Rent vs. Buy House

M

Mysto

Recycles dryer sheets
Joined
Mar 13, 2006
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No this isn't a new thread about the finance aspects of rent or own:LOL:

We currently own a home in Michigan. We have been leasing a snowbird residence in Florida. We are now staying 7 months of the year in the sunshine state and have started to consider moving here full time. Our intent is to continue to lease rather than buy. From a direct cost aspect - it will cost less than what we now spend but...

We do have some fear. We have always taken comfort in the owning of the house. The new place is much smaller so we would have to sell or give away a lot of our "stuff". We would be moving away from some of our support group and family. etc

Have any of you gone from owning to renting in ER? What should we consider? Looking for thoughts to help us come to a decision. Thanks.
 
Mysto said:
Have any of you gone from owning to renting in ER? What should we consider? Looking for thoughts to help us come to a decision. Thanks.
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We're going to be lifetime owners. I think the price of giving up control to the landlord is higher than we're willing to pay. That's control over the house's paint & decor as well as repairs/maintenance, let alone the cost of the rent.
 
Mysto said:
No this isn't a new thread about the finance aspects of rent or own:LOL:

We currently own a home in Michigan. We have been leasing a snowbird residence in Florida. We are now staying 7 months of the year in the sunshine state and have started to consider moving here full time. Our intent is to continue to lease rather than buy. From a direct cost aspect - it will cost less than what we now spend but...

We do have some fear. We have always taken comfort in the owning of the house. The new place is much smaller so we would have to sell or give away a lot of our "stuff". We would be moving away from some of our support group and family. etc

Have any of you gone from owning to renting in ER? What should we consider? Looking for thoughts to help us come to a decision. Thanks.
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Havn't done it, but thinking about it. For a Canadian, there is the added complexity of figuring out health care. In Ontario, the baby boomers have not really gotten going as far as retiring, yet, they are already starting to make healthcare cutbacks, so I am thinking I would prefer to be on gold plated high deductable private insurance.

Seems that Florida is a bit of a ripoff if you are owning a second home there, and it starts to really make sense from a property tax and income tax pov when you have your primary residence there. Renting seems to be especially a good deal now and side steps many risks. There is as well the risk of property values and rents popping up suddenly at some point.

Nothing to stop you from going back up north to renew relationships with family and friends for a few months each summer, renting on a lake or renting a downtown condo that someone vacates for the cottage in the summer, or a student sub-let.

Maybe think about making the Florida place as attractive as possible for family and friends visits, as far as proximity to the beach and spacious enough.

You also have to risk manage the guy getting very sick suddenly or merely dieing in the middle of the night, and what would the wife do, what would her situation be. Think about your location choice in Florida as far as appropriateness for a widow. Think about a path of retreat to family and friends back north, and how that fits into the summer visits.

My grandparents sold the city house and moved into the cottage, rented in Florida. My parents switched from a city house to a city condo in middle life, while I was still in highschool, and then bought in Florida, with the northern condo always being available to retreat to.

This turned out to be important. In his 70s, he quite suddenly developed cognitive problems, which after a winding road of tests, we discovered was lung cancer that had caused brain mets. They were able to work through that tough year of him dieing with children and family around and in their home base.
 
Thanks for the thoughts.
Kroeran, the health risk is one that is on my mind. But I guess that it exists for everyone that is not living close to family. There are so many things to consider. Not the least of them is that with the current situation, Michigan may be a good place to be from.

We retired early due to work changes (Earlier than planned - I had a training business for the Auto companies) and we have to live on the cheap. No pension. Because of that - the cost savings is a real consideration and we don't have a lot of wiggle room for multiple housing options.

I'll be making a decision this spring when we return. It may depend on if we can even sell our house. The current Michigan housing market is very depressed and doesn't look like it will improve anytime in the near future.
 
Mysto said:
Thanks for the thoughts.
Kroeran, the health risk is one that is on my mind. But I guess that it exists for everyone that is not living close to family. There are so many things to consider. Not the least of them is that with the current situation, Michigan may be a good place to be from.

We retired early due to work changes (Earlier than planned - I had a training business for the Auto companies) and we have to live on the cheap. No pension. Because of that - the cost savings is a real consideration and we don't have a lot of wiggle room for multiple housing options.

