long term housing..rent or buy

[justin]

Originally Posted by honobob

You've intrigued me with your right stock plan. It seemed easy but perhaps complicated to just buy $5000 worth of the S&P 500 but ya gotta think that at least 250 of those drag down the top 250 so if I could just concentrate my funds on the "right one" .....

you've missed my point. I'm not saying to buy the top 250 of the S&P 500. That's 249 too many. Just buy the highest performing stock so you can maximize profits. Why waste time in real estate where you can only make $600,000 from a $5000 investment, when you can make $30 million from the same investment in stocks.

Unless you're saying it is hard to pick which stock is the right stock to buy. And of course I'd argue the same problem applies to real estate. But if you want, keep buying bubbly real estate. I'm sure it will keep going up regardless of the fundamentals.

[honobob]

Originally Posted by justin

Unless you're saying it is hard to pick which stock is the right stock to buy.

Exactly!!!! I do disagree with you about the real estate picking. I know I can go out today and get 8% appreciation over time. You let me pick the property, I'll put up the down, you get the financing and we'll split the profits equally but I pick the sell date within the next 15 years. I'll guarantee you the 8%!

But why split $800,000 with me when you can make us tens of millions! Com'on, what do I have to do, buy your newsletter? Take debit or credit?

[Sam]

Originally Posted by honobob

Exactly!!!! I do disagree with you about the real estate picking. I know I can go out today and get 8% appreciation over time.

We have a genius among ourselves. Either that or totalled disillusioned.

[justin]

Originally Posted by Sam

We have a genius among ourselves. Either that or totalled disillusioned.

I think "disillusioned" will describe honobob in 15 years if his real estate speculating doesn't go quite as planned!

[justin]

Originally Posted by honobob

Exactly!!!! I do disagree with you about the real estate picking. I know I can go out today and get 8% appreciation over time. You let me pick the property, I'll put up the down, you get the financing and we'll split the profits equally but I pick the sell date within the next 15 years. I'll guarantee you the 8%!

Wait a sec... you want me to borrow hundreds of thousands of dollars to buy speculative real estate on the cusp of a bubble, and all you are promising me is 8% returns?!?! At least during the 200 P/E ratio dot com tech stock bubbles, the promises were of 40-50% returns going forward to compensate for all that risk.

If I wanted 8% returns over a 15 year horizon, I'd go with some much less risky investments that are liquid.

[honobob]

Originally Posted by Sam

We have a genius among ourselves. Either that or totalled disillusioned.

I've exceeded that over 30 years so if those are the only choices then yeah , I guess genius.

[honobob]

Originally Posted by justin

If I wanted 8% returns over a 15 year horizon, I'd go with some much less risky investments that are liquid.

No, you don't understand. I said 8% appreciation per year! Your return will depend on your purchase price & financing. Return will be more in the 20-30% NBHD. Isn't there a thread about "Why won't people listen?"?
Did you read the part about the guarantee?

Also I would not be buying in a bubble area. So if you're willing to back the same deal in the market and have the NW to back it count me in!

[justin]

Honobob, thanks for the offer. I am serendipitously making way more than 20-30% average annual return on my non-bubble area primary residence. If I ever want a measly 20-30% guaranteed return though, you'll be the first I'll call!

[honobob]

Originally Posted by justin

Honobob, thanks for the offer. I am serendipitously making way more than 20-30% average annual return on my non-bubble area primary residence. If I ever want a measly 20-30% guaranteed return though, you'll be the first I'll call!

Justin

I sincerely offer you the best I have (it's made me a multi=millionaire) and all you can do is spit on it, claim your superiority, AND still not offer me a leg up!!

That seems to be the real problem of some people on this board (you know who you are). So quick to piss in someone elses cheerios but not offering anything better in return.
So Sad.

P.S. I lied. My returns are actually way way more than yours but I tell smucks that so they don't think my supermodel girlfriend stays with me for the money. 8)

[honobob]

Oh! And have a nice life.

[justin]

Originally Posted by honobob

Oh! And have a nice life.

k thx, U 2.

[mathjak107]

Originally Posted by honobob

It seems like the comparison is totally missing the leverage aspect of real estate. In 1986 I bought a $85K SFH with $5K down. My PITI was about $500 a month over renting for maybe 5 years, equaled for maybe 5 and the last ten has been about a thousand a month under renting. My market value is over $600K. What would I have bought in 1986 for $5K to return the same? Can you buy $5000 worth of the S&P500? I don't think the Forbes article is comparing apples to apples.

I'm curious about the rents for your coop during the down time. did they go down proportionately? My experience has never to have rents drop, only stay flat for awhile. Thanks.

i was getting 850.00 a month before the crash. we dropped to 800.00 to get tenants. because of all the co-ops that couldnt be sold and turned rental it was almost 6 years later before we could get the rent back up.

so here it is twenty years later and we are at 1100.00 a month with a value around 135,000 or so

[haha]

Originally Posted by mathjak107

so here it is twenty years later and we are at 1100.00 a month with a value around 135,000 or so

This is interesting. Where I am (WA), if you could get rent of $1100 on a condo, it would sell around $300,000 or so. This may be the most overpriced market in the US right now.

