Revisit Rent vs Own Home

[Dtail]

My parents just sold their house and moved into an apartment complex rental, as just didn't wish to maintain a house anymore. The rental is not cheap at $2,800 monthly, but is typical for their HCOL and is spanking brand new.
They are 89/86 y.o.

 

[Crewer]

In our area we couldn't rent a SFH as nice as the one I own (or where I would want to live longer term). We rented 2 years during our downsizing but everything up to our standards (SFHs only) were homes people were renting until the housing market recovered. Our landlord was reasonable but made excuses to come into the house any chance she got, which sort of gave me the creeps, though I understand she didn't know we'd take good care of her place. I even planted annuals and did some deep cleaning that should have been done before we moved in. Anyway, it was a nice place in a great neighborhood (neighborly even to renters) but good thing I could shower at the gym because corroded pipes meant awful water pressure and the owner wasn't about to undertake the job of replacing the pipes. The homeowner of another place we looked at to rent had a rental agreement provision about no smoking within 100 feet of the place, which we think meant people driving by couldn't smoke in their cars.

I don't see things changing around here until the system catches up with the new tax law and corps or partnerships start getting into rentals of nicer SFHs (to take advantage of tax deductions that individuals may no longer take because of limits or the higher standard deduction). I understand that during the housing crisis some companies started buying up neighborhoods of houses to rent but not in a place I'd live.

 

[Huston55]

now that it has no mortgage the carrying cost of my 3br/3ba townhome (hoa fee + property tax + insurance + electricity/gas) is under [$600 + (home value * 5%)/12]/month.

with all outside maintenance taken care of via the monthly hoa fee.

I can't imagine living anywhere else as cheaply, at least here in the u.s.

fify

 

[COcheesehead]

Just don't want to go on a winter cruise for 2 weeks and come back to find the furnace crapped out and the house is flooded.

Turn off the water and let the pipes drain from your lowest faucet. Problem solved. I know of at least two folks who didn't turn off their water when they were gone and they ended up with BIG problems. Its too simple of a process to not do it.

 

[gooddog]

With the tax laws that have been passed since 2008 regarding real estate, renting is actually a great idea. If we didn't own our home already, would never consider buying. Owning is a money loser at this point, especially when you factor in inflation and the tax environment. Those who think they can get rich off of real estate in today's environment do not understand the entire picture.

 

[HMMY]

I have owned and am currently renting. I love the maintenance free rent lifestyle. I hate renegotiating my lease each year. I would prefer to own; however, I refuse to pay the $2k/mo premium to own. When renting and owning are financially equivalent, I will buy something again.

 

[gooddog]

I have owned and am currently renting. I love the maintenance free rent lifestyle. I hate renegotiating my lease each year. I would prefer to own; however, I refuse to pay the $2k/mo premium to own. When renting and owning are financially equivalent, I will buy something again.

Your post made me think about condos. They 'feel' somewhere in-between owning and renting - the best of both worlds, with a little of the worst.

 

[kimcdougc]

Guess I am fortunate that I get the best of renting. We have owned (4) houses in our 40 years of marriage. We sold our last house to our daughter at a very, very discounted price giving them some built in equity. They moved out of their little house into our bigger house that we sold to them. We moved in their little 800 remodeled 1927 Craftsman with an unfinished basement for our "stuff".

The deal is we get to rent this little house for just what the house note is for however long we want to. We can do what we want to it when we want. Fast forward 3 years later we have decided to keep renting this little house as it is newly renovated, we can walk to town, the rent is the same forever unless the taxes go up we pay that. DD replaces what needs to be replaced if something breaks (DH and I have already said we will go half on that when something happens or breaks - we didn't tell DD that yet - but we will.) We take care of the house and treat it like our own.

So far, so good.

 

[pacificlou]

I own a home but I purchased it when property was fairly inexpensive around $200K back in 1989 in California, current equity is around $800-$900K. Renting for us would be a hassle plus I don't want anyone dictating nor not being surprised when they decide to sell whenever causing stress and the hassle of moving. When both my wife and I are gone our only daughter inherits the home along with our grandchildren will divide the profits if she decides to sell the home or if they rent it out they can get around $1K each month on the rent. Giving them something upon our deaths will help them a little vs renting where you get zero of something you paid years into.

 

[armor99]

When you rent, you have a vested interest in your neighborhood pretty much remaining the way that it is. When your neighborhood improves, rents goes up, and affect you in a negative way. However, when you own your own home, you welcome neighborhood improvements, and you want your neighborhood to improve, so that the value of your home goes up. In my opinion, it’s really more a question of control than anything else. Do you want to be in control of your own life and own destiny, or do you want to perpetually be at the mercy of someone else’s whim.
When you rent, you allow someone far too much control over your life in my opinion. The rent can go up by some ridiculous amount, they can choose not to maintain the property and you have to get legal people involved, or a whole host of other things are now allowed into your life, that probably does not need to be there.

