and I highly prize stability for the kids as they are growing up. So while we could of course live in a rental, you lose a lot of control over your situation. The landlord could jack the rent too high. They could decide to sell the place out from under you. They could default on the mortgage and have the houseforeclosed on. And so on. Since I have kids, a spouse, dogs, a cat and a lifestyle in which stability is very important, owning my home gives me a lot more control/stability than renting does. Cost considerations are frankly secondary or tertiary.

 

[DangerMouse]

We are renters, every time we run the numbers renting comes up as the answer. However, that said, at some time in the future when we actually settle on the location we want to stay long term, it is likely we will buy, purely for emotional reasons rather than financial.

 

[calmloki]

...
In your place, I'd rent. Other than being able to make my own choice about when to move, I no longer see any advantage to home ownership. It's an expensive pain in the neck, and I get angry, thinking about how we fell for the conventional wisdom that home ownership is something worth sacrificing for.

Bitterness alert: Try to get an absentee landlord who is far away--overseas, if possible, so they can't come around and bother you--and has a property manager. They never inspect the property; so, if you don't like paying rent, invite 4 or 6 of your pals to sub-let from you; your landlord will never know the difference. ...

...
I would love to live in our house for only $2500.00 per month (tenant paid utilities), which is what we were able to rent it for while overseas. And not have to lift a finger!...

Wow. for a moment i was about to get all cranky - missed the bitterness alert. So that absentee landlord bit didn't work out all that well for you?
I love the tenant mindset. I like for rent to be be paid (on time would be a nice bonus), that the rental be kept in good order, and that tenants respect each other and avoid trying to make me play hall monitor. Keep trying to tell myself that in any group, be they ever so saintly, there will be better and worse members and a top and bottom 10%.

But honestly - frigging tenants - bunch of irresponsible pigs with entitlement mindsets. Whinny babies. While i prefer to treat people with respect, regardless of situation, there are a few that are about to learn that a vacant apartment has a lot less effect on my life than it will on theirs. Sometimes it does my evil side good to think of someone dragging an eviction around with them for the next number of years. A trashed apartment takes me a little time and money, then it's good. An eviction has staying power.

 

[ls99]

Since age 23, with very few gaps I always owned a house. Relatively small ones. Having gotten married later in life, I can state with certainty that owning a house when single is infinitely less complicated.

Incidentally I refused to buy houses in HOA controlled areas and never will. HOA is an automatic disqualifier.

A few times of living in apartments, for very short periods, have cured me of ever wanting any sort of "close quarters" living. Neighbors, good or bad, within earshot is not my idea of comfort. Not to mention "the rules" the come with apartments and condos.

Even if I outlived DW I'd either keep this house or trade for a smaller one. And if finances became truly dismal, a trailer would be the choice on a 1/2 acre minimum.

But then again I don't care for city living, never did.

Though if I lucked into an industrial building, with a working freight elevator to the top loft, I might be persuaded. That happening is as likely as the DOW at 50000 in the next year.

 

[2B]

Ha,


Here is a helpful article: http://www.nytimes.com/2008/05/28/business/28leonhardt.html
Here is a simple calculator that may be of some use from the money perspective: http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

This guy basically switched from a committed renter to a buyer based on a little drop in house prices. A ratio of buy price/annual rent of 15 got him swooning.

In my case the $250,000 asking price should be a buy when the rent is above $1389/mo. In Houston that will always be the case but I think his "rule of thumb" leaves out things like the horrific Texas property taxes. Right now I'm spending about $2,200 every month to live in my house. That doesn't include any amortization for replacing carpet/tile, roof, painting, etc. I'd need to rent this beast for at least $2,800. That would create a price/rent of 7.4. At that ratio he'd be falling all over himself to buy. At 15 he'd be happy buying my house for $500,000. Why isn't he contacting me with an offer?

What I've seen in the market is that I can rent a similar house for $1600 to 2000/month. That tells me the rental market is pretty soft. I suspect most landlords either have properties they bought years ago or are cashflow negative hoping to make money in appreciation.

 

[harley]

Sometimes it does my evil side good to think of someone dragging an eviction around with them for the next number of years. A trashed apartment takes me a little time and money, then it's good. An eviction has staying power.

So, what does an eviction do to someone? Screw up their credit report, I assume. Anything else? DDs ex-boyfriend/father of her daughter got evicted from his subsidized apartment, and I was wondering what the baggage from that would be.

 

[calmloki]

So, what does an eviction do to someone? Screw up their credit report, I assume. Anything else? DDs ex-boyfriend/father of her daughter got evicted from his subsidized apartment, and I was wondering what the baggage from that would be.

Evictions should pop up on any screening that is done when he looks for a new apartment and make it difficult for him to rent from most people. People with evictions are pretty savvy about that and rent with and in someone else's name (like, say, your DD's) or find a mutt like me that doesn't do credit checks/tenant screenings or is a sucker for a good story of redemption. 'Course, from your other thread, with any luck his living arrangements should be taken care of for a while and after that time the eviction will be only part of the difficulty in getting a place to live....

 

[Moemg]

If I sold this house I would like to try renting for awhile on Anna Marie Island . I 've always wanted to live where I could walk to the beach but I have no interest in owning there . Prices are too high and insurance & property Taxes are insane .

 

[Urchina]

If I was single at this point (no kids) I'd be a lighthouse keeper. Always wanted to do that.

Ha, another benefit of extending your lease a year is that you will be bargaining from a position of increased strength should you find a place to buy. You don't need a new place to live, so you can walk away if you want. That's worth the possible cost of breaking the lease right there.

 

[Brat]

HaHa, stay a renter for now but start "looking" at condos even if you aren't in the market. My rationale is that you can learn a lot about individual buildings and their issues during the exploration process. I presume you visit the Seattle Bubble Forum from time to time (no gossip there about specific buildings, however).

