Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Rent or Buy?
Old 04-18-2014, 08:47 PM   #1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
Rent or Buy?

Should you rent or buy? Here is a map indicating which is the best option in major US housing markets:

Rent or buy a home? This map has the answer

I wonder how different this map would have looked in late 2009...
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-19-2014, 04:31 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
the real answer is it depends on sooo many factors. one thing i have come to understand about rent or buy is from a strictly financial standpoint it may depend on age and opportunity.

as an example when we were starting out back in the 1980's we had little money.

our apartment house where we rented went co-op and we got to buy as an insider.

in a few short years our apartment went up 4x because of the nyc co-op craze.

well we bought a house next and part of that money from the co-op was invested in my portfolio.

the portfolio grew like crazy , i was no longer interested in owning and caring for a home and actually didn't want to be a homeowner.

to much work, i sucked at doing things myself and i did not want to spend weekends doing chores.

well sold the house , rented and invested elsewhere.

an opportunity came up to buy into a real estate venture with family and bernard spitzer the real estate mogal.

i had the money available to me just because it wasn't tied up in a house.

i could have never afforded an equity loan.

so bought in to the business, made a ton of money and can now retire.

now we live in a rent stabilized apartment in nyc .

a co-op like our apartment would run 250-290k to buy.

at this point figuring a muni we can get about 13k a year income on that money we didn't spend on the apartment if we rent.. the equation is very different today because i am not the put the pedal to the metal investor i once was.

if we bought the co-op instead of renting the maintenance fee with no mortgage would be about 12k a year.

with a few more rent increases it may be worth giving up the 13k income , buying and cutting our housing costs down to only 12k a year.

the point is at different stages of our lives the buy or rent is a different decision from just a financial standpoint.

early years perhaps buy, get some appreciation under your belt-- sell , rent and invest in much faster growing assets. later in life cut housing costs by buying as aggressive investing winds down.

just some food for thought here.
the overall answer really is buy because of lifestyle not financial reasons.
mathjak107 is offline   Reply With Quote
Old 04-19-2014, 07:36 AM   #3
Recycles dryer sheets
 
Join Date: Apr 2014
Posts: 70
Like mathjak107 said, there are lots of factors. I bought houses in the last two places I lived and found myself moving around three years later for better job opportunities.

It was not a good time to sell either time, so I took losses on the sale of my homes, but it was worth it for the better job opportunities.

I now rent an apartment because I want maximum mobility and liquidity. Ironically, I have bought a number of single family homes as rental properties over the last two years because I thought real estate was very cheap and a good inflation hedge.

So I've come to think of my primary residence as a consumption item and separate it from my investments in real estate.

One day, I will build or buy a primary residence, but only when I know I'm settling for a long time. It will be less financially driven than utility driven. It will be a place we're happy living in, but I will care little about ROI or future price appreciation since I don't view my primary residence as an investment.
rb35 is offline   Reply With Quote
Old 04-19-2014, 07:43 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
buying for the long term usually represents a cut in expenses namely housing costs. it is always an expense until you stop living in it.

it may give you better cash flow then renting but it really is a means of cutting costs.

9 out of 10 times you will hear retirees say i was able to retire not because my house was worth x but because it let them make do with lower income .

that is not to say a renter with a family and a 3 bedroom apartment can't see the same improved cash flow once every is on their own and the retiree now moves into a 1 bedroom.
mathjak107 is offline   Reply With Quote
Old 04-19-2014, 10:43 AM   #5
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
Interesting map, and thanks for the link, REWahoo. I suspect it would indeed have looked a little redder back in 2009.

As far as the rent-or-buy contraversy, for my home the cost of maintenance, lawn upkeep, taxes, and insurance, plus the lost opportunity costs (due to not investing the cost of my paid off home) is only enough for a one bedroom apartment if I shop around. Given the lower utilities expenses in an apartment, maybe I wouldn't have to shop around *that* much.

I love knowing that I own my home and it is mine. On the other hand, my present three bedroom home has 1600 square feet and I really don't need all this space so why pay for it? I only use about half of my square footage. Also, by owning I have about zero liquidity compared with renting.

