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Re: Better off renting?
Old 02-01-2006, 11:51 AM   #41
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Re: Better off renting?

Quote:
Originally Posted by Jarhead*
The rent for the apt. (no longer furnished), is $l200.00 a month.
I'm not sure how I could come up with that kind of cash... I mean, "L" is the roman numeral for 50, so that would be $50200/month... yowza!
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Re: Better off renting?
Old 02-01-2006, 11:57 AM   #42
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Re: Better off renting?

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Originally Posted by lets-retire
* According to my Puerto Rican neighbor his house in Puerto Rico is built much better than these.* He compared ours to matchsticks.* quote]

Interesting to see this. 5 years ago when we were last on Vieques, the houses were all built like concrete bunkers exactly because of the storms. We are going back next week. I know there has been something of a building boom since the Navy left, and it will be interesting to see if the new construction is as sturdily built or if it will be matchsticks after the next storm.
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Re: Better off renting?
Old 02-01-2006, 12:18 PM   #43
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Re: Better off renting?

Here is my take on the rent vs own issue.* I think it is wiser to own if you are young (under 60) and intend to stay in a community more than 4 years.*

At my age selling the house and renting a townhome or large apartment is beginning to make financial sense.* We want to travel a lot for several years, then move to a retirement community.* If I divide the anticipated net from our home by the current annual rent for a spacious well located townhome it comes out to 22 years when DH would be almost 90.* Yes, rents will increase but the 'house fund' account would be invested to offset much of that.* The rent would include the owners cost of property taxes and maintance which we would otherwise be paying.*
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Re: Better off renting?
Old 02-04-2006, 10:12 AM   #44
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Re: Better off renting?

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Originally Posted by kramer
On the 250K/500K housing exemption -- this one is a real gotcha. You can pro-rate the amount of time you have lived there up to 2 years over the past 5 years. But you must have lived there at least 2 years!!!! If you sell after living there 23 months but before 24 months, no tax break, as in zero. My father, a tax preparer, told me that some of his clients were shocked to find this out, but it was too late.

Kramer
This is how we understood it, and why we are staying the full two years before we close to avoid any issues.
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Re: Better off renting?
Old 02-04-2006, 10:14 AM   #45
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Re: Better off renting?

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Originally Posted by ladelfina
Are you talking "clear" as in... you can sell for 895k? (prob. not..) but even a gain of 155k over 18mo. is huge! Is this really what the market is like? I mean, Florida.. hurricanes.. wow!

I am a home ownership fan, but if you like to move around anyway.. sounds like you have something to gain and not much to lose.
No....we'd clear the difference between 370K and what we could sell it for.....somewhere in the mid 500s.
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Re: Better off renting?
Old 02-04-2006, 10:18 AM   #46
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Re: Better off renting?

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Originally Posted by Brat
Here is my take on the rent vs own issue. I think it is wiser to own if you are young (under 60) and intend to stay in a community more than 4 years.

At my age selling the house and renting a townhome or large apartment is beginning to make financial sense. We want to travel a lot for several years, then move to a retirement community. If I divide the anticipated net from our home by the current annual rent for a spacious well located townhome it comes out to 22 years when DH would be almost 90. Yes, rents will increase but the 'house fund' account would be invested to offset much of that. The rent would include the owners cost of property taxes and maintance which we would otherwise be paying.
This is our issue.....we never tend to stay in an area for more than 4 years. And so all of the hassle of buying/selling, closing costs....well, it adds up. Currently, owning our home outright, we're still shellling out nearly 2 grand a month in expenses (not including utilities). We can rent something comparable for that same 2 grand. And since the market here has cooled considerably, we'd love to throw that 500K+ on top of our retirement accounts pile. We're only 38 and 37, but intend to keep on moving around to different parts of this country.
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Re: Better off renting?
Old 02-04-2006, 02:11 PM   #47
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Re: Better off renting?

I don't agree about renting. The one factor you will have a harder time grasping because of your age, is the rising cost of real estate as time goes on. When I was your age (35 yrs ago) I purchased my first home for $26,000. It was a two family and not cheap by any means for the time. . Today, I would venture to say that the home is probobly in the $500,000 to $600,000 catagory. It was a nice town in New Jersey on 1/2 acre.

By the time you retire, my guess is that the AVERAGE home will be well over 1,000,000, and perhaps even $2,000,000. Rents will also be rising in-acord with the rising real estate value.

There are ways to do both. If you are in the midwest, then you can probobly find a two family home, in wich you can live in one part and rent out the other. Or if there are no two family homes, you could take in a roommate to split the costs including utilities, phone, etc.

