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IN my 50s, still renting. I move fairly often (every 5 years or so) and generally like the flexibility of renting. Also, in the areas where I have lived, rent was fairly cheap compared to property prices, so buying did not really make financial sense, especially with the idea of holding for a limited amount of time. Average returns on my investments have been 7-8% in the past decades, so I have been building plenty of equity regardless.
I'm mid 50s, went through a divorce. Moved to a great new area, but houses are sky high here and unaffordable unless you have two solid incomes of six figures each.
I bought a great condo for half the price that houses are going for. I put 5% down to get it since my divorce hadn't finalized and we hadn't sold the old house yet.
It was the best move I ever made. My monthly mortgage payment is same as what people rent condos in my complex for, but my money is going into equity, not empty rent. As soon as the old house sold, I put my half of the equity in as a massive principle payment on my condo. Without refinancing, my mortgage went from 30 years to 11, with a virtual rate of 1% instead of 4.65%. I paid so far into my mortgage that now 2/3rds of each mortgage payment is principle and only 1/3rd interest.
I've lived here less than 3 years and already my condo has increased in value by $70k.
Sometimes it is better to rent, but in my situation, it was far better to buy. I only share this to let you see the other side of the coin.
Swaglord wrote:
Dude simple stuff really.
Your currently monthly rent is building no equity for you. With a house you're building equity. Bad thing with a house is that you're locked into that area, even if you rent it out. Maintenance costs shouldn't be that expensive really either.
Really it comes down to how much you value flexibility. If you think you'll be in that area for at least 10 years, or if you have a large family or friend presence in the area, then it probably makes sense to buy something. If you won't want to get tied down there, then just rent. Pay someone to maintain your place. It'll still make more financial sense than renting.
This is an incorrect way to evaluate the situation. Yes he may be “building equity” when purchasing but there is opportunity cost as well. In order for this to be worthwhile you have the believe all of the following.
1. The amount of equity you will accumulate over x years (both through paying mortgage, the down payment and any appreciation of the home) will exceed the difference between your rent payment and your mortgage payment (+ the initial down payment + any maintenance/taxes etc.) compounding in the market over that same time period.
2. Any fees lost during selling the property don’t invalidate point 1.
To answer the OPs question. My wife and I hate ownership and debate going back to renting on almost a weekly basis. The problem with renting for us is that renting a house is way less cool than a managed apartment building and we have two little ones so space and a yard are really nice.
Right now the real estate market is in a weird place because of Covid. Home costs are skyrocketing and rents are actually dropping. Historically in most hot real estate markets, these two moved in tandem.
Currently, renting offers a better deal. These low interest rates are offset by the fact that you’re paying a higher price for your house, and higher property taxes based on that inflated sales price.
We moved cross country this summer for a job and sold our home in State #1 and are renting in State #2. Our plan is to buy a home in this new state when our lease ends, because we have 3 kids and want yard space. But we hate the housing market right now and it feels bubblish for buyers.
Also, even though we owned our home in State #1 for 7 years, and sold it close to ask price in a “hot” seller’s market, we lost money on the deal for sure when you add up the home improvements we did and the real estate transaction costs.
Does living in mom's basement count as renting or owning?
highhoppingworm wrote:
Swaglord wrote:
Dude simple stuff really.
Your currently monthly rent is building no equity for you. With a house you're building equity. Bad thing with a house is that you're locked into that area, even if you rent it out. Maintenance costs shouldn't be that expensive really either.
Really it comes down to how much you value flexibility. If you think you'll be in that area for at least 10 years, or if you have a large family or friend presence in the area, then it probably makes sense to buy something. If you won't want to get tied down there, then just rent. Pay someone to maintain your place. It'll still make more financial sense than renting.
This is an incorrect way to evaluate the situation. Yes he may be “building equity” when purchasing but there is opportunity cost as well. In order for this to be worthwhile you have the believe all of the following.
1. The amount of equity you will accumulate over x years (both through paying mortgage, the down payment and any appreciation of the home) will exceed the difference between your rent payment and your mortgage payment (+ the initial down payment + any maintenance/taxes etc.) compounding in the market over that same time period.
2. Any fees lost during selling the property don’t invalidate point 1.
To answer the OPs question. My wife and I hate ownership and debate going back to renting on almost a weekly basis. The problem with renting for us is that renting a house is way less cool than a managed apartment building and we have two little ones so space and a yard are really nice.
I'm in your school of thought but the opportunity cost is a tough calculation and is based on a lot of things you don't know when you choose to buy or rent. Viz. you don't know what your house will sell for, you don't know what the market will do if you invest instead of buying and making a down payment.
When I was in the service and moving every few years, we did some spreadsheet calculations for our first move. After that we realized it was more of a lifestyle choice than a math problem and we bought and rented in different places depending on other factors.
I completely agree with this. I am just trying to dispel the antiquated notion that "you build equity in a house but throw away money renting". It is beyond a stupid take.