 

[triangle]

A few years ago I imagined selling the house and investing the proceeds into a small basket of REITs or more general income producing investments. Since a secondary goal was to downsize I believed I could generate enough income to cover the rent and have a little left over to grow in order to help cover inflation. (Especially when factoring in they yearly budget needed to cover home repairs which could now help offset rent when making a own-vs-rent financial comparison).

But given that this newly generated income would be taxed at whatever was my personal top marginal rate and possibly affect ACA or other income related things I abandoned the idea. So while I don't consider a home an investment per-se I do see it as inflation protection and its helps to minimize the amount earnings and income producing assets needed to live, which potentially reduces one's top marginal tax rate.

 

[indiajust]

I prefer to have my real estate allocation in REITs and MLP's. I have wealth because I rent. My income tax rate is extremely low in NH, while property tax is comically cruel to pay for the school bloat, so owning property is punitive. Government healthcare and education ARE inflation, so homes do not provide inflation protection here.

A state with different tax regime would have different incentives. NH hates property.

 

[indiajust]

Owning gave me a side hustle, renovation of a battered property in a promising (but drug and violence plagued) neighborhood. It contributed to my divorce, damaged the following relationship, and derailed my career path when I could not sell to move toward opportunity. With FIRE, this would not be an issue, since I would not be renting money to own property.

Owning was fine, but renting is why I'm wealthy. I prefer REIT's and MLP's to fill out my real estate allocation investment now.

https://awealthofcommonsense.com/2018/08/some-thoughts-on-investing-in-real-estate/

 

[brucethebroker]

With the tax laws that have been passed since 2008 regarding real estate, renting is actually a great idea. If we didn't own our home already, would never consider buying. Owning is a money loser at this point, especially when you factor in inflation and the tax environment. Those who think they can get rich off of real estate in today's environment do not understand the entire picture.

First, it is a local thing. In some areas renting makes better sense, others, not. In your area, renting may be the better deal. In my area, buying still is the better option for many people. (Many, not all.)
Second, this is a rent vs. owning a home thread. "Getting RICH off real estate in today's environment" is not the topic (unless I missed something).

It is still possible to buy a home, live in it, and after 2 years make tens of thousands of tax free dollars, all the while with a payment that is cheaper than rent (even with the time value of your down payment and any improvements/repairs). Will everyone who tries it succeed? No. But many will.

Younger people also read this blog. Let's not discourage them by telling them they cannot do something in today's economic situation.

 

[meleana]

We are seriously considering a CCRC with individual independent living cottages where they take care of the inside and outside and have nice amenities like indoor/outdoor pools and a gym.. Some are very expensive-others just expensive.


We would be the youngest people there- in our 60's - but at least we would not have to ever move again.

 

[Huston55]

We are seriously considering a CCRC with individual independent living cottages where they take care of the inside and outside and have nice amenities like indoor/outdoor pools and a gym.. Some are very expensive-others just expensive.


We would be the youngest people there- in our 60's - but at least we would not have to ever move again.

Suggest you read some of the excellent threads on CCRCs; here are links to a couple:

http://www.early-retirement.org/forums/f38/ccrc-good-bad-and-86089.html

http://www.early-retirement.org/forums/f47/ccrc-reference-material-faqs-86124.html

 

[SpinDoctorTX]

Now that it has no mortgage the carrying cost of my 3BR/3BA townhome (HOA fee + property tax + insurance + electricity/gas) is under $600/month.

With all outside maintenance taken care of via the monthly HOA fee.

I can't imagine living anywhere else as cheaply, at least here in the U.S.

Wow- for the part of the country you live in, that is cheap! We own our 2200 Sq. Ft. home (just north of Houston) outright also, and our monthly expenses on our house including taxes, hoa, ins., gas & electric, water, lawn guy are $500. a month. That's in part b/c my husband can fix almost everything, and what he cannot fix we know others (for whom he does free work) who can fix what he can't. Gotta love barter. We have solar on the roof, so our elect. cost last year was <$100.00 for the year.

When I retired we let go of our housekeeper (once a week) which was sad, but I've retrained myself to do it happily enough. We'd cut out the lawn guy, but Hubby is 72 almost and in Houston it is just too ghastly in the summer for him to be dealing with the heat & humidity. I sure as heck won't do it.

We like having our own home, and need it really since at some point my mom who snowbirds here will likely be a perm. resident with us, which is fine. We bought a plan this time with 2 masters and made her a sitting/ tv room (she basically has a wing which is good for all of our mental health! lol). We like a back yard with lots of plants that draw bees, butterflys & birds (aka cat TV for our kitty who is a prisoner inside).

Houston is a really cheap place to live, and unless you want to live in an insulated area (gated/ secured) there are nice neighborhoods that are affordable all around. We feel quite secure with plenty of weapons about. We like to live in mixed race/ age neighborhoods such as ours, which is nicely kept up by the hoa and as safe as any big city burb.