Shocked, renting cheaper for me than buying home..

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Shocked, renting cheaper for me than buying home..

Postby crowd79 » Fri Feb 08, 2013 12:18 pm

I've been pondering about buying a house for a few years now. I live in a very low-cost living area with low home prices, and been looking at possibly getting a 100k house outside town in a few years. As it turns out, continuing to rent my side of the duplex (shared with landlord-lives on other side) at $390 per month here in the city w/ water, sewer included plus shared internet is cheaper than home buying over 30 years, if I invest the difference into retirement as opposed to an average home appreciation of 3% in my area. Also, would not claim mortgage deduction with just a 4% interest mortgage payment, for example....

I used the this calculator from this website:
http://michaelbluejay.com/house/rentvsbuy.html
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Re: Shocked, renting cheaper for me than buying home..

Postby Zytos » Fri Feb 08, 2013 12:35 pm

Renting was cheaper in my high-cost area (buying on Long Island, NY vs. renting in Queens) but this was one of those few situations where we made the financially irrational decision to buy. For future kids and general desire to own our home, and whatnot.
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Re: Shocked, renting cheaper for me than buying home..

Postby billyt » Fri Feb 08, 2013 12:41 pm

All else being equal, most people would prefer to own their home. This is why it is generally more expensive. People are willing to pay more to own.
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Re: Shocked, renting cheaper for me than buying home..

Postby NYBoglehead » Fri Feb 08, 2013 12:55 pm

billyt wrote:All else being equal, most people would prefer to own their home. This is why it is generally more expensive. People are willing to pay more to own.


I've been a renter for awhile and am looking to buy. While it may be cheaper right now, you are only one lease expiration date away from being told your rent either went up or the landlord no longer wants to rent it to you.
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Re: Shocked, renting cheaper for me than buying home..

Postby Default User BR » Fri Feb 08, 2013 2:30 pm

crowd79 wrote:I've been pondering about buying a house for a few years now. I live in a very low-cost living area with low home prices, and been looking at possibly getting a 100k house outside town in a few years. As it turns out, continuing to rent my side of the duplex (shared with landlord-lives on other side) at $390 per month here in the city w/ water, sewer included plus shared internet is cheaper than home buying over 30 years, if I invest the difference into retirement as opposed to an average home appreciation of 3% in my area. Also, would not claim mortgage deduction with just a 4% interest mortgage payment, for example....

Are you comparing identical properties? If you're looking at buying single-family houses versus 1/2 of a duplex, that isn't apples-to-apples.


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Re: Shocked, renting cheaper for me than buying home..

Postby SSSS » Fri Feb 08, 2013 2:45 pm

Half of a house is cheaper than a house? :shock:

Mind = blown
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Re: Shocked, renting cheaper for me than buying home..

Postby interplanetjanet » Fri Feb 08, 2013 2:50 pm

NYBoglehead wrote:I've been a renter for awhile and am looking to buy. While it may be cheaper right now, you are only one lease expiration date away from being told your rent either went up or the landlord no longer wants to rent it to you.

This is true. On the other hand, I've just been offered a lease renewal for the 7th year in this house without rent increases.

Housing in my area is finally within my grasp after years of being overpriced. I plan on buying but won't overextend myself, which means probably another year of waiting.
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Re: Shocked, renting cheaper for me than buying home..

Postby etm » Fri Feb 08, 2013 3:14 pm

Default User BR wrote:
crowd79 wrote:I've been pondering about buying a house for a few years now. I live in a very low-cost living area with low home prices, and been looking at possibly getting a 100k house outside town in a few years. As it turns out, continuing to rent my side of the duplex (shared with landlord-lives on other side) at $390 per month here in the city w/ water, sewer included plus shared internet is cheaper than home buying over 30 years, if I invest the difference into retirement as opposed to an average home appreciation of 3% in my area. Also, would not claim mortgage deduction with just a 4% interest mortgage payment, for example....

Are you comparing identical properties? If you're looking at buying single-family houses versus 1/2 of a duplex, that isn't apples-to-apples.


Brian


True. But I would add, does taking out a mortgage not impact your retirement savings? Insisting on rental parity makes sense only if the additional dollars spent over renting don't impact your ability to save for retirement, consume your emergency fund, etc. I guess I'll call this the 'savings parity' argument. ;) I think a lot of the should I buy or rent questions on this board and on other boards have an unspoken assumption behind them. The person asking the question suspects they won't be able to save as much and want to be told that their house appreciation will more than make up for a lack of savings over 30 years. For those who can save enough for retirement and get a home this isn't an issue.
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Re: Shocked, renting cheaper for me than buying home..

Postby Default User BR » Sat Feb 09, 2013 2:09 am

etm wrote:
Default User BR wrote:Are you comparing identical properties? If you're looking at buying single-family houses versus 1/2 of a duplex, that isn't apples-to-apples.

True. But I would add, does taking out a mortgage not impact your retirement savings? Insisting on rental parity makes sense only if the additional dollars spent over renting don't impact your ability to save for retirement, consume your emergency fund, etc. I guess I'll call this the 'savings parity' argument. ;) I think a lot of the should I buy or rent questions on this board and on other boards have an unspoken assumption behind them. The person asking the question suspects they won't be able to save as much and want to be told that their house appreciation will more than make up for a lack of savings over 30 years. For those who can save enough for retirement and get a home this isn't an issue.

It's very difficult to compare long-term renting with home purchase. There are too many variables, and what is true for one area might be different elsewhere. Additionally, there are a lot of intangibles involved, which will vary for each person.

I have done both. In this area, it really doesn't make that much difference financially.


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