All in all, I'd say it is a toss-up for me, despite the fact that for equivalent properties, I suppose home ownership is more economical here than renting. That is why my area is represented by the yellow color on the map (suggesting that owning is better).
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

Happily retired since 2009, at age 61. Best years of my life by far!
W2R is offline   Reply With Quote
Old 04-20-2014, 04:53 AM   #6
Full time employment: Posting here.
 
Join Date: Sep 2008
Posts: 999
Rent or Buy?

Buy and rent it to someone else.
almost there is offline   Reply With Quote
Old 04-20-2014, 05:18 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
then it is renting and just investing elsewhere. after 25 years as a landlord in nyc i would rather invest in anything else besides a rental property and have to deal with residential tenants in retirement.
mathjak107 is offline   Reply With Quote
Old 04-20-2014, 05:31 AM   #8
Full time employment: Posting here.
 
Join Date: Sep 2008
Posts: 999
I am on the opposite end of the equation.
But your situation did sound brutal.
I am sick of the stock market after 30 yrs......... LOL LOL

For me, the key was having my home paid off at an early age. (38)
That pretty much set things up. I have always believed renting to be throwing money out the window. Just another opinion.
almost there is offline   Reply With Quote
Old 04-20-2014, 05:36 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
i can tell you in my own situation if i bought and owned a home through my main investing years i would have been way behind where i am.

by investing in much faster growing assets with the money i did not tie up in the house i was able to take part in investments as a homeowner i never would have had the capital to do.

in fact just thinking about the fact that our first home in queens ny was 169k in 1987.

we sold it in 2003 for 335k. sounds great right?

until you realize the same money in our fidelity insight growth model was worth 2.8 million over the same time.

that would have been enough to subtract out decades of rent , taxes and still have enough left to buy 2 homes.

talk about renting NOT THROWING AWAY MONEY , PHEW!


if i had to say what worked best is buy early on - get some appreciation- sell -rent and invest in much faster growing assets -- eventually buy again cutting housing costs in retirement.

for best results i found it to be a cycle of rent and buy not one action like only buy.

we were able to take the money from the early house sale while renting and buy into a real estate venture with a famous mogal.

i would never have ever been able to come up with that cash if i still had a house. it was a gamble and there was no way i could pay an equity loan back while waiting for things to ramp up if in fact they ever did .
mathjak107 is offline   Reply With Quote
Old 04-20-2014, 05:54 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
as a real estate investor i really was not interested in just collecting rents. i liked more creative bigger rewards .

our venture was buying out rent stabilized apartments of origonal tenants in high profile buildings over looking central park.

we would offer 100k to any tenants willing to sell us their lease rights and we would sell the apartments off.

they went for big bucks but the risk was they may not sell us the leases back.

then you are stuck with way under market rent and a new family member you can't get rid of.

i had such great luck as out of 9 apartments 7 sold us the leases back. i am stuck with only 2 tenants left that do not want to go anywhere.

in fact the first sale paid off all my loans and the money i layed out.

we also owned commercial lease rights where we had the right to collect rents while not owning the property.

in one of the biggest lease rights sale our venture sold the commercial lease rights we had another 20 years on to an investor group for 18 million bucks last month. we held a share of that sale.

not being a homeowner and renting is what allowed me to buy into that venture so i would never ever use the words renting is throwing away money.

if anyone is interested in reading about our lease rights sale it is here:

Bernard Spitzer | 200 Central Park S | Ashkenazy Acquisition
mathjak107 is offline   Reply With Quote
Old 04-20-2014, 05:59 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
My experience has been the opposite of some of the other posters in this thread.

We paid about $75k for our first home on the Mass/NH border north of Boston. It was a two-story with a basement and one car garage under. The main floor was finished with a bedroom, living room, dining room, bathroom and kitchen which was sufficient for our needs at the time. The upper floor was unfinished. I'm handy, so we built out two bedrooms and a master bedroom suite on the upper floor for about $10k plus a lot of sweat equity. I had a job change after we had owned the home about 2 1/2 years and the Boston area was booming at the time so we sold it for close to double what we had into it. The profit was big boost to the portfolio I'm living off of today as given how tight money was with a young family, it would have taken us many years to save the amount we had as a profit and invested.

We later bought a piece of land for a vacation home and we ultimately decided not to build on it, but in the few years we owned it almost doubled in value. Right place, right time perhaps, but that profit was added to the nestegg as well.

