Renting VS Buying

[RemovedParticipant 4676]

After extensive math, I found that the cheapest rent available in my location (600 sq ft) costs more than my mortgage and utilities combined in my current situation (1,300 sq ft). I also get to choose my decore and setup far more liberally, without issues of getting an owners approval. Owning is the best way to go, if you do the research and are sure of your location for a long timeframe. If you are uncertain, don’t risk getting stuck in the obligation.

[calypsoParticipant 68]

Optimal pricing fluctuates dramatically between renting and buying. After the 2008 crash, if you had the cash, you should have bought when interest rates bottomed out – somewhere in 2010 – while prices fell dramatically.

You’d be wise to look at selling that property right now if you bought it then.

If I moved around a lot, I’d spend the money on a nice, but used/depreciated, RV and utilize that.

The advantage in owning is, assuming you purchase when prices are reasonable (not so right now in many places…), then at least when you sell, you get a rebate on living there if not an outright payday. In essence, you can live for free or at a reduced cost compared to rent.

Alternatively, when prices are high, avoid it all. If you live in a major city consider selling any profitable property now and renting. Most real estate markets are at historic highs – a reflation of the bubble that started after the dot com bust. Real estate prices are going to correct again. I’d doubt you have a year of time left before they lose value.

Buy low, sell high. In between, rent. That’s a path to profitable living…

[743 roadmasterParticipant]

Have a friend that is option C. Own and rent. RV paid for, when he gets tired of one place moves. Bad neighbors, move .Bad neighborhood, move. Economy in one area tanks, move. Ex wife found out where you live, move.

mgtow is its own worst enemy- https://www.campusreform.org/

[BeerParticipant 11832]

calypso wrote:

Buy low, sell high. In between, rent. That’s a path to profitable living…

Why…you just end up having to pay realtors, lawyers, and banks every time you make a move, and that is assuming your property value even increases a substantial amount. Its also a hassle to move and might cost you money there as well if you don’t have a truck of your own and people who can help with the big s~~~, and the renting in between is just p~~~ing away whatever gains you may have made.

The best thing to do is buy a reasonable place and live their long term, provided you are lucky enough your employment situation allows. Your mortgage becomes a relatively smaller part of your budget every year as your principal/interest payment doesn’t increase with inflation. Eventually when you pay it off, its super cheap living. Once I feel like cutting the last check to kill my mortgage on my condo for example, which I just haven’t done yet because the rate is so low, I’ll be living in a pretty nice place for about 350 a month for taxes and condo fees(includes insurance, water, and heat). By comparison the scummiest apartment in a s~~~ hole neighborhood I could find around here would probably still run me about 700+ a month, while decent apartments are 850+.

[Anonymous 1]

I’m a millennial and renting for the last couple years. I’d like to buy a house, but the market seems overpriced. I’ve been saving up money and waiting for the market to crash. I believe the market will crash again like it did in 2007. The original reasons for the crash have not been addressed and it seems likely to happen again. I can’t imagine buying a home now and then seeing the price get cut in half after a market crash. Ouch, thats gotta hurt.

[StealthParticipant 5330]

I own my house and here are some items to consider:

– Rent is a trade-off in terms of maintenance and being responsible for the property. You could be that guy mowing his lawn every Saturday, or having Saturday free to do what you want.

– If you own, you can customize your place and take care of it as you like (within local codes). Ie install a deck, paint whatever color, live like you own the place.

– With a house paid off you pay a few thousand each year in maintenance, taxes, insurance, and utilities. Which seems nice vs 1000/month rent. BUT…

– I just figured out recently that if you were to rent and put the price of a house into total market index funds, you would conceivably earn a return over time that would cover your rent free.

– Real estate value in general tends to rise with inflation, but your own particular house might be different.

Everyone used to say owning is better, but in retrospect and over the long haul it is practically a wash. So do what you want.

"Once you’ve taken care of the basics, there’s very little in this world for which your life is worth deferring." -David Hansson. "It’s not when women are mean or nasty that anything is out of the ordinary. It’s when they are NICE to you that you have to be on high alert..." -Jackinov.

