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Old 06-27-2007, 06:27 PM   #21
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For someone retired, with the house paid for - cashing out, putting the proceeds in Cds at 5% and renting is where my head is at. I like freeing up the equity and paying the rent with interest income.

If I was starting out again - I would be saving for a big down payment on a home purchase in about a year or two..when I think the prices will be lower. If you can manage to stay put for a long time I still think owning a house when you are young is a good strategy.

If you do sell, just don't do what Albert Brooks did and buy an RV and head for Vegas...
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Old 06-27-2007, 06:42 PM   #22
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For someone retired, with the house paid for - cashing out, putting the proceeds in Cds at 5% and renting is where my head is at. I like freeing up the equity and paying the rent with interest income.

This is definitely an emotionally appealing approach. But I'm not sure how well it works, unless housing is very overpriced relative to rents.

First, in most good areas rents increase a bit faster than CPI inflation, most of the time. So you really need to look at your real, after tax return on your CD. Which may be close to nil.

If you play the SWR game and assume a 4% real return, and purchase prices are high, then it should work out. But you have exchanged a near certainty- what your housing will cost if you own it- for a market speculation.

This speculation has certainly tended to work out well enough in many areas for a long time.

Of course if housing markets really do tank, it won't matter that you have gotten 0-1% real return on your sales price, because you can re-enter at a lower price. But in many places that fervently hoped for event has shown no sign of taking place.

Ha
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Old 06-27-2007, 07:10 PM   #23
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Don't forget you'll never have to remodel again! and you can easily move if you don't like your neighbors!

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Old 06-27-2007, 07:16 PM   #24
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Several years ago my next door neighbor sold his house and moved into an apartment. I thought that he was nuts at the time but the more that I thought about it, the more that I could appreciate his scheme of using the equity in the house to pay for rent. Another up side, after a few years he decided he could afford a nicer rent place and went upscale with much ease.
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Old 06-27-2007, 08:00 PM   #25
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Free4Now, how did you time this with your need to vacate either your home because it is sold, or your current apartment because the lease is expiring?
Because I was moving less than an hour's drive away, I did the rental search in parallel with prepping and selling the home. Around the time I put the home on the market I had a good idea of what neighborhoods were good and what reasonable rents were, and I started actually touring rentals. A few weeks into the selling I had found my rental and signed a lease. A couple of days after that I accepted an offer on my home, so the timing worked out perfect.

Now I'm using the escrow period to do final packing and move things from the rental to the home.

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In my area there are many people looking to rent, perhaps mostly because no one would pay the rent for a unit that would be required to even come close to covering the mortgage and assoc fee on the unit being rented, if these are figured at market price for a sale. There seem to be more people looking than offering units.

So there is competition for a unit in desirable in city areas. This may not be the case in large suburban complexes.

So if you need a place, you had better grab the first thing that looks OK, or you are going to be looking for a very long time which might entail sleeping on someone's floor or moving into a motel for a spell.
Ha
That was my thinking going into the process; I almost leased the first rental I saw! But I realized that I had at least a few weeks before I needed to commit so I stuck it out to explore more options, and that worked out great. The key is simply starting early so you aren't forced into an undesirable rental by time pressure.
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Old 06-28-2007, 04:01 AM   #26
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although my equity investments outperformed real estate here in new york by almost 2-1/2 times we just 2 weeks ago bought our planned retirement home in lake wallenpaupack pa. we close in 2 weeks and its an all cash deal. theres something to be said for owning a great home in a great area that you just cant put a price on.
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Old 06-28-2007, 06:06 AM   #27
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First, in most good areas rents increase a bit faster than CPI inflation, most of the time. So you really need to look at your real, after tax return on your CD. Which may be close to nil.
I disagree, depends on the availability of housing, number of
rentals on the market, etc. My rental history in Raleigh, NC, a
great area and growing, same area and size:
1990 $450
2007 $550
Pretty sure that is not increasing higher than the inflation rate.

I think unless you willing to stay put at least 5 years, a house is a bad
option. And obviously paying rent vs owning in the long run, its better
to own, but I know a lot of people who have lost money on housing,
myself included, on property they've own for less than 10 years.

Speaking of real returns, housing unlike CDs, require insurance,
property taxes, maintenance, improvements, interest payments.
And a nil return on your CD after taxes, what tax bracket are
you in?
TJ
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Old 06-28-2007, 07:25 AM   #28
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Where are all these upscale rentals? I routinely scan the Homes for Rent section of the newspaper (need to track rates and competition) even call and/or drive-by some. Have yet to see anything near what we have (or would meet DW expectaions ).

FWIW we're in a 4 bedroom on an acre of land in one of the best school districts in the state.

Seems to me - at least in the northeast - any decision to sell and rent would come with a decision to downsize. So it becomes more of a lifestyle issue vice financial decision.
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Old 06-28-2007, 08:05 AM   #29
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I think unless you willing to stay put at least 5 years, a house is a bad option. And obviously paying rent vs owning in the long run, its better to own, but I know a lot of people who have lost money on housing, myself included, on property they've own for less than 10 years.