I researched buildings for my brother in Portland last year. For those who hate associations and covenants, the best buildings were those with the most restrictions and strong Boards. They had great maintenance and solid reserves. He purchased a unit in the building his girl friend calls "Mother may I". Portland's counterpart to Seattle Bubble is the Portland Housing Blog.

 

[mathjak107]

although we call a home an appreciating asset its part of a much larger picture called your overall housing costs... because you live in it these costs are all paid by you and accumulate over a lifetime unlike rental property or investment property which you pay off the income . . the rise of the house in value over time merely offets the giant lifetime expenses of all the costs a homeowner has for the priveledge of owning that home..... your taxes, mortgage interest, repairs,renovation,maintaince,landscaping,insuranc e ,the gardner,the snow plow guy, the list goes on and on.

a lifetime in housing costs are really measured in who lost the least the buyer or the renter, not who made the most as those expenses whether you rent or buy usually eclipse the value of home appreciation over a lifetime. it never stops accumulating even if you sell a home and buy another... like rent just keep adding it all up over a lifetime.

soooooooo if your buying a house think of it as a consumption item, not an investment, think of it as a collector does of fine art, or your jewelry. its something you use and consume and costs you money. the fact a home rises may or may not mitigate the expenses to put you ahead of renting

buy a home for all the things a home can give you (good or bad)

the joy of owning something
doing as you please
the security of owning a payed off home
relatively fixed costs compared to renting

the fun of renovating and changing

etc

while technically a renter appears to be at a dis-advantage because hes not buying anything with his rent that may not be true in alot of areas or situations . here in the greater new york area the cost between renting and buying initially is 1/3 to 1/2 less a month and no massive down payment... it takes about a decade for the rent to equal the costs of buying at the 2 to 3% a year rent increases. each year though the renters advantage grows smaller and smaller as the rent goes up . all though just real estate taxes in alot of areas see bigger jumps the costs are offset with tax deductions on some expenses so its all about what the renter did with the money saved each month and down payment money that determines most of how a renter does.

you cant compare renting vs buying unless you have the renter putting equal amounts of money as well into an appreciating asset. thats where most comparisons fool us, they rarely do this. historically equities have outpaced home appreciation by 2x with alot less expenses in the early years of renting.

i can tell you because home real estate appreciates long term just above the rate of inflation in most markets a person who invests the money he planned to buy with and the money he saves each month compared with buying in nothing more than a mix of diversified index funds stands a great chance of coming out further ahead ...

infact i can say with my own expierience that if you were going to pay cash for the house like i did when i bought my house back in 1987 in queens ny and instead put that money in that same mix of funds (i did that also) i can tell you that today you can subtract out all the rent you would have paid for all those years and still have enough left to buy over 2 houses .....

you have to take a step back and stop looking at just one aspect of your overall cost of housing which is where everyone fixates THE HOUSE
and look at the total costs over a lifetime to know if you spent less renting or buying..... chances are they both cost you and took money out of the ole piggy bank and not made you richer .... housing costs are like food costs, they are expenses not gains

for a eye opening idea of expenses look at only 2 of the many components of expenses a homeowner has , taxes and mortgage interest,,, those two alone usually need the house to appreciate at least 3x and probley more in 30 years just to clear the after tax deduction amount you paid in...

most people pull out one piece of the puzzlel the house cost and what its worth without looking at the big picture namely a lifetime of housing costs and merely look at one aspect without the other parts... since we dont know how much future appreciation will be, we dont know rent increases, we dont know your future expenses or how many times you will sell a house and buy another and incurr more costs there is no answer.. in fact the biggest part on the renters behalf who chose to invest else where and rent is we dont know future market returns..... your trying to predict an outcome thats impossible... we dont know who will spend more in housing costs when all is taken into consideration.

picture it as if you were an investor.. you made big bucks on one investment (the house) but all your other investments tanked.... overall your down , the big gains of the one investment merely mitigated the overall loses


the jury is still out as far as whether the age old debate, is it better to buy or rent financially ?... there is no answer and probley never will be

 

[Running_Man]

Right now the government is about to pass some incentives for purchasing homes, so I think the rent vs buy arguement may skew towards buy. Republicans I see want to make 4 percent mortgages available; that may make a condo purchase a far better value when implemented. I imagine there will be some pretty dramatic inovations available in the coming months courtesy of the Feds

Senators push for more housing help in stimulus - Feb. 1, 2009

 

[Martha]

If I sold this house I would like to try renting for awhile on Anna Marie Island . I 've always wanted to live where I could walk to the beach but I have no interest in owning there . Prices are too high and insurance & property Taxes are insane .

Please can I be your roomie?

 

[Moemg]

Please can I be your roomie?

I have a roomie but you can visit a lot !

 

[OAG]

Right now the government is about to pass some incentives for purchasing homes, so I think the rent vs buy arguement may skew towards buy. Republicans I see want to make 4 percent mortgages available; that may make a condo purchase a far better value when implemented. I imagine there will be some pretty dramatic inovations available in the coming months courtesy of the Feds

Senators push for more housing help in stimulus - Feb. 1, 2009

Wonder if this passes we will be hearing "here we go again"?

 

[Brat]

What got us into this fix was 'creative' lending. Many borrowers were inexperienced and didn't know the terms of the loan.

If the availability of the mortgage required the borrower to attend (and pass) a couple classes about purchasing and maintaining a home and the mortgage was at a fixed rate I don't think we will revisit the mortgage mess.

 

[kcowan]

We own our winter place and rent our summer place. Strictly a matter of market conditions in each place. We sublet our summer place in the winter.