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Old 10-02-2014, 08:24 PM   #21
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You are right. Though I somehow have different feel for 2 places where I own versus 10 plus places where I lived in my life.

I can not put a finger on it.
Placebo effect?

As said above, you don't have to own your home to be a part of your community. I've rented all my life, and, until recently, the same place for 32 years (I'd say that's "putting down roots"), and have been part of my community. Still am, as I moved only a few blocks away from my old place.
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Old 10-02-2014, 08:52 PM   #22
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I just ordered one of these and will let you know in a few days.
Ha! Did you buy it or rent it?


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Old 10-02-2014, 09:13 PM   #23
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I think it boils down to where you are in life, and what your needs are.

Young? Single? Switch jobs alot? Renting is probably the better decision.

Married? Have kids / animals? Need 3+ bedrooms? Lean towards buy.

Retired? Might want to check out that 2 bedroom condo...

I rent, as I enjoy having an easy commute, and I only need one bedroom. Owning can't really compete. When / if I get married / have kids, I'll likely buy.

I refuse to be rushed into owning before I need to, just because the real estate market is heating up. I have faith that my investments will keep up with or exceed any return I might make on real estate.
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Old 10-02-2014, 10:29 PM   #24
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IMHO national, demographic and macro economic trends matter, but what really matters, even more than: location, location, location... is the individual personal housing decision (equivalent of single stock selection can be great even in a bull market or bad in a bear market or disaster in any market).

For many real estate generalizations, I know of a counter example

My own generalization is: if you are considering buying own home then attempt to treat it as an investment decision... of course you can overlay lifestyle priorities! E.g. Depending upon your personal musthaves and constraints, it should be possible to buy at 10% - 25% discount to "retail" pricing.

I am very pro-real estate >50% net worth, where even own home has been a stock beating investment, however, although two of my kids have funds to buy --> I don't believe they should as they have no commitment to a location (nor sufficient funds to allow investment purchase and possible future own home).

That is why I like the NY times calculator mentioned by Cobra - it won't necessarily tell you the right answer (I think real estate outcomes depend upon future guesstimates)... but at least the advanced options ask all the right questions.
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Old 10-03-2014, 08:38 AM   #25
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After the employment years, renting or owning is a matter of preference for a couple as long as the combined finances can withstand a five year nursing home cost of a half million dollars, should one partner need it.
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Old 10-03-2014, 08:46 AM   #26
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I think that the real answer is a big 'it depends'.

I would think that theis decision would be a function of the current real estate market where you live, the type of housing that you prefer, and whether or not you plan to stay in the same housing for a few years.
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Old 10-03-2014, 09:46 AM   #27
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I've never owned a home until last November, and I'm now 68 years of age. I enjoy this thread because it impacts me directly.

In retrospect, I should have gone into 55+ retirement apartments/senior retirement homes, where the chances are greater that it will be quieter. I rushed into buying. For some reason, at least in the Bellingham, Washington area, the 55+ apartments, or retirement homes are less expensive than regular apartments, and they all allow pets.

Now that I have my new house, I need to put things in perspective. I'm certainly not a prisoner, and I have two ideas or goals I focus on when I think I made a mistake buying this house. The first is that my mortgage, insurance and taxes all add up to $498/month, since I put so much down on the house. That's pretty inexpensive rent. Second, when I am approaching my mid-70's, I'll sell and move into a retirement apartment and look at this as being a very good experience. i'm always productive doing yard work, and that certainly has kept me healthy.

It's nice to own. It's nice to rent. You are never locked into either.
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Old 10-03-2014, 10:22 AM   #28
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I think it boils down to where you are in life, and what your needs are.

Young? Single? Switch jobs alot? Renting is probably the better decision.

Married? Have kids / animals? Need 3+ bedrooms? Lean towards buy.

Retired? Might want to check out that 2 bedroom condo...

I rent, as I enjoy having an easy commute, and I only need one bedroom. Owning can't really compete. When / if I get married / have kids, I'll likely buy.

I refuse to be rushed into owning before I need to, just because the real estate market is heating up. I have faith that my investments will keep up with or exceed any return I might make on real estate.
Bingo. The answer is "it depends." Senator brings up a lot of great points, but I disagree strongly with his assertion that "to FIRE you rent." I've done both over the course of the last ten years, and currently own. I made $60,000 over two years on my first property, with nothing down. I turned around and lost about half of that the next two years as the bubble burst and I got out right before it got really bad. DW and I bought again in 2011, right around market bottom here in San Diego. Home values are appreciating nicely, and our mortgage/tax/HOA payment is now less than it would be if we were renting.

Now, we made a small sacrifice in terms of location (not terribly walkable, but right across the street from the Pacific Ocean, so not a bad trade), and we did have to put significant investable money down. Senator has a great point that we would've been better off investing that money in the stock market.

That said, the tax break keeps us in the 25% bracket. The expected appreciation on our property over the next five years (so 9 total) should out pace inflation by quite a bit, and in the event that we decide to move when my active duty time is done, we will be able to sell and take that equity to pay cash for our long(er) term home elsewhere. In the meantime, our housing costs are fixed, and thus decreasing in real terms as inflation creeps up.

None of that will prevent us from retiring early, and in fact the equity significantly reducing our year-over-year housing expenses will likely help.

The only bad decision, as others have pointed out, is buying OR renting more than you need, or buying without carefully looking at your specific market conditions (the old "house values never go down!"). Otherwise, it really depends on your wants and needs as to which is the better path.