I'll be making a decision this spring when we return. It may depend on if we can even sell our house. The current Michigan housing market is very depressed and doesn't look like it will improve anytime in the near future.
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key question is whether you are ready to give up on your specialization or working at all. You could develop a plan to move to an area with friendlier weather and economy, and at least take a shot at it. Last time I checked, the sweet spot was northwest Texas for relatively low unemployment and better weather. It does get very hot in the summer and cold in the winter, but better than Michigan, and the gulf is not that far away for the beach experience.

So, sell, rent or mothball the Michigan house and then look for a very low cost of living situation further south until you get your bearings.

In Florida you are going to pay a big premium for being at or walking distance to the beach, either in insurance or initial outlay, or in limited sq footage. If you go inland a bit you can pick up decent housing in the 100k range with a lot big enough to feed chickens and keep a large garden, keep your insurance and property taxes low. Try to establish a sustainable situation where earning any further income would be a bonus.

regarding the sort of training you were doing, are those skills transferable to any aspect of military spending? was it sales or maintenance?
 
Kroeran said:
Last time I checked, the sweet spot was northwest Texas for relatively low unemployment and better weather. It does get very hot in the summer and cold in the winter, but better than Michigan, and the gulf is not that far away for the beach experience.
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When you said close to the beach to lure friends and family I thought you meant in terms of "on the beach" or "beach view". Northwest Texas to the beaches is like a 12 hour drive.
 
Nords said:
We're going to be lifetime owners. I think the price of giving up control to the landlord is higher than we're willing to pay. That's control over the house's paint & decor as well as repairs/maintenance, let alone the cost of the rent.
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My thoughts exactly. I hate renting 'cause they always want you to paint white if you paint a room, so you put off painting the room. You can't just plant a couple tomato plants in the back as it's not your yard. You can't do this. You can't do that. Heck with it...I'm buying my own property.:rolleyes:
 
We rent "Up North" and have no problem repainting and making improvements. We own down south (in Mexico) because it is so much cheaper. My attitude is that you make the decisions that make sense at the time and forget trying to make a final decision for all time. Take a step. If it does not work, take another step. Be inspired!

Keep some base up north even if it is a seasonal rental.
 
Mysto:
Listen to your gut, it's telling you the truth, you should sell and rent. You can still spend a couple of months a year in Michigan by going to craigslist and looking for Temporary Housing, or you can spend a couple of months in Michigan for free by doing a Home Exchange. I've done both, and although not without their risks, can be a low cost way of accomplishing your goal.
 
Keith, as usual, has the right attitude and wise advice. I would add that obsession with owning a house (not to mention remodeling it endlessly, making it into a "media cocoon" with 50+ inch TVs in multiple rooms, wireless internet, etc.) is a uniquely American obsession that for all-too-many people leaves them with so much of their net worth tied up in it that they find themselves unable to afford to have the life experiences that, IMHO, are what retirement are all about.

I like the French model: rent all your life, a modest-size apartment (but with a small wine cellar or "cave" bien sur), spend your money dining out at cafes with friends, traveling, soaking up the arts, eating amazing food everyday. Some people are natural homebodies and nothing wrong with that, but for many people not having a huge chunk of their net worth tied up in an illiquid asset makes less and less sense the older they get. Frequent posters/world travlers Billy and Akaisha do a great job of explaining the alternatives on their site (Retire Early Lifestyle), and this recent article on Yahoo shows just why renting beats owning financially for many:

5 Reasons Renting Still Beats Buying - Yahoo! Real Estate
 
Kevink:
Thanks for the link and I completely agree with your opinion. The suburban 4 bedroom 3 bath house with a pool and a front lawn, which I'm guilty of having once owned, is an unnecessary costly expense in retirement that does a tremendous amount of environmental damage.
 
Green Retirement said:
Kevink:
Thanks for the link and I completely agree with your opinion. The suburban 4 bedroom 3 bath house with a pool and a front lawn, which I'm guilty of having once owned, is an unnecessary costly expense in retirement that does a tremendous amount of environmental damage.
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This is what we had until a few years ago, then we downsized drastically ready for ER and have been renting for 6 years now. One upside to the static market is that you can try renting without fear of raging house prices meaning that you have difficulty getting back into the housing market.

For us it is working out extremely well, but it is not for everyone. We have very little "stuff" and enjoy the ability to "lock and leave" for many weeks at a time.

