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Re: Housing: Own versus Rent
Old 10-28-2006, 11:26 AM   #21
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Re: Housing: Own versus Rent

I agree with the people that stated it is mainly a personal preference. I am of the opinion that if you like the area you live in and you plan to stay there then owning is perferable to renting. As I get older I do not want to keep packing moving and unpacking every time my landlord sells the house or the property management decides to convert my apartment into condos. To me there are many restrictions imposed on a renter such as modifying and remodeling the apartment or house not to mention conflicts between landlord and tenants that I can live without.
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Re: Housing: Own versus Rent
Old 10-28-2006, 11:41 AM   #22
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Re: Housing: Own versus Rent

Housing appreciation has averaged 1-2% over inflation over the last century. Last 6 years have been way over average. Next 6 years will be way under average.

Probably need appreciation to match inflation to break even versus renting. 1-2% appreciation above that tilts scale towards buying - especially if you'll be in the house more than 5 years.

If I moved to another city and expected to move again in less than 5-7 years, I would rent now. If I expected to be there longer than 5-7 years, I'd buy.
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Re: Housing: Own versus Rent
Old 10-28-2006, 11:42 AM   #23
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Re: Housing: Own versus Rent

Quote:
Originally Posted by perinova
Do you like gardening and home repairs? Do you like ultimate privacy or like to see a few neighbors every so often?
Do you enjoy outdoor activities and room for hobbies? Do you crave a bit of privacy or prefer your every move be done under the watchful eyes of your busybody neighbors?

Just an alternate point of view......
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Re: Housing: Own versus Rent
Old 10-28-2006, 11:54 AM   #24
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Re: Housing: Own versus Rent

Our home has been a convenient part time job for me, much more convenient than anything working for someone else could have ever been.

When we had it built, we left certain items undone knowing I'd complete them over the years. You know, finishing the basement, cabinets in the garage, landscaping and on and on. When that was all done, doing maintenance myself became the part time job. By keeping construction and maintenance costs low and adding improvements ourselves, our current value is quite high vs. our costs.

Of course, if we could have afforded to pay for everything to be done, I would have gladly done that. I also would have never worked for MegaCorp for decades....... Having the house and adding lots of sweat equity was just another way to get to FIRE. And, for us, necessary because we started with a negative net worth.
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Re: Housing: Own versus Rent
Old 10-28-2006, 12:11 PM   #25
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Re: Housing: Own versus Rent

I have owned four homes and am renting my 3rd. Emotionally, owning is the best. My last house was a castle with a sweeping oak circular staircase from a 20x40 2-storey entrance, 350 ft driveway that snaked across the front of the house and around back to the 3-car garage by the pool.

First house $21500 in 9/67 bought
Last house $535000 in 9/97 sold
Annual gross gain 4.763% p.a.
Less selling costs, improvements, maintenance, taxes.

Since then I have been getting more than that after tax with the proceeds.

Plus I am living in a $1.8 million property (current value) for $3000/mo including electricity, heating, water, sewage, maintenance, taxes. Retired in 2002. Travel a lot.
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Re: Housing: Own versus Rent
Old 10-28-2006, 01:41 PM   #26
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Re: Housing: Own versus Rent

Quote:
Originally Posted by youbet
Do you enjoy outdoor activities and room for hobbies? Do you crave a bit of privacy or prefer your every move be done under the watchful eyes of your busybody neighbors?

Just an alternate point of view......
I can't tell what you are saying. I have lived in apartments in many cities, and always found them to be much more anonymous and privacy allowing than living in a suburban house. In many suburbs, you must keep your curtains drawn even in daytime. Maybe that is what you are saying?

Nothing gets the old busybodies' juices flowing like something they think might adversely affect their "property values".

Ha
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Re: Housing: Own versus Rent
Old 10-28-2006, 02:21 PM   #27
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Re: Housing: Own versus Rent

Quote:
Originally Posted by kcowan


First house $21500 in 9/67 bought
Last house $535000 in 9/97 sold
Annual gross gain 4.763% p.a.
Less selling costs, improvements, maintenance, taxes.

Keith
How are you computing your annual gross gain? I figure your property appreciated in value approximately 11.2% each year which is in line with my experience.

Using 5% yearly appreciation on your rented property would mean the owner paid about $428,000 in 1978! I only used 1978 because that was the year I bought my first property in Hawaii for $35,000. I can't imagine any apartment selling for over 12 times that anywhere. Is my math wrong?
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Re: Housing: Own versus Rent
Old 10-28-2006, 02:21 PM   #28
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Re: Housing: Own versus Rent

Quote:
Originally Posted by HaHa
I have lived in apartments in many cities, and always found them to be much more anonymous and privacy allowing than living in a suburban house.
I'm somewhat surprised that you always found apartments to allow more privacy than a suburban house. I would not have thought that to be the situation in all cases. I'm glad that's how it worked out for you.
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Re: Housing: Own versus Rent
Old 10-28-2006, 04:42 PM   #29
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Re: Housing: Own versus Rent

Quote:
Originally Posted by youbet
I'm somewhat surprised that you always found apartments to allow more privacy than a suburban house. I would not have thought that to be the situation in all cases. I'm glad that's how it worked out for you.
Probably not in all cases, just in all cases that I exerienced.

