Housing: Rent vs. Buy

[Nords]

Second house was a somewhat fixer upper in a desirable downtown suburb here in Orlando.  Now a rental with the equity up about $50,000 in 2 years.  Third and current house a deal I found downtown that appraised for $20,000 more than what I purchased it for.  I will say buying is better than renting if it's a smart financial decision to do so.

We did the DisneyWorld deathmarch a couple months ago and were astounded at all the cheap real estate. (We kept looking for the missing zero in the prices.) For the cost of the park passes & lodging we joked about putting a downpayment on a condo and renting it out when we left.

I think the state bird should be the building crane-- with all the construction it's way too easy to overbuild and crash. I'm impressed that you're making money in Orlando; the hurricane insurance alone would push the cash flow into the red!

 

[John Galt]

I've been a few places where I kept "looking for the
missing zero in the price also". I often wound up buying. Never regretted it either.

DW and I were talking about our next Florida trip this
morning, Couldn't agree on where to go and/or what to do there. I told her we could do whatever she wanted
as long as I was there for BIKE WEEK and we didn't
go to Disney World, BTW, I started a thread about
the "best times of your life, other than ER". The worst
"vacations" of my life may well have been to Disney
World. Yet, I knew people who would go back year after
year. I don't get it.

JG

 

[MJ]

The worst
"vacations" of my life may well have been to Disney
World. Yet, I knew people who would go back year after
year. I don't get it.

I don't about going back but I visited Disney's Epcot Center about 20 years ago and enjoyed it a lot. I especially loved Space Mountain which was my first rollercoaster ride ever.

MJ

 

[farmerEd]

We just got bacl from WDW about 6 weeks ago..we loved it, but then again I still have 4 small kids at home so your perspective is very different. When you see it thru kids eyes its very different; I try and leave my cynical side at home....

Anyway, WDW was great, but we rented a house in Kissimmee (a nice 5bd house w/pool) for about $100 day. Cheaper than a 2 really cheap hotel rooms. The house was great, but kissimmee itself is got to be one of the most disgusting, overbuilt excuses for a city I have ever stayed at...zoning gone truly wild...and the roads/highways are horrible (the worst in the country I believe for safety).

I'd shoot myself before I would retire to Florida if the rest of it is anything like Kissimmee....

 

[BUM]

BigMoneyJim,

Echoing Scott Adams, You should buy a house if you want to live in a house. Its a fun debate about which makes the most financial sense. From your post it sounds like you're like me on these lifechanging decisions...overanalysis paryalsis. You probably have visited the DFW area and likely get a couple of area newspapers delivered to you in Indy.

You know how you like to live. Pick a place that suits your lifestyle and allows you the comfort you need to deal with the rest of life. Same with underwear

BUM

 

[grlcndream]

I stay as far away from Disney and Kissimmee as humanly possible

LOVE Bikeweek - what a riot. Going this year for sure!

Yes - Orlando is building up like crazy.....$300k - $1m condos going up everywhere. My concern with those is that the salaries here in Orlando can't support the cost. Salaries here are pretty low. But they are selling like mad.

 

[John Galt]

Well, we have some concensus on avoiding Kissimmee

I want to assure farmerEd that the whole state of Florida is not like Kissimmee. In fact, parts of it actually
remind me of my fav. northern state (Michigan), without
the awful winters of course. There were four reasons
we opted for northern Texas instead of Florida for
our southern base:

I lived there previously.
Less humid
Less buggy
Less populous

JG

 

[BUM]

Jg,
You hit the bullseye... My wife wants to visit FL as a possible deep south half-year home. I said fine as long as we can avoid:

1. Big BUGS
2. CROWDS
3. Hi HUMIDITY

I think we need to pick another state (TX?)

BUM

 

[RockMiner]

Jg,
You hit the bullseye... My wife wants to visit FL as a possible deep south half-year home. I said fine as long as we can avoid:

1. Big BUGS
2. CROWDS
3. Hi HUMIDITY

I think we need to pick another state (TX?)

BUM

I'm with you on all three, BUM. A word to the wise...avoid Houston.(and the gulf coast in general) It has all three of your things to avoid, in abundance! The phrase 'living h*ll' comes to mind. The same could be said for Dallas though less humid. Central, or north Tx is better but you'd better like the heat, IMHO. Good luck.

 

[Jay_Gatsby]

I'm sure that this has been mentioned and/or discussed previously, but I wonder whether it makes sense to rent in an area where the property values seem to be escalating at an outrageous (and unsustainable) rate over the long term?

Where I live, property values have increased 30-50% year over year for the past 3-5 years or so. However, with one bedroom condominiums within a 25-30 minute commute to the city going for $300,000+, townhouses for $450,000 and single family homes for $600,000+, it would seem to make more sense to rent a decent-sized apartment close in at $1,200-$1,500 than it would be to buy an affordable place outside the 30 minute commute range. That commute can stretch to more than an hour with traffic, which isn't an unusually occurrence 1-2 times a week.

Am I being left behind if I don't buy?

 

[grlcndream]

WOW - where are you located? Those prices are insane.

Any chance of finding a steal in the area? A fixer upper that, with a little TLC, can produce a nice return later on?

