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Re: Scott Burns Article today - Home Own vs. rent
Old 08-29-2004, 08:20 PM   #21
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Re: Scott Burns Article today - Home Own vs. rent

Not to mention, if in 30-35 years the unthinkable happens and I start to run out of money, I'll have an approximately inflation adjusted three hundred and something dollar equity I can cash out of and reload the gravy train. At that point renting might make more sense to me.

More of the "what would you have at the end" point I guess.

I'm also interested to see what rents look like in 20 years. A little over 20 years ago I rented a nice 2 bedroom home in a nice neighborhood in eastern MA for $325 a month. I'm betting thats at least $1500-1700 right now.
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 10:49 AM   #22
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Re: Scott Burns Article today - Home Own vs. rent

Quote:
Yea, I agree. I took him at face value and never stopped to figure my Costs.

My house is about $500K and 5% would be $25,000 per year. I spend about half of that for Taxes, Insurance, Association Fees, Maint, Utilities. 2.5% seems to be a more reasonable figure.

Someone should call him on this one! - Maybe someone that is retired with plenty of time. Do you know anyone?
Cutthroat: Probably beating this point to death, but your figures sound high also. Taxes, maybe?
In any case, besides a highly inflated cost, Burns methodolagy is seriously flawed.
The maintenance on a home is based on your sq. footage, and not on price. Taxes, of course would come into play, but unless you live in an absolute property tax hell state, one would off-set the other.
Just another reason to follow your own star.
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 10:55 AM   #23
 
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Re: Scott Burns Article today - Home Own vs. rent

Taxes are half of that. Association Fees are another $3.6K So it's $10K per year at least. Threw in another $2.5K for Utilities. SO it actually may be a bit more than $12.5K per year.
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 10:56 AM   #24
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Re: Scott Burns Article today - Home Own vs. rent

Cut-throat also mentions utilities in his calculation. You'd have to pay utilities whether you own or rent (usually), so those shouldnt be part of the equation.

Also a renter needs renters insurance and liabiity coverage, which arent as much as homeowners insurance, but they're up there.

I also get a 10% discount on all my insurance for carrying homeowners insurance along with my car insurance, so a small savings there for owning a home.

I think if you really split out the independent costs of homeownership, unless you're in an extremely expensive neighborhood tax-wise, or you've got one heck of a maintenance needy home, you'd have a hard time topping 4-5k a year. Another possibility is having a very, very inexpensive home (50-60k) thats in a special insurance area like fire, flood, hurricane, etc and also requires extensive maintenance.

Cant see it being the norm though.
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 11:47 AM   #25
 
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Re: Scott Burns Article today - Home Own vs. rent

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Cut-throat also mentions utilities in his calculation. You'd have to pay utilities whether you own or rent (usually), so those shouldnt be part of the equation.
Here in Minnesota the heat is usually included in Apt. Rent, because the heat is usually a common boiler etc. - The heat is the biggest part of utilites in Minnesota.
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 11:56 AM   #26
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Re: Scott Burns Article today - Home Own vs. rent

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Taxes are half of that. Association Fees are another $3.6K So it's $10K per year at least. Threw in another $2.5K for Utilities. SO it actually may be a bit more than $12.5K per year.
As TH mentioned, you are going to be paying utility rates whether you own or rent.
The key here is the taxes and assoc. fees.
I live in a semi-tax hell state. (Calif.), however, we are rewarded for staying put. My home, which up to about 3 mos. ago, I figured would bring about $600,000 if sold. Since then, my neighbor sold his home for $750,000. Could I get more for my home? Probably, because its a little larger, but who knows.
My annual property tax bill is $2800.00, and can only be increased 1% a year regardless of the price of the property. I paid $200,000 for the property in 1987, and the taxes were $2100.00 (1% and $100.00 for local bonding).
A blip in an otherwise expensive place to live.
The state does alright, because there is a lot of turnover, and the property values increase have given them a pretty good pop.
In any case, Burns is way off the mark generally, and specifically, extremelly off.
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 02:46 PM   #27
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Re: Scott Burns Article today - Home Own vs. rent

Jarhead, I almost fell off my seat! My home in London ON has the same tax as yours, but is only worth about a third. I guess that's why we have ( free??) health care?
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 03:08 PM   #28
 
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Re: Scott Burns Article today - Home Own vs. rent

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Jarhead, I almost fell off my seat! My home in London ON has the same tax as yours, but is only worth about a third. I guess that's why we have ( free??) health care?
Also Zipper, California has the biggest deficeit of any state in the U.S. - So it's kind of a false economy. Someday, someone will pay for this.

My taxes are 6K for a 500K home in Minnesota. We're also in bigtime debt, because of cuts of income taxes for the upper tax brackets. Property taxes could go even higher here to pay for the debt.