[BeerParticipant 11832]

Anonymous wrote:

I can’t imagine buying a home now and then seeing the price get cut in half after a market crash. Ouch, thats gotta hurt.

I bought my condo about a year and a half before the crash, and if I sold it today I’d probably only get back about 2/3 of what I paid, and I could care less. The reason being is had I rented for the last 10-11 years I’d be paying more per month to rent right now than I pay to own, and if I moved out as a renter I’d be moving away with nothing where as if I sold my place I’d be walking away with 30k in my pocket, which is more than my original down payment and all the work I put into it for upgrades. So more or less right now I’m looking at 650 a month(will go even cheaper when I pay it off, I just haven’t because my rate is less than 3%) for mortgage/taxes/condo fees + 30k equity compared to 850 a month to rent with no equity had I been renting this whole time, and the longer I live here the more owning is going to work out in my favor.

Maybe 8-9 years ago in the middle of the crash I was kicking myself for not waiting a little longer, but hey, I was 22 at the time and new to the real estate market and wanted out of my parents house so timing a bubble wasn’t really something I was considering. The thing is if you sit out for years waiting for property values to dive you may end up waiting for a long time p~~~ing money away on rent…so even if you save 30k on the purchase price by waiting for a dip but p~~~ed away 40k in rent that could have instead went towards the first few years of your mortgage…did you come out ahead?

Real estate is local though…I’m just speaking from what I’ve seen in my area…so take it for what its worth.

Stealth wrote:

– I just figured out recently that if you were to rent and put the price of a house into total market index funds, you would conceivably earn a return over time that would cover your rent free.

I’ve heard quite a few people and have read a few articles that make this comparison, but one thing they often fail to look at is most people aren’t paying for a house in cash, they mortgage it, in which case you have to compare what do you have to show at the end of 10, 20, or 30 years if you mortgage something today compared to if you pay rent for the next 10, 20, or 30 years. When I do this I just come to my above conclusion…since I opted for a mortgage rather than renting I’m now living in a place that is cheaper than rent and have equity. How would renting have been a better move financially?

Plus you also have to look at that although property values tend to not generate huge growth, owning outright is cheaper than renting. My above example for my condo, if I killed the mortgage it would cost me 350 a month to live here, vs 850 renting. They sell for about 50-60k right now…so although property values aren’t screaming up 10% a year, its saving me 6,000 a year in expenses. I’d need about 150k worth of stock paying me 4% dividends to generate that same amount of money without ever having to sell shares, and if you are shooting for financial independence -500 a month in living expenses is every bit as valuable as +500 a month in passive income that would all just be going to pay your higher rent bill anyhow.

[narwhalParticipant]

I used to ask myself, why does the government want everyone to own a home? It’s actually counterproductive to environmental efforts and such. It hit me that part of it is that a worker in debt is a better worker. The other is that a home owner is a better consumer. You buy a big house, you have to fill it with crap, right?

It really isn’t so much about renting or buying as it is about not getting in over your heard. Don’t listen to how the bank tells you can afford, only get the house that fits your need. And don’t fill it with crap you don’t need.

Most importantly, don’t have a woman spend this money for you or cloud your judgment allowing you to make stupid decisions.

Ok. Then do it.

[PrincekieParticipant 1042]

Biggvs_Dickvs wrote:

Beer wrote:

The only reason not to cut out the middle man, the landlord, is if you plan on moving within a few years.

.

Now,if I were to buy a house now, I would need at least 5-10 years of “normal” appreciation in order to basically break even with closing costs, interest etc.

The problem is, I’d be depending on someone from the millenial generation to buy my house. The most broke and indebted generation in, well, human history.

Now consider who I’d be buying from – likely a baby boomer. This is a generation who as a whole have not saved anywhere close to adequately for retirement. In many cases the only “retirement plan” is the “equity” in their house.

It’s a demographic and economic ticking time bomb as things like retirement, medical costs not covered by medicare, etc creep up.

This all adds up to a whole lot of older people who really need to sell, and a whole lot of younger people unable (or unwilling) to buy.

Somehow I doubt that Gen X will take up the slack.