Ha
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Re: Housing: Own versus Rent
Old 10-28-2006, 05:20 PM   #30
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Re: Housing: Own versus Rent

North of Boston renting is the way to go - at the moment. Been triing for years to get my tenants to buy what they currently rent. Even the mortgage brokers talk about "sticker shock" when they see what owning will cost (forget about MAINTAINANCE, TAXES, INSURANCE, WATER ... I'm talking MORTGAGE).

Have yet to get anyone to bite! But believe things will change .
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Re: Housing: Own versus Rent
Old 10-28-2006, 08:12 PM   #31
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Re: Housing: Own versus Rent

Quote:
Originally Posted by kcowan
Plus I am living in a $1.8 million property (current value) for $3000/mo including electricity, heating, water, sewage, maintenance, taxes. Retired in 2002. Travel a lot.
Let's make sure I understand you correctly. You're currently renting a $1.8M home for 36K/year including utils? That's 2% of the property value. What is this landlord thinking about? I'm guessing that he's counting on continue appreciation of at least 6% annually.
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Re: Housing: Own versus Rent
Old 10-28-2006, 08:16 PM   #32
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Re: Housing: Own versus Rent

Quote:
Originally Posted by tryan
Have yet to get anyone to bite! But believe things will change .
I know exactly what you're talking about. Last month was the worst month for Boston since a long long time. The good news (if you believe it) is that they predict a bottom in the summer of 2007, 8 more months to go!
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Re: Housing: Own versus Rent
Old 10-29-2006, 07:00 AM   #33
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Re: Housing: Own versus Rent

We lucked out with the Phoenix area price runups of recent years, buying our first house for about 140k in 1998 and selling for 370k in 2005, so the buy decision was definitely the better move from a (hindsight) financial perspective. I'm pretty sure on those numbers maybe not exact. Decision to sell was based on it being too big and being sick of yard work, so we used profits from big house to buy townhome... man was the home buying process easier being able to pay cash, much less stuff to get in order and no writer's cramp at closing.

So now we're in a pretty nice 2BR/3BA townhome with no mortgage, last annual property tax was $938, $170/m HOA dues that covers exterior maintenance, roof, landscaping, water/trash/sewage and community pool, and relatively cheap eletricity because of smaller size to cool. No other debt so if we had to we'd be relatively comfortable on a $2k/month income stream... this gives me much peace of mind for some reason.
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Re: Housing: Own versus Rent
Old 10-29-2006, 07:31 AM   #34
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Re: Housing: Own versus Rent

WRBT, great example. Works even better for those who sell in highly appreciated areas, and move to lower cost of living states ... we're seeing many folks from CA, AZ, NV, the northeast, FL, move into Nashville, TN. Selling >$1M homes, and retiring here in comparable homes costing $200K to $300K. Interesting migration, I didn't expect to see.
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Re: Housing: Own versus Rent
Old 10-29-2006, 07:57 AM   #35
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Re: Housing: Own versus Rent

In my experience it has been more advantages owning a house than renting. I have owned four houses and the least I made on any of them was about 15000. The longest I lived in any one house was just over four years. Coincidentally that was also the one I made the least on. It didn't require any work. The most I made was just short of 80,000, after deducting improvements. I lived in that house for about three and a half years. That last house was also the only one where I could compare costs to a rental, because before I bought it I looked to rent a house of similar size and condition a couple blocks away, but still in the same subdivision. The rent payment was about $50 more than the mortgage payment.

All of my houses were purchased without a down payment, either with a VA loan or a 100% financing deal from the bank. No creative financing was used. So if you consider I was able to keep all of my cash invested and still make a decent return on my houses, I will be skeptical of anybody who claims renting is better.
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Re: Housing: Own versus Rent
Old 10-29-2006, 08:23 AM   #36
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Re: Housing: Own versus Rent

Quote:
Originally Posted by WRBT
We lucked out with the Phoenix area price runups of recent years, buying our first house for about 140k in 1998 and selling for 370k in 2005, so the buy decision was definitely the better move from a (hindsight) financial perspective. I'm pretty sure on those numbers maybe not exact. Decision to sell was based on it being too big and being sick of yard work, so we used profits from big house to buy townhome... man was the home buying process easier being able to pay cash, much less stuff to get in order and no writer's cramp at closing.

