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Anyone renting for life?
Old 04-17-2017, 12:34 PM   #1
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Anyone renting for life?

Having not grown up around here, but been here for over 12 years now...
I never really got indoctrinated in the whole mortgage thingy.

Anyone here already been renting for life, and planning on it? And instead putting their money in other somewhat more liquid assets for investing instead (ie stocks etc)?

Is there a disconnect where younger people are more likely to see this as a viable path compared to older generations?
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Old 04-17-2017, 12:48 PM   #2
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I rent and own. I rent my current place because it's cheaper than buying (each month it costs me what utilities alone would if I had bought). I have bought my retirement home (still ~10 years left on the mortgage) however. If I hadn't bought the retirement home, I'd be putting that into an investment account to pay for a retirement home in cash when I do retire as having a paid for home will almost always result in lower monthly expenses for the average retiree.
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Old 04-17-2017, 12:51 PM   #3
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Anyone here already been renting for life, and planning on it? And instead putting their money in other somewhat more liquid assets for investing instead (ie stocks etc)?
Me! (For the most part, anyway.)

I did own a house that I lived in for 4.5 years. At the time, I loved my little house and was very open to the possibility of growing old in it. Then the market went up sharply, and I started thinking about how nice it would be to have all that money in my bank account. I sold the house, went back to apartment living, and ended up using the money to purchase 3 rental houses. Owned them for about 18 months while the market continued it's strong upward journey. Before long, I started weighing the thought of all that lovely equity I had built in a very short space of time, against the long-term liabilities of owning 3 houses. I sold them and haven't looked back.

Owning was fun and while I wouldn't rule it out again in the future, I really do like the lack of responsibility and liability that comes with renting. Being single, I don't have a family to house, or another person to think of. I suits me quite well. I do think that if you plan on being a lifelong renter, you also have to be open to being adaptable as to what kind of places you live in, and where you live. At some point, my current rental will probably no longer be a rental, due to the type of property and the age of the owner. Rent in the Bay Area has risen so sharply that when I have to move out, it will almost certainly be to another area. I'm open to change, and find the challenge of meeting it interesting.
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Old 04-17-2017, 01:30 PM   #4
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Me! (For the most part, anyway.)

I did own a house that I lived in for 4.5 years. At the time, I loved my little house and was very open to the possibility of growing old in it. Then the market went up sharply, and I started thinking about how nice it would be to have all that money in my bank account. I sold the house, went back to apartment living, and ended up using the money to purchase 3 rental houses. Owned them for about 18 months while the market continued it's strong upward journey. Before long, I started weighing the thought of all that lovely equity I had built in a very short space of time, against the long-term liabilities of owning 3 houses. I sold them and haven't looked back.

Owning was fun and while I wouldn't rule it out again in the future, I really do like the lack of responsibility and liability that comes with renting. Being single, I don't have a family to house, or another person to think of. I suits me quite well. I do think that if you plan on being a lifelong renter, you also have to be open to being adaptable as to what kind of places you live in, and where you live. At some point, my current rental will probably no longer be a rental, due to the type of property and the age of the owner. Rent in the Bay Area has risen so sharply that when I have to move out, it will almost certainly be to another area. I'm open to change, and find the challenge of meeting it interesting.
Very good points! I have owned for a good bit of my adult hood and can say that if I was single (I don't have kids) I would most likely be a perpetual renter. I tend to get a little stir crazy after a while (perhaps moving around w/ the military?) and am not sure that I would want to live in the same place for 10+ years. DW and I are considering the pros/cons of custom building a house for our next stop but in all honesty, I see the cons far outweighing the pros...and I am beginning to think that when we sell this house (and most likely a rental we have), that renting will be the way to go and not sure that I would own again.
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Old 04-17-2017, 01:42 PM   #5
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Hi - check out FIREcracker's very opinionated view. It's funny and very relevant. We do own but never got house-horny or worried about impressing people we don't like.
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Old 04-17-2017, 02:28 PM   #6
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We have always owned. Both of us grew up in the D.C. suburbs in the 1950's and '60's and at the time house prices always held steady with inflation or more often grew in price because of inflation and increasing commuting distances as the population grew. So we saw it as a very safe investment. The year 2008 was the first time either one of us ever heard of house prices falling because living near D.C. one is pretty much insulated from the financial disasters that befall other areas, like a major manufacturing plant closing or the oil industry cycles. The steady federal jobs in D.C. and the surrounding areas provide a lot of insulation to the cycles of the financial world "beyond the Beltway" as it is called around there. (The Beltway is the nickname for I-495 which circles D.C.) Had I not scrimped and saved to buy a house after my divorce in 1985 I'd have had a very difficult time staying local to my job because five years later the rent on a 1-bedroom apartment was more than my house payment. So with the advantage of hindsight buying at that time and place was the smart move.