Our main home we lived in for 25 years was probably a wash in that we sold it for what we had into it as while we got a good deal on it we put a lot into it in improvements we could enjoy and it was in an area that real estate is more stagnant.

We probably have more into our current home than what we could sell it for but we have no plans to sell, love the waterfront location and it is truly home.

While I have always viewed a home as something you live in rather than an investment, we have made some nice profits on some of the real estate we have owned over the last 35 years. Plus, if I want to make a major change to where I live that I enjoy, I don't have to ask permission or worry about leaving it behind to enrich the landlord when I leave - it's mine.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 04-20-2014, 06:03 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
now that i have toned down my investing the opportunity costs are no longer not only not there like they were but my focus has gone from not growing richer to not growing poorer through retirement.

now my focus is not spending more for rent than i would in costs if we buy a co-op.

i am watching the lines for crossing with every rent increase.

the equation is a very different one if you do not have to figure in those lost opportunities because the dough was tied up in the house , now that those days are over my focus is on pure costs.
mathjak107 is offline   Reply With Quote
Old 04-20-2014, 06:32 AM   #13
Full time employment: Posting here.
 
Join Date: Sep 2008
Posts: 999
I guess its the same with cars...... Some folks buy, for others it seems better to lease.

The area I live in is priced pretty high on average. SoCal coast.
So, it was never a slam dunk buying a 2nd and 3rd property in my personal situation. (While raising a family) Was able to buy a small 2nd home as a rental 2 yrs ago. Paid $270k, its back up to about $425 now. Rents for 2k/mo. Its a small 1500 sq ft 4 bd rm. But it took a housing crash for it to pencil out.

I enjoy making improvements on our home. Have been here 22 yrs now.
Also enjoy restoring things (cars & bikes / whatever) so a garage is important.
Then there is the garden and fruit trees. For me, renting just wouldn't work out. But on paper I guess I can see that it could. It would kill me to have to ask permission to make changes to a place. Or be asked to move.
But its probably more of a mind set than anything else. My area is red on the map. So, I guess its better to rent here. LOL LOL
almost there is offline   Reply With Quote
Old 04-20-2014, 06:42 AM   #14
Gone but not forgotten
imoldernu's Avatar
 
Join Date: Jul 2012
Location: Peru
Posts: 6,335
If you have less than $1.5 Million you may have reason to consider this, before deciding.

Protecting Your House After You Move Into a Nursing Home | ElderLawAnswers

If a spouse should be confined to a nursing home for an extended period, depleting joint assets, medicaid could protect from $543K to over $800K, (value of owned home) for the other spouse.

While this sounds improbable, it hapened to my own parents, and to a very good friend.
imoldernu is offline   Reply With Quote
Old 04-20-2014, 07:06 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
there re so many ways to deal with nursing home issues today depending on your state that i wouldn't consider a home as a reason .

the bigger problem is income to live on which unless negotiated out with medicaid can lead to impovershment for the stay at home spouse even with a home.

it is like long term care insurance can protect assets over a 5 year time frame so assets can be shifted. but at the end of 5 years while the assets are protected any attempt to live off of any income over the tiny limits results in it being put up for grabs by medicaid. few affordable policies go out longer than 5 years.

so far residents in ny ,ct and fla have been making good use of the just say no law and medicaid has been negotiating down to affordable rates.
but that is another topic.
mathjak107 is offline   Reply With Quote
Old 04-20-2014, 04:52 PM   #16
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,302
So much of it is local in nature. I bought a house in late 1985 after my divorce. It definitely cash-strapped me but rents were rising rapidly in that D.C. suburb. Four or five years later rent on a one-bedroom apartment was more than my house payment and utilities so it worked for me.

By then the first big rise in house prices was over and it just tracked inflation until the 2nd housing bubble began around 2000 or so. When we sold in July 2002 it had appreciated 9.5% per year. Not great but not bad either. The one we're in now - who knows? We paid $234k, so far it's holding steady (went down a lot in 2008 of course) but no big rise either. Since it's paid for, ownership is ~$800/month including a set-aside for maintenance issues as they arise. I suppose we could find a 1-bedroom apartment for that but we wouldn't want to live there.

