Owning vs Renting?

[Tommy_Dolitte]

There appears to be a poplar fundamental answer to this question....

....interested in perspectives and decisions you've made regarding this?

TD

 

[unclemick]

RENT - heh, heh unless she "makes you an offer you can't refuse". Anywise - fishcamps aren't/weren't too expensive.

 

[KB]

I bought my first house in 1977 and have owned 3 different ones since then. Each time I paid extra on the mortgage and when sold rolled all money into the next house. The California housing market has increased quite a bit since 1977 so I have a very nice nest egg in my current home and will be able to ER after owning it for 2 years and then selling it.

Renting doesn't build equity. THat's my opinion on rent vs own.

 

[SDY888]

Agree with KB. Seek to buy if at all possible / circumstances permit.

All other things being equal, renting is dead amoney, whereas buying builds equity. One can look at the mortgage payments, remove the interest and simply visualise the capital repayment as actually paying money to onesself - all you are doing is swapping cash for equity, only the interest is a ''cost''.

BTW, we now have two properties, so I should declare a personal bias towards 'Real' property.

Simon888

 

[otako]

Depends on how often you move.  I would suggest buying only if you plan to stay for at least three years.  Most of money paid up front on mortage is interest.  Also, not every housing market is like the west and east coasts where properties appreciate rapidly.  For instance in Texas where wide tracks of land is avalible for new homes, people often take a loss on selling their used home once closing costs are calculated.  I seen people have to do 10 to 15% market downs to get home sold.

A home may not always be a good investment.  Look at your situation and the local real estate market.

 

[cute fuzzy bunny]

I've made almost as much money buying and selling my primary residence as I have investing in stocks, but I'm going to split the answer.

I think you should own if you live in an appreciating area, and rent if you live in a stable or downturning area.

Since my area is appreciating, I own again. Paid $252k for my house a year ago and similar models on less land on a main road (mine is on a large lot in a small cul de sac) are selling for $315-330 now.

My plan uses the residence as a backstop. Should I start running out of money later on in life, say in my 60's or 70's, I'll sell the house and move into a smaller apartment or rent a small house somewhere and replenish my portfolio with cash from the home sale.

 

[John Galt]

TH, I like your plan, maybe because it is similar to
mine Anyway, you're a smart guy and a pretty
funny one. Keep working on your shtick and pretty
soon you will as witty and entertaining as unclemick
and I.

John Galt

 

[ats5g]

Since I usally take the point of view that the markets (stocks, bonds, real estate) are unpredictable:

(1) I would only buy a house if you can afford it (payments, repairs, taxes, etc.).

(2) I would only buy if you can afford to see your "investment" decline in value.

- Alec

 

[Whakamole]

Whenever I ask friends of mine who own houses what they did on the weekend, it's almost always "I worked on the house..."

Owning makes more sense if you are married or otherwise living with someone, since you can use the extra space and both of you can help with chores. Extra bonus points if you have kids that you can tell to mow the lawn

 

[Billy]

I am hearing there are some good deals in southern Florida today.

Billy
Website www.geocities.com/ba264

 

[Cut-Throat]

I think everyone wants to own a home that they like; someday, but it is not the financial nirvana that real estate agents and all of your co-workers claim it is.

I rented a long time when I was unsure of where I wanted to live. This was after I owned a home that I basically hated and in reality would have been better off renting.

So I would only buy, if you want the damn thing. Buying to make money is a Full Time Job

With that said, my wife and I built a place about 6 years ago and really like it. But there is not the hurry or panic that American Society seems to inflict on everyone.

 

[cute fuzzy bunny]

John - I can only dream about one day aspiring to reach the level you and Unclemick have achieved.

I must have lucked out on the house thing. I've done a ton of work to my wifes old house but thats because its 50 years old and nobody has done any maintenance on it for a decade.

I've hardly a darn thing to the last three I've owned. Nothing really to the latest one although I'm going to have to spend an hour or two installing a drip edge as the builder was an idiot and didnt put one on.