Ha

[honobob]

Originally Posted by mathjak107

i was getting 850.00 a month before the crash. we dropped to 800.00 to get tenants.

so here it is twenty years later and we are at 1100.00 a month with a value around 135,000 or so

Well not so bad unless you were really counting on the appreciation. My rent went from $350 in the early 80's to $1500 now. There's even a lady in this building doing monthly vacation rentals at $3500! Market value is about $400K. Because of the Diamond Head building restrictions the last condo built was 30 years ago. Even Waikiki didn't see alot of building from the 80's to early 2000. Thanks for sharing.

Originally Posted by HaHa

This is interesting. Where I am (WA), if you could get rent of $1100 on a condo, it would sell around $300,000 or so. This may be the most overpriced market in the US right now.

Ha

Ha, A good comparison of similar properties is the Gross Rent Multiplier(GRM) Market value divided by annual rent.
My Vegas and two Diamond Head properties have a GRM of 22, 23 & 24 with Vegas being the middle one. The GRM on the WA property you mentioned would be 23. Here in SF I've seen GRM's over 30!

Mathjak107 is looking at a 10 GRM which is what my cousin tells me is the norm in the Louisville KY area.

[kcowan]

Compared to a GRM of 23, the PE of the NYSE is looking cheap. After taxes and expenses, I expect the comparison is even better. Of course I cannot buy stocks with little money down.

Maybe this means that stocks are safer for debt-averse people, and RE is good for people in their 30s-40s with plenty of disposable income (and tolerance for the occasional deadbeat).

[Brat]

Originally Posted by HaHa

This is interesting. Where I am (WA), if you could get rent of $1100 on a condo, it would sell around $300,000 or so. This may be the most overpriced market in the US right now.

Ha

I nominate Portland for at least runner-up.

[Celany]

back to the original post...living in nyc myself, it seems more worth it to me to rent than buy. I believe my building is rent controlled. We have about 560 sq feet, 1 bedroom waaaay uptown & it's $1200/mo. It seems like a pretty good deal, for nyc.

the thing that seems to really zing people in nyc are common charges, which can be far more than my rent alone, per month! although, I'm not sure, when people figure in housing stats, do they also figure in stuff like, if you have your own home, garbage/electric/gas/water/major repairs averaged into a monthly budget (like new roof, new siding, etc)?

about the only way it seems to make sense to me is if I could buy a place for all cash, that had cheaper monthly common charges than my current rent. and I'm probably never going to have that much cash on hand.

also, it always seems to me, when people say they bought a home for 100k, 10 years ago, & now it's worth 300k, say. ok...that doesn't actually say how much a person really PAID for the home, right? I read somewhere that, by the time you pay off a morgage, you've generally paid more than twice the purchase price of your home (although that would depend on a number of factors, like length of the morgage, % of the morgage, if you paid off more pricipal early on). So how accurate are those numbers really?

I can see how people that have issues with overspending, owning a home could force them to save, by making morgage payments/building up equity in the home. But I put a lot of my money into investments that earn me money *now* (as everything I've invested in, thus far, has gone up each year). Whereas putting money into a morgage, a big chunck of that money is just going back to the bank, being taken away, even *with* the tax breaks, it's still a lot being taken away.

So I don't see how it's necessarily a 'sure deal' to invest in personal real estate, especially if the majority of a person's money gets tied up in their home. Yes, I can understand that you can live in a home (I can't live in my investments. ). And, in tough times, bedrooms could be rented out in a home. But it seems like my investments will do better, at least for me.

For the record, I understand the quality of life issue. I used to be dead set on owning a home & I felt like I'd never feel like I have a secure place in the world, unless I owned a home. Then I started seriously crunching #s, right about the time of Katrina. I realized that homes can certainly be destroyed & take away that feeling of security & a person won't necessarily get all the money back that they put into their home, from the insurance company. It's no longer worth it to me to make a major investment in a home, vs. investing in US/International stocks & bonds. I would like to own a home someday, but I'd want something small, that represents no more than say 40-50% of my net worth. I've considered doing rental properties somewhere down the line (say in 5 years maybe).

So, that's my current take on it. I'm not the world's most educated person when it comes to homebuying. I have to admit that a lot of the serious acronym-laden discussion goes totally over my head (though I'd like to learn more). But based on my limited (yet probably less-limited than the average american) knowledge & my more extensive knowledge of my own personal situation, renting seems much better than buying, at least right now.

[justin]

Originally Posted by Celany

back to the original post...living in nyc myself, it seems more worth it to me to rent than buy.

I realized I got sidetracked earlier in my discussions with Honobob (we have peacefully resolved our debate through PM's, FYI). Back to a discussion of what the OP was posting about. Celany, you are definitely thinking straight. It probably makes more sense for you to rent than to buy when you consider all the factors that you've listed.

There is the financial aspects that can be modelled fairly well. And there are emotional aspects that you must subjectively deal with. In some parts of the country, renting is way cheaper than buying. Other places it is about equal. Best to do your own financial and emotional analysis than to rely on someone else's opinion though. So many of the inputs are unique to your circumstances.

[cho oyu]

Originally Posted by Celany

back to the original post...l

I think you are spot-on with your analysis.

Since you pay interest on the loan, you do end up spending considerably more than the purchase price of the house. Two things help mitigate the payments and interest: 1) inflation and 2) tax benefits.


Out of curiousity, what are common charges?