It all depends on what "floats your boat" :cool:
 
Leonidas said:
When you said close to the beach to lure friends and family I thought you meant in terms of "on the beach" or "beach view". Northwest Texas to the beaches is like a 12 hour drive.
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well, there is a decision tree implied but not well explained in my postings - my bad :D

as a general statement, the more resorty the retirement location, the more visitors you are going to get. Also, gated communities tend to be more social.

given that there is an involuntary early retirement in play and a concern about money expressed, I thought we should step back for a minute and consider moving to an area with money making possibilities, but with a gentler climate.

when I did an informal study on this, mostly to give advice to people thinking of moving to Florida who post in the city data forum for southwest Florida, I discovered that the ONLY lowish unemployment area of the
States in the southern belt is Texas, northwest Texas in particular.
 
Also be careful not to rent something that will attract visitors. It is much more cost effective to arrange for a short-term rental nearby when needed than to rent something bigger than you need for the whole season.
 
A bit late but... The New York Times has a soul-soothing calculator that lets you know whether you'd be better off renting or buying. It can be found as a side-bar to this article:

Economic Scene - As Markets Fizzle, Buying May Cost Less Than Renting - NYTimes.com

The Times analysis is based on comparing the costs of buying and renting a similar home, using data from Moody’s Economy.com, a research firm, and from real estate agents. This kind of comparison can never tell someone for sure what the best financial move will be. But it does show whether a buyer will need a big jump in future prices to cover all the costs of owning — including the down payment, closing costs, property taxes, mortgage interest, repairs and co-op fees.

A simple way to do the comparison is to look at something called the rent ratio: the purchase price of a house divided by the annual cost of renting a similar one. The number 20 provides a useful rule of thumb. When you do the math, you discover that a ratio above 20 means you should at least consider renting, especially if you may move again in the next five years or so. When the ratio is well below 20, the case for buying becomes a lot stronger.
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We are planning to sell our house and rent in 6-7 years, when our kids are done with college. Like many ER's we are debt free and have $ tied up in our house as equity, which we would like to use to have fun!! It costs us ~ $900/month to live in our house, Tax's, Oil, fix ups, Insurance, water, cable, internet etc.. We can rent an very nice all inclusive 2 bedroom apartment for ~$1200/month. It has been my experience that most property managers don't mind changes as long as they approve them first.

The benefit to us is that we can travel, have the kids over and really not worry about the property. If we get tired of an area - we can just move on!

The one negative is that you are not building any equity and those renting $'s never come back. I think that a lot of people who thought that a home was an investment are re-thinking that position. It is a home first, if you break even then you did well.

Just my 2 cents!
 
another argument is that a large mortgage is forced savings, especially if it has a short amortization

for 95% of people, money not going to a mortgage would likely disappear into consumption spending

this was my father's reasoning when he encouraged me to take on house ownership as quickly as possible

I would think this is one of the best moments in history for the young to buy a house

renting in retirement makes sense to me though, for a long list of reasons

a risk to manage is ensuring the widow does not lose the extra cash to a clever investment "advisor" after you are gone, if the husband is running the investments
 
We sold our house in January 2005, right after I retired. It seemed like house prices were crazy then. After traveling almost non-stop for five years, we wanted a home base again but the real-estate market here had continued to skyrocket and now we find ourselves priced out of the neighborhoods we had expected to settle in. Big oops.

Not wanting to commit ourselves to owning in a less-desirable location or buy a fixer-upper (been there, done that), we decided to continue renting.

I would never try timing the market like this with any financial asset, but one is forced into timing the housing market. After all, you can't dollar average your way into a home.

The market has been crazy for a while, and one ignores that with peril. This chart from Barry Ritholtz today.
Median-Prices-v-Income.png


The accompanying article is a rant about Greenspan's errors, but what it says about the credit bubble seems and its effect on house prices seems plausible to me. He is expecting another "leg down" in housing.
A Closer Look at the Second Leg Down in Housing | The Big Picture
 
The conventional wisdom is that the Austin market lags the dominant trend by a year or two. I have no idea why that would be true, but one hears it. It seems like it held true this last go round. We sold our house near the US market peak (purely coincidence), but the Austin market continued to climb until last year (more than a year lag, but what the hey).

Things are really confused here now. Lots of stuff on the market at high prices, but sales seem sluggish. I see lots of For Sale signs that have been up for months and months. We have actually had a couple of condo developments auction off unsold units.

I just wish Austin would stop showing up in all those media pieces about cool places to live. REWahoo provides a much more accurate picture of life in central Texas.
http://www.early-retirement.org/forums/f27/another-reason-not-to-live-in-texas-35643.html#post657492
 
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