Yes, it is more responsibility, but you are young and can handle it. When we bought our first two family home, we took the small one bedroom appartment (much less desirable) and rented the upper appartment which was a very large 3 bedroom. The rent paid our mortgae, and we just had utilities to pay. Yes, you will have repairs, and some tenant hassles, but as I said, you are young, and what ever money you lay out on the house, you get back and then some when you sell. It is a form on in-voluntary savings.

When you retire, rents won't be $400/$500 a month where you live. They will probobly considerably higher. Thirty five years ago just before I purchased the two family home, my rent was $100 a month. This was in New Jersey, which has never been cheap. Today that apartment would probobly be fetching over $1,000 a month in rent. So you do the math.

Unless you have a VERY big portfolio when you retire. ($1,500,00 mil in dollars 35 years from now is not even giving you $200,000 in buying power. A comfortable retirement won't be $1,500,000. It will take WAY MORE.

Real estate over long time has always been a winner. You should think of it as your SECOND class of investment, because that is what it is, and it gives you a place to live as well.

Take, my advise, and go look for a two-family.
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Re: Better off renting?
Old 02-05-2006, 06:15 AM   #48
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Re: Better off renting?

Was reading some of the articles on the Efficient Frontier site..
Here's one that talks about owning/renting:
http://www.efficientfrontier.com/ef/405/housing.htm
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Re: Better off renting?
Old 02-05-2006, 07:28 AM   #49
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Re: Better off renting?

Quote:
Originally Posted by ladelfina
Was reading some of the articles on the Efficient Frontier site..
Here's one that talks about owning/renting:
http://www.efficientfrontier.com/ef/405/housing.htm
Good article. One reason that we may rent after we sell this place is that we are cash buyers and still low interest rates are working to continue to keep prices up.
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Re: Better off renting?
Old 02-07-2006, 07:40 AM   #50
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Re: Better off renting?

Based upon your perspective above, I agree you should continue to rent.* You've got a low stress situation, and that is invaluable.

However, when circumstances inevitably change, consider the tax benefits of owning as well ... you can't compare $405/month rent to just the total PITI on a home.* You need to after-tax the PITI for a true comparison.

Also, considering the recent residential real estate markets, it may pay to wait, depending upon your location ... though that kind of advice has seldom fared well, historically ...

Remember that appreciation in a home can help you get to your retirement goals faster ... it has helped us greatly in the last decade.* *We have been amazed at the appreciation.* There is also a handy section 1031 in the tax code that makes moving that money around much easier, without taxation.* Congress has generally been very kind to real estate.* AS they say, it isn't what you make ... it is what you keep.

Best of luck.
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Re: Better off renting?
Old 02-08-2006, 04:18 AM   #51
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Re: Better off renting?

well the way i figure it right now renting is my best deal...first off the write offs from owning can be mis-leading.....we all get the first 10 or 12,000 or so in standard deductions so subtract that right off the bat from what you think your getting back....next thing is we have had some large capital gains over the last few years and triggered the amt tax,say good bye to real estate tax write offs..and because in the years we hit the amt tax the local and state taxes have been large amounts the years where we had no capital gains to trigger the amt the large state and local tax payments and the deductions triggered the amt tax again..point is dont figure your tax benifit of ownership to heavy,you may not get it....
as i said before i bought my house in 1987...169,000...sold it a few years ago for 335,000.......also in 1987 i had a diversified mix of stock funds worth about 100,000,,,today they are over 1 million.....figuring all the rent i would have paid all those years if i didnt buy my house id be able to have rented and bought 3 houses today.............as a place to live a home is great....as an investment its debatable
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Re: Better off renting?
Old 02-08-2006, 12:46 PM   #52
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Re: Better off renting?

mathjak107--It looks like you might be correct in your situation. What would your house demand for rent in 1987 and now? Compare that to what you paid in mortgage payments. You seem to be compareing different timelines. You said you sold your house a few years ago. How long ago? You also said your investments were worth a million now. Is that including the profits from your house sale?
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Re: Better off renting?
Old 02-08-2006, 07:47 PM   #53
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Re: Better off renting?

mathjak107--It looks like you might be correct in your situation. What would your house demand for rent in 1987 and now? Compare that to what you paid in mortgage payments. You seem to be compareing different timelines. You said you sold your house a few years ago. How long ago? You also said your investments were worth a million now. Is that including the profits from your house sale?
house was paid for cash when i bought it in 1987....it was sold in 2004....back in 1987 the house rented for 1200 if i wanted to rent it...about 1900 or so in todays dollars...and no the million dosnt include the house sale
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Re: Better off renting?
Old 02-14-2006, 03:26 PM   #54
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Re: Better off renting?