Then it becomes a game of “whoever drops their price and sells first, wins.” Self reinforcing deflationary spiral ensues.

Oh, and the Chinese, who in some areas have been 70% of new purchases the last few years or so, are probably out of the game now for quite some time. Among other reasons, the government there is putting the serious kibosh on the currency exports that have been keeping, or at least greatly helping to keep, our market floating the last few years.

Also, the original problems that caused the 2007 housing crash were never really addressed. See my original point about the price to income ratio.

Until we the the market resolves some of these issues (it will one way or another), buying a house right now is EXTREMELY risky, at least in most overpriced urban areas.

The risk premium doesn’t come close to being matched by the expected gains at this point.

My $.02

This is probably one of the best forum posts I’ve read in a VERY long time.

Here in the UK, there is a crazy obsession with owning property. I mean crazy! Over the last 20 years we have had a humongous property bubble, inflated by cheap credit, ridiculous asking prices, low interest rates and dodgy estate agents. And the main beneficiaries of this bubble? The boomers…the ones who bought their houses for pennies, who bought 2,3,4,5 properties and rented them out. They’ve nicely screwed Generation X, who are small in numbers and big in debt. Followed by Millenials who have larger debts and not much raw cash.

Now that boomers are dying off, the whole property scam in the UK that has been inflated by dodgy Government schemes, cheap credit and other “incentives” is now starting to deflate. This year has been the worst year for property sales for many years. Mortgage approvals are down. Interest in actually buying a house at the stupid levels they’re at is down. And unless government steps in with another crazy scheme, I think this time the slump will last. Let’s hope so, because a home should be for living in…not for killing off someone else’s dreams.

[BeerParticipant 11832]

Princekie wrote:

I think this time the slump will last.

The issue is though…if property values drop, what will it look like? If property values drop 40% next year…yeah, it was a good move to wait, but if you can accurately time market tops and bottoms you should already be so damn rich buying a place to live is just a drop in the bucket for you. If property values 10 years from now are down 10% from where they are today but you took a 30 year mortgage you will have roughly 25% of the principal paid off 10 years into the loan…so you still end up with equity you wouldn’t have had if you were renting. Who knows…maybe all the money printing they’ve done catches up to us and prices appreciate 20% over the next 10 years, in which case you’ll still be sitting on the sidelines p~~~ing away money on rent in 10 years waiting for the crash when you could have a 50% equity stake in a property instead.

I think the most important thing you can do is to compare rent values to what a mortgage on something similar will cost. Find several similar properties for rent and several for sale then compare the cost of a monthly mortgage to monthly rent. In my opinion, if its close and there aren’t a ton of empty rentals in your area it just means a significant, long term, sustained drop in property values isn’t likely. We may have some catalyst that causes a short term drop in values but in the end they’ll find a bottom and work their way back up again as falling prices just make properties attractive to investors and make paying rent make less sense. Even during the middle of the mortgage meltdown here, landlords didn’t lower rents.

[SolidusXParticipant 854]

Renting versus Owning has been a battle for decades… each has it’s pros and cons they way I look at is is this…

Any economist will tell you a house is what you would call a liability because 99% of the time you have to leverage money to buy it, the house does not generate you an income (unless you rent a room etc), and the house costs you extra money over its purchase price with upkeep. The only time it will be an asset is if it is paid off and generating you more money than it costs to upkeep.

Renting is not a liability as you do not actually own the property and instead are trading money for a service. You gain shelter from money, just like getting a hotel room. Renting allows you to amass money (from savings over paying a mortgage and upkeep costs) to buy something outright with no liability of repaying back to a bank.

There is a reason rich people get richer and usually it has to do with their understanding how liabilities and assets work among other things. Too many people are short sighted and do not play the long game and think getting a mortgage or other loan is a good idea not realizing the long term costs associated with it.

I like to do a hybrid version of owning properties…. I rent a low cost place and with the savings I buy real estate investment trusts that pay me tax free dividends which I DRIP invest back into more shares. I have all the benefits of owning property without the costs and risks associated with it. When I have enough passive income to buy a house outright then I will own property.

Knowledge is power..... Don't waste your brain on bullshit

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