 

[JOhn Galt]

One of my real estate ideas is that I try to have a nice
profit locked in on the day that I buy it. Just takes some
research and shoe leather.

JG

 

[grlcndream]

John - my point exactly. A property in which you are making an instant profit the day you sign the papers....might take some work, but well worth it.

 

[Jay_Gatsby]

WOW - where are you located?  Those prices are insane.

Any chance of finding a steal in the area?  A fixer upper that, with a little TLC, can produce a nice return later on?

Our nation's capital -- Washington, D.C. The problem is that statistically speaking (although I never knew statistics was its own language, but then again, I'm not a statistician) there is a 15-year housing shortage in the D.C. area. I'm thinking it might make sense simply to buy a "fixer upper" 3-bedroom condo that I can make some nice repairs/upgrades to, and then flip it in a couple of years. Perhaps it might be better to do so with a townhouse, which although it might require more cash up front, might sell better than the condo.

 

[Pete]

Hi guys,

This is pete from san diego, california where renting is a way of life not a choice. The homes are ridiculously overpriced(557K being the median). This does not make any sense where median income is said to be 63 K, yet the demand seems to be constant. The question is not whether to rent or buy rather whether to stay or leave. Any thoughts on this irrational phenomena?

 

[Jay_Gatsby]

Pete,

It sounds like Southern California is approaching the point New York City (or more specifically, Manhattan) many years ago where it became cheaper to rent than it did to buy. Areas like NYC and Southern California, as well as Washington, D.C., are among the most highly concentrated areas of job growth/availability in the country. Consequently, I don't expect that prices will fall dramatically as interest rates rise. On the other hand, prices won't rise substantially again until wages rise and there is a subsequent decrease in interest rates.

 

[Jarhead*]

Hi guys,

This is pete from san diego, california where renting is a way of life not a choice. The homes are ridiculously overpriced(557K being the median). This does not make any sense where median income is said to be 63 K, yet the demand seems to be constant. The question is not whether to rent or buy rather whether to stay or leave. Any thoughts on this irrational phenomena?

Pete: I started to answer this question with a somewhat different angle (real estate in coastal Calif. requires more of a creative approach than most areas of the U.S.
However, I see your question is whether you should stay or leave. That's a decision you'll have to make yourself.
Jarhead

 

[unclemick]

Oldest nephew has rotated from Whidbey to San Diego - now renting. Any creative solutions would be welcome.

 

[Jarhead*]

Oldest nephew has rotated from Whidbey to San Diego - now renting. Any creative solutions would be welcome.

Is your second question any easier?
In today's overheated mkt. in the coastal area of Calif.,and the short time span that your newphew will probably have in that area, he should probably enjoy the relatively inexpensive rent. (And the So. Calif girls, if he's single.)

 

[Hyperborea]

This is pete from san diego, california where renting is a way of life not a choice. The homes are ridiculously overpriced(557K being the median). This does not make any sense where median income is said to be 63 K, yet the demand seems to be constant. The question is not whether to rent or buy rather whether to stay or leave. Any thoughts on this irrational phenomena?

I live in Silicon Valley where the prices are even higher but so is the median family income ($80K - $100K depending on town).  Yes the median income family will have trouble buying the median priced house but the market isn't made up of median income families.  It appears that the incomes here are bimodal.  The income distribution curve probably looks more like a two humped camel.  There are a lot of people whose family members work in low paying jobs - teacher, fast food employee, grocery clerk, nurse, government employees, etc. - and their family incomes are below the median.  This is the lower of the two humps on the income distribution curve.

The upper hump in the distribution curve are those families where the members are working in high tech jobs making from $80K to $200K (and up) each.  If you've got two people working in such jobs the family income can be very large.  So, what you've got is maybe one third to one half of the families that have at least one member in the high tech industry and who can really buy a home that are driving the housing market.  The rest will probably never be able to buy even if the prices do drop.

 

[lets-retire]

I think Hyperborea hit the nail on the head. The median income will always seem low when compared to the median house prices. When compared to the median household income it doesn't look so bad. Attempting to predict the housing market is a loosing propasition. Not long ago the housing gurus predicted a housing crash nation wide. Obviously it didn't happen. I think that if conditions remain the same you might see a slight drop in housing costs or a slowing of apprieciation, but I doubt it. I don't foresee a sharp decline everyone is screaming about. Interest rates go up, but only to the point where banks start losing money, then they will lower them again. It has happened in the last couple of years. The mortgage rates started going up, the real estate market started to cool, then the banks started lowering them again, and the values started rising again.

As far as buying goes I have been fortunate I've owned four houses and have made a profit on three (I still live in one). I owned the houses for 4, 3, and 1 year, I lived in all of them and normally made over 15,000 per house when I sold it. If your motivated, then owning them short term can produce profits. However they need to be in poor condition and you need to be able to do all of the work.

If you are unsure whether you should buy or rent, then you should rent. If there is a quetion in your mind then you probably aren't ready for the long term commitment of dealing with owning house. Also if you are unsure if you are going to stay in your current area then I would definately say rent until you find an area you are willing to live for at least 5-6 years.

Of course al of this is looking through the rose colored glasses of a place where retirees love to live so until the baby-boomers quit retiring the property values around here will most likely go up.