Any retirees here who have been life-long renters?

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countofmc
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Any retirees here who have been life-long renters?

Post by countofmc » Mon Jul 25, 2016 3:20 pm

Could be a very small or non-existent group here. But I keep hearing the siren song of home ownership, but I am not sure if this is ever going to happen for me.

I guess I need to hear from some folks that may have been able to retire and "win the game" without having been home owners.

jane1
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Re: Any retirees here who have been life-long renters?

Post by jane1 » Mon Jul 25, 2016 4:04 pm

Life-long renters here and no desire to own. No kids. Won the game unless inflation hits very hard. We live frugally. I believe it is easier to FIRE (Financially Independent Retired Early) as renters if you have the discipline to save. You can move easily to better opportunities, higher paying jobs, shorter commute.
I don't want to debate the emotional aspects of home ownership here. Financially home ownership isn't always better than renting. Depends a lot on the assumptions of home price appreciation rate and rent increase. People typically buy bigger than they need, spend more on furnishings, landscaping, maintenance than they expect. Tax benefits also aren't typically as significant for most as people estimate (need to account for standard deduction).
I value time and flexibility a lot and not owning a place gives me that.
Go for it if you are a saver.

soboggled
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Re: Any retirees here who have been life-long renters?

Post by soboggled » Mon Jul 25, 2016 4:56 pm

countofmc wrote:Could be a very small or non-existent group here. But I keep hearing the siren song of home ownership, but I am not sure if this is ever going to happen for me.

I guess I need to hear from some folks that may have been able to retire and "win the game" without having been home owners.
Not me, but actually not a bad idea. Life is way too short to worry about repairs and maintenance. The time and money spent on it could be put to much better use. The problem is you are restricted in your choices when renting. Also, landlords do not keep up their property like an owner would. The American public, as in so many other things, has been brainwashed by the real estate industry, which is second only to Wall Street in the infestation of parasites.

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countofmc
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Re: Any retirees here who have been life-long renters?

Post by countofmc » Mon Jul 25, 2016 5:13 pm

jane1 wrote:Life-long renters here and no desire to own. No kids. Won the game unless inflation hits very hard. We live frugally. I believe it is easier to FIRE (Financially Independent Retired Early) as renters if you have the discipline to save. You can move easily to better opportunities, higher paying jobs, shorter commute.
I don't want to debate the emotional aspects of home ownership here. Financially home ownership isn't always better than renting. Depends a lot on the assumptions of home price appreciation rate and rent increase. People typically buy bigger than they need, spend more on furnishings, landscaping, maintenance than they expect. Tax benefits also aren't typically as significant for most as people estimate (need to account for standard deduction).
I value time and flexibility a lot and not owning a place gives me that.
Go for it if you are a saver.
Thanks! Do you mind if I ask if you did any sort of other real-estate investing, whether it's owning rental property or owning more REITs in your portfolio or anything like that?

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countofmc
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Re: Any retirees here who have been life-long renters?

Post by countofmc » Mon Jul 25, 2016 5:14 pm

soboggled wrote:
countofmc wrote:Could be a very small or non-existent group here. But I keep hearing the siren song of home ownership, but I am not sure if this is ever going to happen for me.

I guess I need to hear from some folks that may have been able to retire and "win the game" without having been home owners.
Not me, but actually not a bad idea. Life is way too short to worry about repairs and maintenance. The time and money spent on it could be put to much better use. The problem is you are restricted in your choices when renting. Also, landlords do not keep up their property like an owner would. The American public, as in so many other things, has been brainwashed by the real estate industry, which is second only to Wall Street in the infestation of parasites.
Are you suggesting the public is brainwashed to rent or to buy or both? Sorry, you added that sentence in after listing a couple of cons related to renting, so I wasn't sure...

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Re: Any retirees here who have been life-long renters?

Post by dognose » Mon Jul 25, 2016 5:44 pm

I've been a long-term renter and then a long-term owner. As an owner, I gained millions of dollars in gains on my properties, over and above maintenance and other costs. From strictly a financial perspective, owning property has worked well for me. I also like the emotional aspects of home ownership, although I realize the emotional angles vary widely by the individual. Do whatever works for you.

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Re: Any retirees here who have been life-long renters?

Post by soboggled » Mon Jul 25, 2016 5:51 pm

countofmc wrote:
soboggled wrote:
countofmc wrote:Could be a very small or non-existent group here. But I keep hearing the siren song of home ownership, but I am not sure if this is ever going to happen for me.

I guess I need to hear from some folks that may have been able to retire and "win the game" without having been home owners.
Not me, but actually not a bad idea. Life is way too short to worry about repairs and maintenance. The time and money spent on it could be put to much better use. The problem is you are restricted in your choices when renting. Also, landlords do not keep up their property like an owner would. The American public, as in so many other things, has been brainwashed by the real estate industry, which is second only to Wall Street in the infestation of parasites.
Are you suggesting the public is brainwashed to rent or to buy or both? Sorry, you added that sentence in after listing a couple of cons related to renting, so I wasn't sure...
To buy. They get huge unearned commissions on every sale. Most of their effort goes into getting the listing. The latest scam is "buyer agents" who do not look out for buyers at all. Sell the suckers on "The American Dream" and lobby Congress to make mortgages the only interest that is tax deductible, thus increasing demand and raising prices.
But they have been so successful, it's hard to find decent rentals unless you want a small apartment, everyone wants to buy.

