Mortgage payments are throwing money away.
Mortgage payments are throwing money away.
Wise saying wrote:
Mortgage payments are throwing money away.
These six words alone in a post, might be the dumbest thing I've ever seen posted here in LR.
Go ahead. Keep renting and paying your landlord's mortgage.
Here is my situation.
My rent is 4K a month, All my maintenance is covered.
An equivalent unit to mine sold for $1.2 million. Monthly maintenance fees cost are around $1,900 a month. If I put 20% down- $240k, My payments would be around $4,700 a month plus $1,900 in monthly maintenance. Total monthly cost is $6,600 a month. So for now, my calculation is to keep renting. $4,000 a month vs $6,600 a month. What say you letsrun forum financial gurus?
6% closing fees when selling a house - that's why renting can be a better decision if you plan on staying less than 5-8 years.
In a $1Mio house (common in costal markets), that's $60k just for the two brokers and the lawyers. CRAZY.
Your analysis is probably horrificly flawed.
Renting makes more sense than owning in a lot of cases, ESPECIALLY in high cost of living areas like SF/Seattle
Berknee wrote:
Too busy to read through the whole thread, but I hope it has been pointed out that you cannot rent a house for the same price you can own it. As a renter you are paying your landlord's mortgage, taxes, insurance, upkeep, whatever utilities are included, plus a premium to make it worth his while.
NO, NO, NO. You're not paying for any of you landlord's expenses.
You are paying the market rate for renting at your location.
Your landlord, in many markets, has made a very BAD DECISION to own this particular property. Your landlord may be underwater on this property. Your landlord may have a bad interest rate on this property. Your landlord may have inherited this property, and may be struggling with co-inheritors - brothers and sisters and cousins - who don't agree on the future financials of this property. Your landlord may be so rich that they don't follow the financials on this property. Your landlord may be a real estate investment trust (REIT), disconnected from the realities of this property. Just ininformed and dumb.
In summary: You are not paying your landlord's expenses. You are paying the current market rate.
And in many cases, that is better than owning the house yourself.
The rule of thumb is...
Living there less than 3 years => rent
Living there greater than 5 years => buy
Between 3 and 5 years => could go either way
Of course, there are lots of intangibles to consider.
Your monthly maintenance fee is $1,900? Do you punch a hole in your wall every night before you go to bed? If you do, I would suggest going the renting route
RenterX wrote:
Here is my situation.
My rent is 4K a month, All my maintenance is covered.
An equivalent unit to mine sold for $1.2 million. Monthly maintenance fees cost are around $1,900 a month. If I put 20% down- $240k, My payments would be around $4,700 a month plus $1,900 in monthly maintenance. Total monthly cost is $6,600 a month. So for now, my calculation is to keep renting. $4,000 a month vs $6,600 a month. What say you letsrun forum financial gurus?
In response to this guy ^
Your house appreciation costs are not real. Because your only option to cash in on that value is to sell your house. But then you need to buy another house that has also appreciated, so you don't end up with any extra cash in your pocket.
But on the overall point, yes, buying is much better than renting. You are taking on financial risk by buying a house, and when you operate in a reliable way to mitigate that risk, you are greatly rewarded. This is not just a feature of capitalism, but a feature of human reality. Show yourself to be trustworthy, and society rewards you.
To accurately compare renting to owning, you would need to find a rental property with a lease of 20 years or more. Such a long lease would transfer the risk from the landlord to the renter. As a result, the price would be much lower, and might be comparable to owning, after all the numbers are crunched. Such rental arrangements don't commonly exist since people general sort themselves into those who are more and less reliable. Generally speaking, reliable people own, and are rewarded for it, in comparison to the less reliable renter.
Closing Fees wrote:
6% closing fees when selling a house - that's why renting can be a better decision if you plan on staying less than 5-8 years.
In a $1Mio house (common in costal markets), that's $60k just for the two brokers and the lawyers. CRAZY.