I'll gladly take your medical care and property taxes!
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 03:22 PM   #29
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Re: Scott Burns Article today - Home Own vs. rent

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Jarhead, I almost fell off my seat! My home in London ON has the same tax as yours, but is only worth about a third. I guess that's why we have ( free??) health care?
No, I doubt that's the reason Canada can afford health care. Every state in U. S. has different ways to compute property tax.
In the late 70's Calif. had a property tax "had enough revolt". The taxes were so high on property that retired folks (Lots of them) were forced to sell their homes because they couldn't pay their property taxes.
We have had prop 13 since that time.
When you buy a property, it is 1% of the amount you paid for property. As long as you live in that property, the property tax can only increase 1% a year regardless of the appreciation of the property.

If I were to sell my property for say $800,000, the new owners tax bill would be $8,000.00
If I had to pay property tax like some areas in the east coast, I would be long gone.





'
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 03:33 PM   #30
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Re: Scott Burns Article today - Home Own vs. rent

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Jarhead, I almost fell off my seat! My home in London ON has the same tax as yours, but is only worth about a third. I guess that's why we have ( free??) health care?
Naw, your property tax doesn't pay for health care. *The low rates here in California lead to a dismal school system. *People here send their kids to private school at big costs to get close to the kind of education that I got in public schools in Ontario.

I know a lot of people who have worked here until their kids reach school age and then they leave for somewhere with at least a half decent school system.
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 03:40 PM   #31
 
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Re: Scott Burns Article today - Home Own vs. rent

Scott Burns is not far off the mark for urban areas of Texas. In Dallas and Houston property taxes are about 2.5% of currently appraised values. In parts of Houston, such as the Woodlands (north of Houston) they are about 3 1/2 percent. Homes are appraised yearly with a cap of 10% and they are appraised at true value. Utilities are very high, especially air-conditioning which can run 500 a month in the summer. The real deal breaker,however, is homeowners insurance, which is around 2K for a 400-500K home. The numbers do add up easily to close to 20K for property taxes, utilities and homeowners insurance. There is no state income tax, but it is an expensive place to live.

In addition the laws of supply and demand in Texas, with an over-abundance of new construction, result in not much profit in real estate. We owned rental homes for many years and after expenses lost quite a bit of money because homes did not increase in value enough to cover costs and make a profit.



The folks that make money in Texas real estate are the realtors and developers!
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 06:52 PM   #32
 
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Re: Scott Burns Article today - Home Own vs. rent

I am neither realtor nor developer, and I can guarantee
you that I can make money in Texas real estate.
In fact, I am right now.

John Galt
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 06:58 PM   #33
 
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Re: Scott Burns Article today - Home Own vs. rent

Barbara:

I'm in Houston, inside the loop, I've seen some people make a lot of money. But as you point out, taxes, insurance, utilities are high. Outside the loop, especially in suburbs, I don't think there is much money to be made. By the way, I am a homebuilder here.

Allan
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Re: Scott Burns Article today - Home Own vs. rent
Old 08-31-2004, 08:40 PM   #34
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Re: Scott Burns Article today - Home Own vs. rent

[quote author=BarbaraAnne link=board=costs_board;num=1093782732;start=3

In addition the laws of supply and demand in Texas, with an over-abundance of new construction, result in not much profit in real estate. *We owned rental homes for many years and after expenses lost quite a bit of money because homes did not increase in value enough to cover costs and make a profit. *

BarbaraAnnie:
Interesting post.
I remember going through Texas, heading for a conference in New Orleans in the late 70's
We spent a couple of days in San Antonio, (Alamo, River-Walk, etc.)
My wife is late riser, and I was killing some time and noticed a Real Estate Open House. I am a native Californian, and had just purchased a home. (In fact it hadn't closed escrow yet.) In any case, the house I was buying at the time was maybe 1800 sq. feet. The house I looked at in San Antonio was a new house, with about 2600 sq. feet and the selling price was less than half of mine.
Add that to the fact that California has a very punitive state tax for higher earners, I went back to the Motel, and only half-kidding told my wife we were going to cancel the deal I had just made and move to Texas.
The states are going to get their pound of flesh, in one form or the other.



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Re: Scott Burns Article today - Home Own vs. rent
Old 09-01-2004, 07:09 AM   #35
 
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Re: Scott Burns Article today - Home Own vs. rent

Jarhead,

You are so right!

Wherever you live there are costs. The key is to decide which costs are the lowest for a particular lifestyle. Suburban Texas is fine for raising a family. The schools are very good and you get a lot of house for the money. The problem is when you retire. Since homes don't increase in value like they do in California, Seattle, Santa Fe, etc., which are great retirement spots ,its hard to make a move to an area where homes have continued to skyrocket in price. Retirement in Texas, when income is much lower and buffered by capital gains, doesn't make sense because there are no tax advantages in that Texas has no income tax. On the other hand its is hard to plan for future property taxes since there isn't the 1% cap that California has.

In addition, utilities and homeowner's insurance are very high and unpredictable. It's hard to budget and plan with such uncertainty and know that you can live on 4% or less.

We live in a home recently appraised at 450K ,without a mortgage, and our taxes, insurance and homeowner's insurance as well as utilities (electricity, gas, water) are close to 20K. That doesn't include maintenance.

Even though we like it here, we are searching for a retirement spot where our ongoing costs would be more reasonable.

It's great to learn about everyone else's situation to help in our planning.

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