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Re: Any retirees here who have been life-long renters?

Post by Non7WoodUser » Mon Jul 25, 2016 5:52 pm

Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.

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Re: Any retirees here who have been life-long renters?

Post by IFRider » Mon Jul 25, 2016 6:14 pm

Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person.
Not a zealot, but I was a renter for nearly 20 years and I can confirm my house is a much better place to live than any of the apartments I rented.
I wasn't thinking of the investment aspect of home ownership when I bought, I was just sick of everything associated with renting -- the sights, sounds, smells, etc.

I can't answer the OPs question because I haven't won the game yet. I hope I can win as a homeowner though. I certainly don't want to go back to renting.

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Re: Any retirees here who have been life-long renters?

Post by Dontridetheindexdown » Mon Jul 25, 2016 7:01 pm

Yes, rented until 50 years old.

We both had traveling careers.

Our home, on a rural acreage, represents a very small percent of our investments.

It is a wonderful place to live, and we hope to remain here until the end.

However, it does demand attention to detail - maintenance of buildings and infrastructure, payment of taxes and utilities, and continual vigilance.

We are delighted to live here, and as long as we are able, we would not trade for any place else.

In the past we invested in CGMRX (CGM Realty Fund), and it returned well for us.

My in-laws sold their home a year ago, and now live in Casa de Manana http://www.casademanana.org/

We are in our 60s, they are in their 80s.

Casa de Manana is a great place to live.

Our home, on a rural acreage, is also a great place to live.

The answer, as always, is "it depends."

It depends on your personal choices, your "hierarchy of needs (cf Maslow)," your health and fitness, and the availability of hired help.

Owning your own home is delightful, but remember, you are always "renting" it from the tax authorities.

Renting is also enjoyable, but you may not always delight in the neighbors.

It really comes down to "6 of 1, half a dozen of the other."

Regardless of the choice, if you live within your means, and are delighted with your choices, it matters not whether you live in a single-family residence, a multi-family residence, a hotel, or a retirement home.

Enjoy every day, and live life to the fullest.

Just my opinion, for what it is worth.

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Re: Any retirees here who have been life-long renters?

Post by jane1 » Mon Jul 25, 2016 7:15 pm

countofmc wrote: Thanks! Do you mind if I ask if you did any sort of other real-estate investing, whether it's owning rental property or owning more REITs in your portfolio or anything like that?
No real-estate investing. Simplicity. Had been considering increasing REITs allocation but so far I haven't seen any compelling reason.
We only rent in apartment complexes managed by a professional company where maintenance is well taken care of, so don't really have a lot of complaints. One possible issue is that other tenants are rarely at a similar stage in life (as us), so we have less in common with our neighbors.
I hear some friends (homeowners) how they have to call the plumber or roof person or remodel or replace the stove, etc. They are always busy. I just call the rental office and things get taken care of within a short time. I am free to hike, travel, attend events, volunteer, pursue hobbies. It is a lifestyle thing. I don't have to worry about theft since apartment complexes are rarely targets. Yes, I know several people whose houses (in wealthy neighborhoods) have been burglarized.
But it is all about what you like and feel comfortable with.

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Re: Any retirees here who have been life-long renters?

Post by teniralc » Mon Jul 25, 2016 7:21 pm

Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.
How do you come up with the formula of <$100 per square foot?

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Re: Any retirees here who have been life-long renters?

Post by kite » Mon Jul 25, 2016 8:40 pm

Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.
You can instead purchase a condo which has a known cost associated with home ownership - the HOA fee. Not much more needed on top of that and if you find a well managed HOA, you can be secure in your payments.

To the OP, I am an owner currently but I plan on being a full time renter when I eventually retire. I will own my current condo forever and I can use it as a safety net but I'm allowing for a rental payment in retirement so I can live where I'd like.

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Re: Any retirees here who have been life-long renters?

Post by 8foot7 » Mon Jul 25, 2016 8:48 pm

Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.
LOL :confused

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Re: Any retirees here who have been life-long renters?

Post by tennisplyr » Tue Jul 26, 2016 6:29 am

Owned my home for 35 years and are in process of selling it. Besides the joys of home ownership, financially this has now become my ace in the hole. Representing 1/2 of my net worth, I now have the ability and security I don't believe I'd have if I rented. I know many don't agree, but I am totally happy with my situation. :sharebeer
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Re: Any retirees here who have been life-long renters?

Post by ZumZabo » Tue Jul 26, 2016 6:53 am

kite wrote:
Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.
You can instead purchase a condo which has a known cost associated with home ownership - the HOA fee. Not much more needed on top of that and if you find a well managed HOA, you can be secure in your payments.