Yeah. Purchased real estate usually has some very significant turn-over costs that rentals avoid. Frequently relocating could be expensive indeed. Then you've also got the (oops, the AC just died and the roof needs replacing) maintenance costs as well. I always thought the big offset was the tax deductible mortgage interest and long term value growth. Our own plan to pay cash for the "new place" now eliminates the tax deduction, though, and our largely reduced retirement incomes make it less important anyway.

I can see the point of renting. It's just that we haven't rented in 30 years and are used to being "owners". Emotional.
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Old 06-28-2007, 08:31 AM   #30
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I haven't rented in forty years but since I'm thinking of selling my house the idea of renting a house on or within walking distance of the beach is real appealing .
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Old 06-28-2007, 11:10 AM   #31
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Quote:
Originally Posted by teejayevans View Post
I disagree, depends on the availability of housing, number of
rentals on the market, etc. My rental history in Raleigh, NC, a
great area and growing, same area and size:
1990 $450
2007 $550
Pretty sure that is not increasing higher than the inflation rate.
TJ
It is hard to discuss with people who point to their personal experience and then generalize that to "the way things are".

My personal experience is that rents increase much faster than inflation, in supply constrained areas. That is why Sam Zell doesn't invest in the South, Texas or the Southwest. Urban Northeast, big West Coast markets, etc.

My experience getting an apartment is limited to Boston, Manhatten, Venice CA, Berkeley, San Francisco and Seattle. All supply constrained markets with strong employment and sustained rental demand. I am sure that there are many markets without these characteristics. Wichita KS should be good.

My assertion that rents natianwide have over time increased faster than CPI inflation is based on official US gvernment data, and should be easy enough for you to check to your personal satisfaction.

As to youir other question about real after tax return, if you are happy, then I am happy for you.

Ha
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Old 06-28-2007, 03:07 PM   #32
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It is hard to discuss with people who point to their personal experience "facts"
My experience "facts" getting an apartment is limited to Boston, Manhatten, Venice CA, Berkeley, San Francisco and Seattle.

Ha
My facts in Dallas area are as I have previously stated, the rental rates are below the costs of taxes, upkeep, HOAs, insurance, etc. not counting the cost of a mortgage.

Guess the facts are different in different parts of the country as HA stated.
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Old 06-28-2007, 07:03 PM   #33
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It is hard to discuss with people who point to their personal experience and then generalize that to "the way things are".

My experience getting an apartment is limited to Boston, Manhatten, Venice CA, Berkeley, San Francisco and Seattle.
What I'm saying is I don't think you can make generalize statements like
they're fact from your sampling of the most expensive places in the US.
I've rented and owned RE, when I ER, I will do neither
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Old 06-28-2007, 08:41 PM   #34
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I've rented and owned RE, when I ER, I will do neither
Big cardboard box under the overpass?
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Old 06-28-2007, 09:00 PM   #35
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Big cardboard box under the overpass?
Think small cardboard box. Why ruin a good plan with high maintenance costs?
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Old 06-28-2007, 09:00 PM   #36
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Big cardboard box under the overpass?
ROFL!!! As long as I don't end up living like that, and scavenging trash cans for dinner, I know I will enjoy my retirement!
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Old 06-28-2007, 09:02 PM   #37
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Think small cardboard box. Why ruin a good plan with high maintenance costs?
Obviously you're an inexperienced box owner. If your box isnt roomy, you'll kick one side open by accident and there goes another 6' of duct tape out the window...
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Old 06-28-2007, 09:03 PM   #38
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As long as I don't end up living like that, and scavenging trash cans for dinner

Ah yes, the "john galt" method. At least thats where it goes once you lose the income producing spouse...

Oh my...these claws are a little sharp tonight. May be a good idea for me to go scratch on the side fence for a while...
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Old 06-29-2007, 07:14 AM   #39
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Over the years knew a couple retiree's lived in their RV's and traveled until the bug died off.

One we knew lived on their boat - worked temp(jobshopper engineers) and headed for the Carribean whenever the stash got fat enough to go for a half year or more.

heh heh heh - more than one way to skin a cat. And then there were/are squatters - houseboats tied up - some formal and some er informal.
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Old 06-29-2007, 12:12 PM   #40
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My personal experience is that rents increase much faster than inflation, in supply constrained areas. That is why Sam Zell doesn't invest in the South, Texas or the Southwest. Urban Northeast, big West Coast markets, etc.

My experience getting an apartment is limited to Boston, Manhatten, Venice CA, Berkeley, San Francisco and Seattle. All supply constrained markets with strong employment and sustained rental demand. I am sure that there are many markets without these characteristics. Wichita KS should be good.
Ha
Rental rates in my area are just below or on par with what a mortgage these days would cost - not including other costs or taxes. Not sure why you would rent here except for the excellent schools - for the rates i saw listed.

when we rented in great neighborhoods/schools - we rented from old fellers who had long ago paid off the house - so whatever they got for it was profit, aside from minor costs or taxes - and was well below what we would have paid for a mortgage - win win for both parties.

i'm starting to see some lease signs pop up in my moms neighborhood (next to the dozen or so for sale signs) where it is unlikely most of the houses are paid off (the neighborhood is about 10-12 years old) so i'm thinking folks are desperate and will end up breaking even or losing.
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