There's a lot of average people who are starving to feel important so they want to feel like they accomplished/worked for something by mortgaging a house. Then they brag about it when the thing is, it is a common thing to do. Hence still being average and wanting to feel important perpetual cycle.
Me, too. Same 3 pts as OP plus
4. For down payment, have to sell a lot of stocks, losing money right off the bat paying capital gains tax, paying real estate brokers, etc., and losing on gains of early-stage companies that might make 99% of their revenue 10-20 years from now. It feels like taking a lot of money you worked hard to save to own 100% of things that cost you 0% to own and it disappears into 20% of something that costs 2-4% of the value to own (1-2% in property taxes and 1-2% in maintenance).
5. Prices of apartments and condos in my city are going down at the moment. I was amazed the other day when someone showed me an advertisement of some new apartment complex going up, about 30% cheaper than I would've guessed.
Swaglord wrote:
Dude simple stuff really.
Your currently monthly rent is building no equity for you. With a house you're building equity. Bad thing with a house is that you're locked into that area, even if you rent it out. Maintenance costs shouldn't be that expensive really either.
Really it comes down to how much you value flexibility. If you think you'll be in that area for at least 10 years, or if you have a large family or friend presence in the area, then it probably makes sense to buy something. If you won't want to get tied down there, then just rent. Pay someone to maintain your place. It'll still make more financial sense than renting.
It is decidedly NOT true that owning makes more financial sense than renting - even if you are going to own for a long time. That notion is a myth.
Sometimes it makes better financial sense to own. Sometimes it makes better financial sense to rent. But so many people get convinced that ownership is the way to go by the simplistic "argument" that "renting is just throwing your money away."
Try not to be swayed by the cute phrases of simpletons.
highhoppingworm wrote:
I completely agree with this. I am just trying to dispel the antiquated notion that "you build equity in a house but throw away money renting". It is beyond a stupid take.
Well put.
highhoppingworm wrote:I completely agree with this. I am just trying to dispel the antiquated notion that "you build equity in a house but throw away money renting". It is beyond a stupid take.
I bought a 2 bed 2.5 bath, 1314sq ft condo in 2002 for $189,000. It's now valued at $530,000. If I put it up for sale it will be sold in 30-60 days due to being in a market that is a seller's market. I almost have it paid off due to making extra principle payments when I have refinanced.
Idiot thinker has no concept of reality.
Silver Lining Guy wrote:
I'm in my 60s. I still rent an apartment. There are three people in this building in their 70s renting apartments. Many of my friends and age peers rent apartments.
I grew up in family homes in the suburbs. I'm in Manhattan now. I have no desire to own a home
That's encouraging. I'm not 60 yet but after 25 years of home ownerhip, an apartment is starting to look good.
Yep, lots of money saved but it’s a pretty cheap option to rent. Hoping for a ‘rona shakeout before we buy.
I like owning wrote:
highhoppingworm wrote:I completely agree with this. I am just trying to dispel the antiquated notion that "you build equity in a house but throw away money renting". It is beyond a stupid take.
I bought a 2 bed 2.5 bath, 1314sq ft condo in 2002 for $189,000. It's now valued at $530,000. If I put it up for sale it will be sold in 30-60 days due to being in a market that is a seller's market. I almost have it paid off due to making extra principle payments when I have refinanced.
I am not sure what your point is exactly. If you had take 36k in 2002 and put it in the stock market and then invested 750 dollars a month from then until now you would be sitting on like 600k at the moment...
highhoppingworm wrote:
I like owning wrote:
I bought a 2 bed 2.5 bath, 1314sq ft condo in 2002 for $189,000. It's now valued at $530,000. If I put it up for sale it will be sold in 30-60 days due to being in a market that is a seller's market. I almost have it paid off due to making extra principle payments when I have refinanced.
I am not sure what your point is exactly. If you had take 36k in 2002 and put it in the stock market and then invested 750 dollars a month from then until now you would be sitting on like 600k at the moment...
That is true but I would still have to live somewhere. Are you suggesting I could rent a place for $750? Not even in 2002 could I find something that cheap where I live. At that time it would easily be $1000. Now it would be closer to $2400 and up.
I also pay less on my mortgage than I would paying rent. Rents fluctuate too usually trending upwards. At the end of the day, I own my place while renter's pay other people's mortgages.
No. I am saying if you could find a place where rent was $750 less than your mortgage + all upkeep, taxes and other expenses it would be worth it. This is not true in all locations but is the premise of the rent vs. buy calculation.
A good friend of mine is a CFO of a Chicago based company. She makes very good money and due to her business status, she knows the City's leaders. As is the case with several poorly-run cities, huge deficits and pension obligations dictate endless tax increases that will largely fall on people like her. These taxes are built into rent and depress home prices, but by renting she can leave when the crime, out-migration, and the tax burdens get too high. Despite record low-interest rates, homes don't move in her area. The game is up. I suspect that this may come to a town near you.