Now we would be much more open to renting. We contracted for this house in Sept. 2001 and moved a year later when I retired. Up until 2008 it appreciated nicely of course, but still has not fully recovered from the fall in house prices, so clearly a strong case can be made for renting in this area. In the D.C. area I'd still say buying is probably the better bet if one can afford it because the real estate market shows no signs of slowing down there.
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Old 04-17-2017, 02:32 PM   #7
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Yeah, thats part of the point...

What if housing prices were just a multi-decade bubble (an extravagant way of putting it, but it gets to the point), and now will stagnate - or even decline over the next few decades.

Just a thought, as I could totally be wrong.
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Old 04-17-2017, 02:38 PM   #8
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I like owning so I can decorate, paint, etc the way I want. I also don't want to have to worry about moving. However, my kids all prefer to rent.
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Old 04-17-2017, 02:47 PM   #9
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Yeah, thats part of the point...

What if housing prices were just a multi-decade bubble (an extravagant way of putting it, but it gets to the point), and now will stagnate - or even decline over the next few decades.

Just a thought, as I could totally be wrong.
It depends on the location. But renting for life is not smart for some HCOL areas in California.
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Old 04-17-2017, 02:54 PM   #10
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My grandparents always lived in high end (rental) apartments. It worked for them.

I think there are pros and cons to both sides of things (renting vs owning)... in my area (southern california) it is often cheaper/better cash flow to rent... especially if you are a long term tenant with a private (vs corporate) landlord... A 3br house that just went up for rent a few blocks from me is charging $2500. A very similar house recently sold for $620k. Assuming the buyer puts 20% down, they'd finance $496k. The payment is pretty darn close to the rent amount - and you're tying up $124k in down payment. If you put down less - your mortgage payment is more than rent.

Location and real estate prices matter.
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Old 04-17-2017, 02:57 PM   #11
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We own but that was because it was way cheaper to buy than rent. Today, it's a closer question of rent vs own here in Raleigh. I don't really care about having 100% control over what I do with my living accommodations but my wife says she does.

Right now I'm dealing with 3 different issues requiring professionals (plumbing, HVAC, roofing) and wouldn't miss this aspect of homeownership a bit. It's probably still cheaper than renting even when considering the sunk cost of a $180,000 house. We pay ~$3,500-4,000/yr total for taxes, insurance, routine maintenance, plus big capital items. A comparable rental house would probably be $15000-18000/yr. In the end, we save around $10,000+ on a $180,000 house value which is a 5.5% yield on cash (and that's probably in real terms, since the underlying real estate should keep up with inflation over the long term). I am currently unable to find a guaranteed 5.5% return (real or nominal) anywhere else, so I'll keep owning for now.

Make sure to not conflate owning a larger, more expensive 3-5 BR house vs. renting a much simpler 1-2 BR condo or apartment. Instead, consider the all-in costs of owning a smaller attached dwelling (townhouse, condo) vs renting the same.
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Old 04-17-2017, 02:57 PM   #12
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It's much higher here. My brother is a landlord and the rent on his house is $10k a month. Ouch! Even I can't afford that.
But here is the math. Bought it for $2M, owe about $900k. Monthly mortgage is about $4500. HOA, Mello Roos and property tax is about $4k. So it's roughly break even. But the house is now worth $3M-$3.5M. About 12 years of ownership. His kids are grown up, he and his wife downsized to a condo.
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Old 04-17-2017, 03:03 PM   #13
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It depends on the location. But renting for life is not smart for some HCOL areas in California.
When I run the numbers, it seems like it's nearly ALWAYS a better deal to rent in the HCOL cities vs. own. Unless you assume perpetual 9% property value appreciation forever (or some other crazy high number).

Rodi's example seems very typical - $2-3k rent vs. mid to high six figures (or more!) to buy a comparable house/condo/townhome. The mortgage alone is about the same as rent but as an owner you still have to pay for all the lurking maintenance expenses, property tax, insurance, HOA, etc. And you have $100k+ tied up in the down payment!
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Old 04-17-2017, 03:10 PM   #14
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When I run the numbers, it seems like it's nearly ALWAYS a better deal to rent in the HCOL cities vs. own. Unless you assume perpetual 9% property value appreciation forever (or some other crazy high number).

