How many of you ERs are renters?

[xynny]

I live in the San Francisco Bay Area where rent is about 1/2 to 1/3 the cost of buying a house right now. It didn't used to be this way, but right now it seems that it's cheaper to rent in a lot of areas. So I'm wondering, how many of you ERs are renters?

 

[FANOFJESUS]

This would make a good poll to take. I own in the midwest cheaper to own here.

 

[haha]

I rent in Seattle. Much cheaper than buying.

Ha

 

[mb]

I'm in the bay area and I own. But I have been in my house for 15 years. You are right, I think that economics are skewed towards renting now.

 

[xynny]

ah, 15 years ago was a good time to buy. My parents bought 9 years ago and they are coming out ahead by owning so they keep on telling me to buy, but the math just doesn't make sense to me right now.

 

[Rambler]

I'm in the bay area and I own. But I have been in my house for 15 years. You are right, I think that economics are skewed towards renting now.

We have a home in the east bay, bought 15 years ago. It seems that the rents are up only a little since then, but home prices are way up since then.

R

 

[aenlighten]

It should always be cheaper to rent in the present,

but always be cheaper to own in the future in a growing area. The uncertainty is how far into the future. In growing metro areas, rents should double in around 15 years so paying double to own is steep but can pay off in the long run, it just depends on how long you have. Triple would really be pushing it though and it might take 50 years to breakeven, so you might want to wait for a better time or if less time come out ahead renting.

 

[whitestick]

Almost ready to pull the plug to rent rather then own here in the North Dallas area. Not even counting the interest or opportunity cost of the mortgage payments, it's cheaper to rent then own. With our slowly rising property values, it's been this way for over ten years, and likely to continue for at least that long in the future. Crystal ball is clouded after that, but who knows, we may move again before the next ten years. Average is after all, every seven years for moving

 

[LOL!]

This would make a good poll to take. I own in the midwest cheaper to own here.

You mean like this: http://www.early-retirement.org/forums/f28/millionaires-do-they-pay-off-their-mortgages-24936.html
which suggests less than 5% of the folks answering the poll rent.

 

[chinaco]

Not ER yet, but we intend to own at our normal home.

We will probably rent vacation homes several months each year... We have debated over ownership vs rent for a second home (condo). Renting seems to fit our needs better.

 

[lazygood4nothinbum]

i'm currently debating myself on this. i said to a friend about real estate "stick a fork in me; i'm done" to which he replied that i'm "twice baked." my horrible experience with the housing bust (two of'm in south florida, yikes) has me leary to ever own again. but i've got a very nice property tax advantage in owning because i've been homesteaded here for so long. so it might be worth parking some money in a small apartment even if i wind up vagabonding & renting elsewhere for the next 15 years. decision pending.

 

[tightasadrum]

but always be cheaper to own in the future in a growing area. The uncertainty is how far into the future. In growing metro areas, rents should double in around 15 years so paying double to own is steep but can pay off in the long run, it just depends on how long you have. Triple would really be pushing it though and it might take 50 years to breakeven, so you might want to wait for a better time or if less time come out ahead renting.

I agree with this in the long-term. However, their are clearly other factors that influence these shifts in costs. As a landlord of multiple properties, I can tell you that rents in this area, Athens, GA, a college town, have not increased much in 10 years. The largest influence for this comes from the number of units available for rent compared to the number of people looking to rent. The county commissioners continue to ok every new apartment complex that submit for approval. so the rate of increase for rental units has continued to expand faster than the number of people looking to rent. Result: rent stagnation.

Home prices have increased at a higher rate over that same period. Only recently have we seen a serious slowdown in home sales. Buyers of high end homes are not upgrading; buyers of more modest homes can't get financing. So the local governments solution is to raise taxes and provide for those who can't afford housing which leads to even MORE people moving to the area from surrounding areas who need housing; which leads to the government increasing taxes to...well you get the idea.

I would make it a requirement that you live in the county for at least 5 years before you could qualify for housing subsidies.

Tight

 

[kcowan]

We have rented since 1995 and the returns on our equity portfolio enabled us to ER in 2002. Had we owned, we would have been rich on paper but without the income needed (without downsizing).

We live in Vancouver BC and PX MX (where we own).

 

[rs0460a]

You should include an option to vote "own and paid off".

OK, before you start, there is the question of taxes, upkeep, etc. on a home without a note, but even with what I'm paying today, I could not match (based upon sq. ft.) what I have today, in rent vs what I pay for "upkeep".

For those of you that want to talk about "valuations", yes, things go up/down, but speaking for myself (in these depressed RE days) the home is still (based upon current comps) "worth" 2x what I paid for it 15 years ago.

- Ron

 

[W2R]

You should include an option to vote "own and paid off".

OK, before you start, there is the question of taxes, upkeep, etc. on a home without a note, but even with what I'm paying today, I could not match (based upon sq. ft.) what I have today, in rent vs what I pay for "upkeep".