So now we're in a pretty nice 2BR/3BA townhome with no mortgage, last annual property tax was $938, $170/m HOA dues that covers exterior maintenance, roof, landscaping, water/trash/sewage and community pool, and relatively cheap eletricity because of smaller size to cool. No other debt so if we had to we'd be relatively comfortable on a $2k/month income stream... this gives me much peace of mind for some reason.
This is exactly what we plan to do in the next few months. Currently looking for a townhouse/condo to buy because of yard work/pool work getting to be too much as I look outside the window now the pool cover as well as the back yard are full of leaves. It will take of couple of days of raking and cleaning until the next windstorm then it's all over again until the end of November. DW is opposed to moving away to a cheaper area of the country due to family and friends reasons and we both are still working for a couple of more years we hope.

Maybe I'll buy the townhouse/condo now as it is a buyer's market and hold on to my house for a few months hoping for a seller's market then. With an income stream we should have no problem qualifying for a mortgage.
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Re: Housing: Own versus Rent
Old 10-29-2006, 10:56 AM   #37
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Re: Housing: Own versus Rent

Quote:
Originally Posted by youbet
Do you enjoy outdoor activities and room for hobbies? Do you crave a bit of privacy or prefer your every move be done under the watchful eyes of your busybody neighbors?

Just an alternate point of view......
Funny.
That was kind of my point: Personal preferences, and circumstances as well.
Personally I have been wanting to buy for a while. For personal preferences even though I believe it is much better financially to rent and loose money in the stock market.

I have looked to buy on and off since 1997.
1997 relo. to so.NH. Visited many condos. Not sure I liked the area Decided to rent instead.
ca.2001 in so.MA. Looked into relo buying home but in the process saw that economy was going to joepardize job. Sure enough...
2003-04 in NJ was outbid a couple of times and then an realized that the new prices end-2004 where not in line with financial sanity. Property taxes are high anyway.
Now I have a comsulting business in NJ. Waiting to see what will happen to the health insurance cost and property taxes here: The answer: NOTHING. I think we can safely answer. (Not any time soon anyway per Gov Corzine's recent comment on prop taxes).
So we are thinking of relocating to a place with more sane COL. Maybe TX.

The circumstances have made it different due to job changes, and due to people outbidding me. I have made the best of it. For example it allowed me to relocate and find higher paying jobs more often and to have more free time for other thingds than home maintenance.
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Re: Housing: Own versus Rent
Old 10-29-2006, 02:52 PM   #38
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Re: Housing: Own versus Rent

just got back from looking in CARBON COUNTY PA. .saw a very nice 55+ community going up. this could be the place, has everything we want.

not the cheapest place to live in retirement but coming from nyc it looks like a bargain to us.
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Re: Housing: Own versus Rent
Old 10-29-2006, 05:18 PM   #39
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Re: Housing: Own versus Rent

As many posters have said, personal factors are key in the decision to rent or own.

For the number crunchers, here is a link to a current economic analysis that includes Canada and the US: http://www.scotiacapital.com/English...n/retrends.pdf

This report makes it very clear that the purchase vs. rent differential varies widely according to local market conditions and over time. Note the big spike in new and existing housing inventory in the US (page 7)!

In the US and other countries where mortgage interest is tax deductible, the economic argument to buy would be greater. However, my understanding is that you might have to pay tax on your capital gains in some circumstances, which has to be factored into the economics of moving.

In Canada, mortgage interest is not tax deductible, and there is no tax on the capital gain from the sale of a principal residence. I'm considering the following plan:
1. Identify low tax province and pleasant location in which to ER (done)
2. Purchase property at ER location, mobilizing cash from portfolio and taking an investment loan to replace investments (the loan payments would be tax deductible)
3. Rent property at ER location
4. Use rent to pay off loan, then
5. Don't renew lease on rental property
6. ER
7. Sell current primary residence free and clear of capital gains tax
8. Move to ER location and enjoy!

OTOH, maybe I should just sell now and rent till ER. But I'm too busy to go through the hassle of moving house!
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Re: Housing: Own versus Rent
Old 10-29-2006, 06:58 PM   #40
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Re: Housing: Own versus Rent

I agree with the general themes on this thread: rent vs. buy is mostly about how often you want to move, the economics vary a lot by local market conditions, and in recent years house prices in the US have appreciated by a lot more than the CPI.

I see one other factor that hasn't been mentioned. Buying allows you to partially "lock in" your housing cost, which is a big part of your basic expenses, against inflation.

If you have the cash to buy, but you rent anyway, then you're sensitive to the differences between investment yields and rent increases. Worse yet, if much of your retirement income comes from a fixed pension, then inflation is your biggest risk, and anything you can do to dampen it (such as owning a house) is to your advantage.

Spreadsheet analysis won't necessarily tell you this, because we normally input "most likely" inflation rates instead of "worst plausible". To a certain extent, owning is insurance against inflation. Insurance isn't a very good deal when nothing bad happens, but you may buy it anyway because it protects you when events get unusually bad.
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