But its a bitch to find a house in a rising market, and the way things are right now, most risen markets just have to be topping out. However I did think that about the SF bay area market 8 years ago and now look at it.

Whats really troubling is that all the nearby and even not so nearby areas are starting to really get ridiculously overpriced. I moved from a highly desirable area to a so-so one 45 minutes away, and stuff an hour past me in a very, very so-so area is now selling for prices I wouldnt even consider.

I guess I dont even have renting as an option right now. Too many cats and dogs...I'd never find a landlord that'd take 'em. Plus I like the idea of knowing what my housing costs are for the next 25 years. Zero. Well, almost zero...a little paint, a little caulk, and a couple of appliances.

 

[johnblake]

Renting isn't throwing money away, you're paying for a place to live. Buying doesn't necessarily build equity -- you have to pay off the mortgage.

I'd be very careful buying realestate in a market where rents are considerably less expensive than a mortgage payment on house (assuming 10% or so down.)

Buying ends up being an excellent option for the many people that can't save unless they are forced to.

The transaction costs for realestate are insane. I expect this to change over the next 10 years.

 

[otako]

My advice is wait.  Rent until the market goes down and buy.  Right now the price of houses on the both west and east coasts are inflated because of bubble.  This real estate bubble will pop as interest rates go higher.

Trust me your going to feel stupid buying 300k overpriced home on the west coast after the bubble bursts.  When the normal starter house goes back to sub 100k, you will still be stuck with mortgage and nobody to sell it too.

 

[Jane]

I agree with Otako, if I am aspiring to buy, I will wait for a few more years. My hunch is that we are seeing a housing bubble that is about to burst or deflate.

Now I am on a buy side, not because I believe that rent is a waste of money but because:

1. Moving somewhere is not in my plan. I like my neighbourhood and/or city. This area is appreciating with lots of amneties (shopping, schools, banks, community centre and gasp! Golf course & country club - yeah my area has a lot of McMansions). John Blake is right, people often forget that there is more to real estate transaction than downpayment (that said, always try to negotiate these closing costs).

2. With my 4.45% fixed interest rate, my mortgage payment costs less than if I rent similar place (this is important as I always looking at cutting cost of living). That said, if you are going to buy, never buy more than you can chew. Just because interest rate is low, don't stretch yourself out.

3. From emotional point of view: I would like to have a roof over my head that is my own. I am also on the side of "paying your mortgage sooner than later".

4. From FI point of view: one day, with a paid-off residence, my housing costs will go down considerable (not zero though), which means if I ever lose my way of earning a living, I can live on a lot less and my savings will go farther.

5. I don't actually see my home as an investment although it probably can be treated as one. I need a place to live whether renting or otherwise. So it solves having to worry if my home value will go down/up. To me, if it goes up, great! If it goes down, oh well...I still need a place to live. I always tell people that unless you buy a property for rental, don't look at it as fool-proof "investment". Sure you have to think about location, the condition of the place, etc, but don't treat a home as your "retirement savings".

4. I would rather live somewhere where I can control the cost (own) rather than depeding on landlord's rate (rent).

Jane

 

[panhead]

The rent versus buy debate, it will never end ! I'm on the own side of this, but for different reasons than only financial. I bought a cheap foreclosure house a few years ago b/c the mortgage payment was cheaper than rent on any place I could get, never mind a house with a garage. Of course the place was in disrepair, but I enjoy fixing things, so this was ok. As an investment, getting it cheap and putting in some sweat equity and watching the value of the place double was very rewarding. BUT, I have a hobby where I like to play with cars and motorcycles, so I wanted my own garage and yard where I could do what I pleased, and not be at risk of being asked to leave b/c the house is for sale. I guess the point is that this is more than a simple financial decision, but on the financial side, buy it right and don't buy more than you need.

Now, I've paid off my mortgage and I'm looking for investment property #1......

-Pan-

 

[ShokWaveRider]

I am hearing there are some good deals in southern Florida today.

Billy
Website www.geocities.com/ba264

Where? Duh!