This ties in perfectly to my previous post. Only when you stay in a the same house (paying off the same loan) for a substantial period of time, do you display reliability, and get rewarded for it.
what an absolutely silly and emotional debate. have any of you guys actually looked at the empirical evidence here? does anybody know what inflation is? does anybody know who bob schiller is? does anybody know what historical returns in the markets (housing, stocks, bonds, etc) have been? bottom line... there are plenty of folks getting an awful lot wealthier than you by making rational decisions and renting for life.
RenterX,
The gains of owning in part come at the price of owning less than what you could afford if you merely rented. Comparing absolute costs on a monthly basis ignores this reality and is part of why so many people are sucked into renting. They want the short term reward of maximizing what you can have today over the long term security and financial benefits of owning something.
I misread the title as: "Owning a horse versus renting." Because I have opinions about that...
I really don't know the money part, but have a few things consider.
Taxes, insurance, unless the house was built to your specs, (at least my wife) your wife will have a constant stream of stuff that "needs" to be re-done. Someone moves in next door and now there is pot smell and loud music around.
That said, we were pretty conservative with our house and paid it off in a decade. We like the place and it is kind of nice not to have any monthly payments.
Apartment is a lot easier to walk away from if you move out of the area.
Yes, you’re missing a lot. Every time a new tenant leaves, you need to hire a realtor to find a new tenant and they charge one month commission plus in most cases the house sits empty for at least one month until the new tenants are able to move in. Now you already lost teo months rent and if that’s not enough most of the time you have to fix and clean the unit before renting it again. And don’t even attempt to keep the deposit if the damages were caused from “normal use of the premises”. Otherwise you may be involved in a lawsuit with a lot more fees involved. And I’m not even mentioning when you have a bad tenant and they destroy your property and you have to make an eviction, in that case your “profits” are gone for the next five years. And what about when the next recession comes and the real estate prices decline?? Goodbye equity and probably hello foreclosure and good credit.
Wonderin' wrote:
RenterX,
The gains of owning in part come at the price of owning less than what you could afford if you merely rented. Comparing absolute costs on a monthly basis ignores this reality and is part of why so many people are sucked into renting. They want the short term reward of maximizing what you can have today over the long term security and financial benefits of owning something.
This is dumb logic and not at all correct. If you are going to go this route then you might as well also include any salary cuts you make by living in a place with low housing prices where you own and low salaries rather than a place with high housing prices where you rent and high salaries. For example i can live in new york, rent a 3 bedroom with 2 strangers and take in 100k-200k in annual bonuses as an I-Banker or i can own a house in Ohio and make 20k of illiquid, on-paper wealth from 5% appreciation. Ill gladly be a renter!
All depends on timeframe. In the vast majority of locations, you will make $ buying whatever your expenses........the only question is your break even time period. In SF and the like that can be 3 months., In stagnant places it might take decades. The average I would think might be 3-4 years (except at crash times like 2008).
So, this tends to be a young folks dilemma. Twice in my 20's I lost $ because of job forced moves. If things had gone as planned I would still be sitting in my original house rolling in equity.
Question:
Has anything been said in the 4 pages of this thread that add to or contradict the NY Times buy/rent calculator? My impression is that tool captures at least all of the thinking in this thread in an orderly and analytical manner as opposed to the rambling mess of poorly thought out echoing in this thread.
If anything this thread makes the decision more confusing. Especially when you have nonsense statements like "You are taking on financial risk by buying a house, and when you operate in a reliable way to mitigate that risk, you are greatly rewarded." Housing price risk is almost entirely driven by the economy and you can't mitigate that risk by "operating in a reliable way" unless youre out there buying credit default swaps. Like WTF.
The decision to buy or rent is driven by:
Home prices in you area
Time frame
Mortgage market
Expectations of the future (i.e. price, rent, inflation, cost of capital, etc.)
Taxes in your area
Expected maintenance of the property
Closing costs