One could say we could take that $235k or whatever we'd net from selling and invest it but at 64 I'm not feeling adventuresome with investments.
__________________
When I was a kid I wanted to be older. This is not what I expected.
Walt34 is offline   Reply With Quote
Old 04-20-2014, 05:12 PM   #17
Gone but not forgotten
imoldernu's Avatar
 
Join Date: Jul 2012
Location: Peru
Posts: 6,335
Quote:
Originally Posted by mathjak107 View Post
there re so many ways to deal with nursing home issues today depending on your state that i wouldn't consider a home as a reason .

the bigger problem is income to live on which unless negotiated out with medicaid can lead to impovershment for the stay at home spouse even with a home.

it is like long term care insurance can protect assets over a 5 year time frame so assets can be shifted. but at the end of 5 years while the assets are protected any attempt to live off of any income over the tiny limits results in it being put up for grabs by medicaid. few affordable policies go out longer than 5 years.

so far residents in ny ,ct and fla have been making good use of the just say no law and medicaid has been negotiating down to affordable rates.
but that is another topic.
The legal decisions on this are quite complex, as are the court cases where the "just say no" law has been enacted and challenged:
http://scholarship.law.marquette.edu...context=elders

The real question about about the decision and forward planning really depends on the situation. I'll cite the situation of my own parents... second marriage for my mother. This was circa 1995, so the $$$ would be different.

My folks lived in Barrington RI, oceanside, in a cottage on the bay, which he bought in the 1930's for $6K. When my mom went into a nursing home, Earl, (my stepfather) was a moral, salt of the earth patriot, who vowed to pay her nursing home bills, from his small savings, and from selling the house, which had substantially increased in value. He planned to move in with my stepsister. We all went to an elderlaw lawyer who suggested that he stay in the house, and use his savings to pay the nursing home, until the savings ran out. My stepsister helped him live in the home, which he kept. My mom lived for about 5 years, the last four of which were paid for by medicaid... perhaps $350-400K as much extra care was involved.

When my mom passed away in 1995 at 84 years old, Earl still owned the home. He lived another 2 years, and when he passed away, the home went to his family, which really needed help. The selling price was about $800K in 2006, (more the value of the waterfront than the home) and in truth saved the lives and well being of that family, which was in serious health and financial troubles.
.................................................. ......................
The prequel to this was that my folks had considered selling for $200K and moving to a rental retirement home a few years before she became ill.

The dollars were different then... the laws somewhat different, but essentially the same as today...

In our case... (DW and I) we made the decision to include owning the home, as in a similar situation, the value would act as a cushion in the event our nest egg assets were to be depleted. (for many members with multi millions in assets, this would not be the same situation, but hopefully it would work for us.)

In any case, it could be worthwhile to look at this as an option. Less so for the "comfort value" of the home in the later years, and more as a factor in financial planning.
imoldernu is offline   Reply With Quote
Old 04-20-2014, 05:23 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
we were at our estate attorney on friday and spoke about the say no law.

he said they are doing soooooo many negotians with medicaid on behalf of clients and have zero court cases to date.

medicade many times just lays back and will go after the estate when the at home spouse dies but that hasn't happenbed much at all.
mathjak107 is offline   Reply With Quote
Old 04-27-2014, 11:47 PM   #19
Dryer sheet wannabe
 
Join Date: Apr 2014
Location: Gainesville
Posts: 10
That's a really complicated question. I'd say a lot of it just depends on your income and standard of living. Are you planning to someday buy a house regardless? Because if you are, renting is just a waste and you should dedicate to a house. Unless your income is so low that it would force you to live below your current standard of living, renting would be pointless. But if you're okay with renting forever, in the long run it is a lot of times much cheaper. It all depends on how you feel and if you, emotionally, have a strong desire to own the space you live in, or if you're okay with living in someone else's.
LendingWire is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Buy, buy, buy! Dr. Doom said so. NW-Bound FIRE and Money 16 10-23-2013 04:09 PM
Recession over? Buy, buy, buy? NW-Bound FIRE and Money 42 05-27-2009 04:53 PM
rent stabalization and rent control mathjak107 Other topics 2 04-10-2006 04:56 PM
rent or buy condo for business jakester Young Dreamers 2 07-10-2005 11:34 PM
Housing: Rent vs. Buy BigMoneyJim Young Dreamers 45 01-19-2005 12:54 AM

» Quick Links

 
All times are GMT -6. The time now is 05:01 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.