Edit: one thing I should mention is that when I was 25 and buying my first property, I did not take a holistic approach to looking at my investments. Now, as I understand I have significant assets "tied up" in my home, I understand that my overall portfolio risk is not as great as I assume it to be based on 85/15. In other words, I didn't understand the opportunity costs of buying vs. renting as I do now. That said, making $30,000 over four years with nothing down and sub-letting a room of one house really made it a wise financial move (though the more wise financial move would've been to take my $60k and rent the second place). In short, I probably got lucky and used my VA loan privelege at a perfect time.
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Old 10-03-2014, 12:23 PM   #29
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This is a lifestyle question way more than it is a financial one.

Having said that, I've spent a TON less money owning my house for the last 20 years than I ever would have renting. Hell my yearly prop tax is less than one month's rent for an equivalent house. And I have an asset that I can sell for more than what I paid (under current conditions).
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Old 10-04-2014, 01:37 PM   #30
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Placebo effect?

As said above, you don't have to own your home to be a part of your community. I've rented all my life, and, until recently, the same place for 32 years (I'd say that's "putting down roots"), and have been part of my community. Still am, as I moved only a few blocks away from my old place.
You are a gift to your landlord.
My parents did the same type of thing, rented a place for 23 years. They essentially paid for the place for the landlord, then moved with nothing in their pocket.
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Old 10-04-2014, 02:24 PM   #31
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You are a gift to your landlord.
My parents did the same type of thing, rented a place for 23 years. They essentially paid for the place for the landlord, then moved with nothing in their pocket.
I had extremely favorable rent. So favorable that I was able to FIRE at 55. I left with plenty in my pockets.
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Old 10-04-2014, 02:48 PM   #32
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My parents did the same type of thing, rented a place for 23 years. They essentially paid for the place for the landlord, then moved with nothing in their pocket.
Well, they did get something of value or they wouldn't have done it. They had the freedom to move anytime they wanted. They had the freedom to not have to think about setting aside cash for maintenance expenses on the house or worrying if the next roof would cost $8k or $18k. They didn't have to think about property values or property taxes.

While I have always owned a house as soon as I could, not having rented an apartment since 1979, there are valid reasons to rent instead of own. It's just that so far none of them has applied to me.
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Old 10-04-2014, 03:01 PM   #33
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If you maximize the renting experience, by only buying the size of rental you need, when you need it, you are better off.

Then further maximize the experience by living where the commute times are shortest, and taking jobs where the income is maximized, rather than close to where you live, you are better off.

Then, do not get all cluttered with 'stuff', so you can travel lite, you have more money to save.

Of course, if you want to "own a piece of land", owning is better.
Shorter term, you probably would have been right. Since we stayed in the same home 25 years and raised the boys, we were paying $450 for the first note, until we paid it off last summer. Not sure what renting would have resulted in, but I'm pretty sure, the last 10-15 years of paying between 1200 to 450/month we came out ahead.
To be sure, most don't stay in the same home for 25 years.
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Old 10-04-2014, 04:09 PM   #34
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You are right. Though I somehow have different feel for 2 places where I own versus 10 plus places where I lived in my life.

I can not put a finger on it.
There is a definite bias against renters in our neighborhood. I think in general it comes from the fact that owners tend to take of their house better than a landlord, where it is mainly a business decision.
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Old 10-10-2014, 04:45 AM   #35
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Here's a little tid bit that is rarely considered...
When you own a house, if you sell one day many years later for a BIG profit you will have to realize that capital gain all in ONE year. This compares with owning investments like stocks, bonds and ETF's in which you can stagger selling in pieces in different years, and thus perhaps dropping down to a lower tax bracket.
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Old 10-10-2014, 05:15 AM   #36
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by the same token you can't 1031 exchange a stock.

we were big investors in real estate here in nyc and live in a rent stabilized apartment as tenants. renting and not having the money tied up in a house has let us take advantage of some great deals. i would never have had the money to invest if i owned. taking an equity loan for investments that may take a few years to pan out was not an option as i wouldn't be able to afford the payments nor would i risk my house for a venture...

but now that i am retiring in 10 months i am no longer the aggressive investor i was. the opportunity costs are far less and now things may be better measured in costs cut vs gains.

we are watching that line carefully now and may end up buying a co-op again in the near future.

the savings may end up being greater than the income generated with that money which will then be tied up in the apartment.
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Old 10-10-2014, 05:40 AM   #37
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Nope, just setting expectations, since that's how this discussion always goes.

If you perform an advanced search looking for the word "rent" using the "titles only" option you will see many threads on this topic, and they usually do wind up going this way.
You were right


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Old 10-10-2014, 07:02 AM   #38
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Shorter term, you probably would have been right. Since we stayed in the same home 25 years and raised the boys...
Your are correct. When you live in a place like you own it, for a long period of time, you are better off buying.

But you did, early on, have the peace of mind that you could move very easily, very inexpensively. And if the neighborhood went to crap, you could move without losing money. Bad neighbors or better job, just pack and go.
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Old 10-10-2014, 08:55 AM   #39
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Here's a little tid bit that is rarely considered...
When you own a house, if you sell one day many years later for a BIG profit you will have to realize that capital gain all in ONE year. This compares with owning investments like stocks, bonds and ETF's in which you can stagger selling in pieces in different years, and thus perhaps dropping down to a lower tax bracket.
If it's a home you live in, then the first $500,000 of profit is tax free, but if it's an investment, then yes it's a big hit.
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Old 10-10-2014, 09:01 AM   #40
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the thing is though markets historically blew away residential real estate by 5 to 6x.

compared to how our house did vs markets over the same time frame i could have subtracted out all the rent we would have payed and the taxes and bought 2 homes today maybe more and we live in queens in nyc...
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