Rodi's example seems very typical - $2-3k rent vs. mid to high six figures (or more!) to buy a comparable house/condo/townhome. The mortgage alone is about the same as rent but as an owner you still have to pay for all the lurking maintenance expenses, property tax, insurance, HOA, etc. And you have $100k+ tied up in the down payment!
Honestly, I don't know if there are properties in Rodi's price range in my hood. My sister just bought a condoish near me for 3/4 of a million and even then her house went up already. She said she can't afford it today.
I've rent before and I never found a property as good as my property for the same payment. It's not comparable.
While in theory it sounds good but it's not in real life.
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Old 04-17-2017, 03:15 PM   #15
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It's much higher here. My brother is a landlord and the rent on his house is $10k a month. Ouch! Even I can't afford that.
But here is the math. Bought it for $2M, owe about $900k. Monthly mortgage is about $4500. HOA, Mello Roos and property tax is about $4k. So it's roughly break even. But the house is now worth $3M-$3.5M. About 12 years of ownership. His kids are grown up, he and his wife downsized to a condo.
Great example. $3.5 million house renting for $10k. You get a $3 million mortgage and pay $14,000/month mortgage plus another $4k tax/HOA (and it's probably higher since the tax is based on 12 year old purchase price plus a small % increase). Throw in some basic annual maintenance and repairs and you're probably hitting close to $20k/month to own a place that you could rent for $10k (and you have a half million tied up in equity!).

Only way this pencils out is if you assume significant price appreciation at rates higher than the ~1% plus inflation that the entire US real estate market has experienced over the very long term.

And that's before considering the friction costs of buying and selling property (unless you're one of the rare few that stay in one house for many decades).
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Old 04-17-2017, 03:16 PM   #16
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Honestly, I don't know if there are properties in Rodi's price range in my hood. My sister just bought a condoish near me for 3/4 of a million and even then her house went up already. She said she can't afford it today.
I've rent before and I never found a property as good as my property for the same payment. It's not comparable.
While in theory it sounds good but it's not in real life.

Very strange because the renters I know in HCOL cities say the opposite Either they pay a lot more for a smaller/crappier place because they own (house poor) or they're in a sweet rental for not a ton of $ that they couldn't otherwise afford.
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Old 04-17-2017, 03:16 PM   #17
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I think in some areas it is smarter to rent and less hassle. Robert Shiller has said housing is generally not a great investment:
Shiller: Housing Not A Great Investment - Business Insider

In our area there are many factors to consider for either renting or owning. Prop 13 favors long term home ownership, yet the chance of a big earthquake makes renting attractive.
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Old 04-17-2017, 03:18 PM   #18
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Great example. $3.5 million house renting for $10k. You get a $3 million mortgage and pay $14,000/month mortgage plus another $4k tax/HOA (and it's probably higher since the tax is based on 12 year old purchase price plus a small % increase). Throw in some basic annual maintenance and repairs and you're probably hitting close to $20k/month to own a place that you could rent for $10k (and you have a half million tied up in equity!).

Only way this pencils out is if you assume significant price appreciation at rates higher than the ~1% plus inflation that the entire US real estate market has experienced over the very long term.

And that's before considering the friction costs of buying and selling property (unless you're one of the rare few that stay in one house for many decades).
If you buy today, it's 3.5M. But he bought it 12 years ago at around $2M. He put down $1M. He won't be able to find similar house in similar location. I think his expense is about $8K, his wife is in real estate, so she can sell it for no fee or cheap. But I think it's about appreciation.
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Old 04-17-2017, 03:26 PM   #19
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Very strange because the renters I know in HCOL cities say the opposite Either they pay a lot more for a smaller/crappier place because they own (house poor) or they're in a sweet rental for not a ton of $ that they couldn't otherwise afford.
I can see it is true even for me. For my current house, it's cheaper to buy. For my other house in the Bay Area, if the buyer was to buy it, it would cost more. But my renter has offered to purchase my property there and I refused. The reason is I pay low property tax, my house value has increased 5 times since I bought it. My mortgage is nearly nil.
I don't need the money. If I sell I have to pay capital gain.
Both houses are in HCOL areas.
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Old 04-17-2017, 03:36 PM   #20
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When we lived in the States, we always owned and always made a profit on price appreciation when we sold. Now we live in Switzerland, where owning is very expensive and so 2 out of 3 people rent (most living in flats in apartment buildings in the cities).

As retirees we like the flexibility of renting; but the cost is high (think NYC level prices). Over the next thirty years we will spend close to the equivalent of $1M on rent alone. If our flat were for sale we could never afford to buy it, so there is that.

Rental insurance is very sophisticated here; for example, we carry full replacement insurance on our window glass. Swiss windows are amazingly well made and thus very expensive. That one was new for us.

As a consequence of not directly owning real estate, my wife and I invest in Real Estate Investment Trusts (REITS) in our portfolio.

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