It seems pretty obvious that every market is going to be different.* This is something that has always been on my mind because I'm 24 and my lifestyle would be more suited to a 1 BR apartment that I kept really really nice and got for super cheap.....


But.....Instead I bought a 3 BR house and have 2 roommates.....its a little annoying, like apartments can be, but at least this way I'm using my years of singleness to work for me financially.

The house was all of 130k when I bought it and costs me about 900/mo....with utilities it is about 1200/mo for everything(elec., util, cable, internet, etc.).....I charge the roommates 400/mo, so I'm paying 400/mo also and the house went up 100k in 4 years.
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Re: Better off renting?
Old 02-14-2006, 03:33 PM   #55
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Re: Better off renting?

Modhatter,

I live in the Midwest and thought about taking in a roommate, but my wife said no to the idea.

setab
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Re: Better off renting?
Old 02-14-2006, 04:10 PM   #56
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Re: Better off renting?

Quote:
Originally Posted by Charles
Based upon your perspective above, I agree you should continue to rent.* You've got a low stress situation, and that is invaluable.

However, when circumstances inevitably change, consider the tax benefits of owning as well ... you can't compare $405/month rent to just the total PITI on a home.* You need to after-tax the PITI for a true comparison.

Also, considering the recent residential real estate markets, it may pay to wait, depending upon your location ... though that kind of advice has seldom fared well, historically ...

Remember that appreciation in a home can help you get to your retirement goals faster ... it has helped us greatly in the last decade.* *We have been amazed at the appreciation.* There is also a handy section 1031 in the tax code that makes moving that money around much easier, without taxation.* Congress has generally been very kind to real estate.* AS they say, it isn't what you make ... it is what you keep.

Best of luck.
Everyone talks about the tax savings as being a reason i should buy instead of rent but I can't afford a house that would be expensive enough for the deductable interest to put me above the standard deduction so there is no tax savings for me. Yet another reason for me to continue to rent cheap at 405/mo ( same rent as 6 years ago).
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Re: Better off renting?
Old 02-14-2006, 08:19 PM   #57
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Re: Better off renting?

Another aspect to the use of the interest deduction in our comparisons is that even at after-tax parity, we are substantially increasing risk. If we lose a job, that deduction won''t be worth much. But we still owe the full amount of the mortgage payment every month.

Ha
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Re: Better off renting?
Old 02-15-2006, 10:08 AM   #58
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Re: Better off renting?

Ding Ding Ding!
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Re: Better off renting?
Old 02-15-2006, 12:32 PM   #59
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Re: Better off renting?

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Everyone talks about the tax savings as being a reason i should buy instead of rent but I can't afford a house that would be expensive enough for the deductible interest to put me above the standard deduction so there is no tax savings for me. Yet another reason for me to continue to rent cheap at 405/mo ( same rent as 6 years ago).
I'm not attempting to talk you into anything (it won't work anyway), so this is all academic.

Assuming you have decent credit the mortgage required for you to pay enough interest to reach your personal deduction amount is only about 67000, with a 6.5 % interest rate. Your payment would be about 415, but you would have the utilities that you currently don't pay and taxes/insurance. That amount would be relatively stable over the thirty years. Whereas your rent will go up, eventually.

I just looked back at your original post. Everywhere I've lived my electric has been the most expensive bill. My water/sewer typically ran from a low of 15/month to a high of 55/month. The low was the minimum to keep the water on. It was in an apartment, so essentially it was just washing and drinking. I've lived in a lot of different places. I don't know where you live so I don't even know if a condo can be purchased to 60000, but on a place that cheap your taxes will probably be way lower than your estimate. I live in a high property tax state and when I bought my house a few years ago the taxes were and still are less than 2000/year the house sold for about 145000. The last state I lived in the house was valued at 100,000, and I paid 400/year. Since your personal deduction is being taken car of by the interest on the loan the property taxes would come off your income. I also pay high insurance, it's the hurricane thing, and I pay less than 800/year. Association fees would probably be more, but you also don't have some of the maintenance expenses that a house does.

mathjak107--Since you paid cash for your house it makes it very difficult to do an apples to apples comparison. I am assuming you invested the money you would have used to pay the mortgage or rent. There are too many variables requiring access to personal information I don't want to know, to do an accurate tabulation of what would have been.
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Re: Better off renting?
Old 02-15-2006, 03:50 PM   #60
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Re: Better off renting?

Aaron, could you tell us what town you live in please? I'd like to fiddle around with realtor.com and some scenarios when I get bored at work.


Thanks in advance,

Tom
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