SWR

 

[Floridian]

"good deals in southern florida"
hmm...if that is a joke, maybe only a floridian could 'get it'?
Bonnie was over blown. we'll see with Charlie.

 

[Billy]

You might try Tampa in an hour or so.

Billy
Website www.geocities.com/ba264

 

[Floridian]

Going by the local grocery's empty shelves, everyone is pretty much stocked up on batteries and beer....

 

[brewer12345]

I have owned for the past 6 years, mostly due to lifestyle cosiderations (i.e. dogs, cat, kid, not wanting to be forced to move, not wanting to deal with landlord BS, etc.). The first place we sold after 4 years at an obscene gain (bought for 93k, put not more than 5k into it, sold it for 220k). Naturally, two years later I saw a similar place that we sold for 220k being listed for 300k! We are now in a house that I expect to be in for the forseeable future (i.e. at least until we hit FIRE). We like the area, have mostly pleasant neighbors, and it is unlikely that the neighborhood will radically change in the next 10 or 15 years. The house is also big enough for anything we could conceivably need (maybe 2000 sq ft or a tad more).

Long term, I only expect housing to keep pace with inflation in my planning. Thus far, it has far outstripped inflation. Mostly, I don't really care, since this is a place to live rather than an investment. Assuming you are planning on staying put, the real way to look at a purchase is to see what your costs are relative to renting (interest, taxes, maintenance, and insurance vs rent). You then layer on all the lifestyle considerations. I think this is why lots of people continue to pile into the ousing market: the cash out for buying may be higher than the cash out for renting, but when you factor in the principal repayment and lifestyle considerations, it still works.

 

[Billy]

Good,.... you need a strong battery to keep that blender running!

Hold on down there.
Good Luck.

Billy
Website www.geocities.com/ba264

 

[cute fuzzy bunny]

Going by the local grocery's empty shelves, everyone is pretty much stocked up on batteries and beer....

Same thing used to happen when I lived in new england and a big winter storm was coming.

I always wondered what people did with all those batteries...

As far as real estate transaction costs, I've sold my last two at a 1.5% sellers agent rate and a 2% buyers agent rate.

If your regular agent wont do 1.5%, there are entire companies that operate at that rate standard. 3% made sense prior to the internet and the MLS when an agent actually had to SELL your house. And 3% to the buyers agent also made sense 20 years ago when a house didnt cost much and the buyers agent had to hustle around looking for properties to show.

In the day of the internet, MLS and virtual tours, coupled with mid six figure home costs, 1-1.5% on each side makes more sense. I only offer 2% to the buyers agents because for less than that they'll skip over your listing when showing properties.

In fact, the final two homes I wanted to buy last year were ones that *I* found myself on www.realtor.com and brought to the agents attention. Later I noticed they were both 2% sellers agent sales.

The other thing to do if you're buying a house is to look at the offers brought to you by Costco and Sams Club. I went through costco for my buyers agent and as part of the deal she kicked back a little less thab 1/3 of the buyers agent commission (.85% of the sales price of the home). That came in handy. It was extremely easy, I filled out an online form from Lending Tree, later I got an email from them, then one from the buyers agent. I emailed the buyers agent back with my specifics and she called the next day with a list of properties to look at. After the sale was transacted, I filled out a short form, had the realtor sign it, and mailed it in. A few weeks later I got a check.

 

[KB]

TH, I've heard of people negotiating their sales fees, but not below 4%. If I stay in the area when I sell my next house, I'll check out Costco program for buying.

I sold my last house in December using Help-U-sell. I showed the house and the broker did all the paperwork, placed the ads for the open houses and provided the signs. He also did some negotiating with the buyers. I ended up paying a broker fee of 4950.00 and about 100.00 in flyers. The selling price was 324,000.00 so the percent ended up being pretty low.

I would absolutely do it again.

 

[wabmester]

Same here. I paid an agent $700 to list my place in the MLS and offered a full 3% to the selling agent. I simply don't understand why anybody would pay a listing agent 3% -- it's robbery.