For those of you that want to talk about "valuations", yes, things go up/down, but speaking for myself (in these depressed RE days) the home is still (based upon current comps) "worth" 2x what I paid for it 15 years ago.

- Ron

My home is paid off too. Last year my taxes plus insurance (homeowners and flood) averaged $175/month. Additionally I probably spend an average of $100-$200/month on repairs and improvements, when I feel like it. It would cost me about $1200/mo to rent a similar home in my neighborhood. So, my nest egg has been growing pretty fast as I add the difference to it, each month.

But more than that, I have found an intense personal satisfaction in having a paid off home. Perhaps others with paid off homes know what I mean. This is a goal worth working for.

 

[kcowan]

My home is paid off too. Last year my taxes plus insurance (homeowners and flood) averaged $175/month. Additionally I probably spend an average of $100-$200/month on repairs and improvements, when I feel like it. It would cost me about $1200/mo to rent a similar home in my neighborhood. So, my nest egg has been growing pretty fast as I add the difference to it, each month.

But more than that, I have found an intense personal satisfaction in having a paid off home. Perhaps others with paid off homes know what I mean. This is a goal worth working for.

Hi W2R
Have you ever looked at what your house equity would have earned last year in your portfolio? That is the analytic way to look at the cost of your emotional ownership "safety net". Not that you should change. Just to be informed of the cost of things for when you retire.

In a similar vein, what cost/sq.ft. premium will you pay to move to Springfield when your retire? Understanding such tradeoffs will make you stronger financially. And you might just make the odd better decision...

 

[W2R]

Hi W2R
Have you ever looked at what your house equity would have earned last year in your portfolio? That is the analytic way to look at the cost of your emotional ownership "safety net". Not that you should change. Just to be informed of the cost of things for when you retire.

As a matter of fact, yes I have! Guess I first did that back in 2000-2001, when I was trying to figure out what to do with my nestegg in a down market, and first thought of using it for a down payment. I guess that the instinct to approach these decisions from a computational angle is one of the advantages to being mathematically inclined as I'm sure you are, as well. At a 4% SWR, the 2002 purchase price of my home plus all interest paid would have earned $586/mo for me (before taxes). A rough estimate of what my house might cost today, would give me $633/mo before taxes. So I think I'm pretty informed. $175 + $586*.85 + $150 = $825/mo as a rough estimate? Maybe a little off but the last time I checked, I felt happier with the cost of owning my own home than with spending $1200/mo on an equivalent rental.

In a similar vein, what cost/sq.ft. premium will you pay to move to Springfield when your retire? Understanding such tradeoffs will make you stronger financially. And you might just make the odd better decision...

You're right - - understanding the costs of such a move is definitely a very first step that everyone should complete when considering a big step like that. So, I did that for the first time several years ago, and update several times a year. When I move to a bigger home in Springfield, the excess of around $70K or so (due to moving to an area with lower home costs) will pay for all expenses associated with both real estate transfers, the cost of a professional move by a major moving company should I so desire, redecorating and refurnishing my new home, maybe a new car, and more left over... I'm glad I won't have to come up with the cash for these expenses in some other way.

I feel pretty good about my decision (which of course, would not BE my decision if I had not done the prerequisite research, even down to the level of pricing furniture at furniture stores in Springfield, storage on both ends, and more). Apparently such computations often come out quite differently in real estate "bubble" areas than they do in the so-called "flyover country".

 

[rs0460a]

Hi W2R
Have you ever looked at what your house equity would have earned last year in your portfolio? That is the analytic way to look at the cost of your emotional ownership "safety net".

I know that you did not reply to me, but I just wanted to give you a "different view" of home ownership.

My wife/me have been "blessed" financially, and being that we do not have a "next generation" to worry about (yes, we have a son - he is disabled and he is taken care of via disability and a "special needs trust" for his minimum needs after we are gone), but our remainder estate is going to our named charities.

Our situation is that we don't have to worry about taxes (no conversion of IRA's to Roths's) nor estate taxes, even though we are beyond the current federal limit. Our named charities (via a trust) will able to use whatever is left to further their "good works" (BTW, in education and old age assistance).

Not to say that in most instances, buying/renting a home makes a difference. Just to note that sometimes there are conditions that the final dollar does not matter.

Regards,

- Ron

 

[mb]

Hi W2R
Have you ever looked at what your house equity would have earned last year in your portfolio? That is the analytic way to look at the cost of your emotional ownership "safety net". Not that you should change. Just to be informed of the cost of things for when you retire.

.

Yes, but I would have to include the cost of a divorce in the calculation

 

[kcowan]

Good answers from all three. Thanks. Special to W2R, very impressive! I would expect no less. Life in Vancouver leads to the rental decision but then we have condos that are selling for $2300/sq.ft. and so many people are buying on emotion and going to get the shaft and I don't mean elevator...that I kind of react when anyone says they want to own because it feels good.