To the OP, I am an owner currently but I plan on being a full time renter when I eventually retire. I will own my current condo forever and I can use it as a safety net but I'm allowing for a rental payment in retirement so I can live where I'd like.
Hello Kite,
Condo fees can and will increase over time. Management companies change and not all do a great job. There are also property taxes to pay (unless yours are included in your condo fees). There is also the possibility of one time assessments to cover big ticket items that can't be covered with the sinking fund. Like an apartment, you can have lousy neighbors but can't just move because you own the unit. You can have a smoker move in downstairs and ruin every minute of your time in your sanctuary. Point being, there are some unknowns with condo living although you do hire out a lot of the hassle factor of home ownership. I have owned single family homes, one condo and many rental properties. We are renting now (for the last 3 years) and are quite content. Very simple and makes mobility very easy. Our rent is half of what the property taxes were on our last single family home and no maintenance issues.

Best, ZZ
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Re: Any retirees here who have been life-long renters?

Post by Hulu » Tue Jul 26, 2016 7:12 am

Long term renter after owning for five years. I agree w others that you have to be a good saver. I own rental properties away from where we live. Love the convenience. And the choice. And trading a cranky neighbor for great ones. Miss the stability. Pros outweigh costs greatly for me. Not sure about partner.

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Re: Any retirees here who have been life-long renters?

Post by Da5id » Tue Jul 26, 2016 7:14 am

Rent vs Own always becomes a flame war, seems like (with dividend paying stocks) one of the most contentious topics on bogleheads... The real answer to rent vs own, of course, is "it depends". On both financial and non-financial considerations. https://www.bogleheads.org/wiki/Owning_vs_renting gives some of the trade-offs...

And in answer to your question, of course you can retire as a life-long renter.

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Re: Any retirees here who have been life-long renters?

Post by soboggled » Tue Jul 26, 2016 7:17 am

tennisplyr wrote:Owned my home for 35 years and are in process of selling it. Besides the joys of home ownership, financially this has now become my ace in the hole. Representing 1/2 of my net worth, I now have the ability and security I don't believe I'd have if I rented. I know many don't agree, but I am totally happy with my situation. :sharebeer
OK, glad it has worked out for you. Maybe you live in an area where home prices have escalated fast. But have you considered what you would have earned if you had invested the down payment and DCAed 35 years of mortgage payments, repairs/maintenance, taxes and insurance $ in the stock market? That does not include the opportunity costs of personal time spent on a house. I know many of the positives of home ownership are intangible, but the costs are tangible.
Last edited by soboggled on Tue Jul 26, 2016 7:19 am, edited 1 time in total.

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Re: Any retirees here who have been life-long renters?

Post by legio XX » Tue Jul 26, 2016 7:18 am

Can't say I retired early since I am over 70 and still working part-time, but if I won the lottery or the NY real-estate market returned to rational (about the same odds on either happening) I don't think buying a home would be my first thought. My friends the owners seem to have a second job being owners; just the thought of condo board meetings makes me glad I can still rent.

V

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Re: Any retirees here who have been life-long renters?

Post by ubermax » Tue Jul 26, 2016 8:29 am

countofmc wrote:Could be a very small or non-existent group here. But I keep hearing the siren song of home ownership, but I am not sure if this is ever going to happen for me.

I guess I need to hear from some folks that may have been able to retire and "win the game" without having been home owners.
My inlaws were lifelong renters , side x side duplex with another long term rental family - they endured the Depression , were middle class but very risk averse and unsophisticated investors - they came close to buying a home 3 separate times but close relatives either talked them out of it , were unwilling to lend them a small amount of money , or were reluctant to join them in a joint venture .

They retired at 65 and spent 3 months in Florida for many years - they were very frugal and made it work .

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Re: Any retirees here who have been life-long renters?

Post by dziuniek » Tue Jul 26, 2016 8:57 am

Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.
I've seen a couple people post this.
That's just not realistic and I'm not even talking HCOL areas. Maybe in Midwest?

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Re: Any retirees here who have been life-long renters?

Post by Rodc » Tue Jul 26, 2016 9:09 am

Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.
Or perhaps don't be fooled by anti-home ownership zealots. :)

There is nothing magic about owning or renting. You just have to understand the pros and cons and how they fit your life. Either might be great for the OP or might be really bad, or something in between.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: Any retirees here who have been life-long renters?

Post by Texanbybirth » Tue Jul 26, 2016 9:30 am

I'm nowhere near retiring, but perhaps I can help shed a different light. As a somewhat new homeowner, I'm nowhere near where I'd like to be when retired. We're planning for a paid off house when I'm finally able to retire, but that doesn't mean the bills stop. We're in TX where property taxes are high, about $500/mth now. There's also mortgage insurance, which is small but still larger than renter's insurance was, about $140/mth. The utility bills are somewhat higher than in our apartment. We also set aside some money each month for any eventual repairs. The general rule is 1%/yr of the value of your home; that's about $250/mth for us. So in the end although we won't be paying principal and interest by the time I retire, we probably will still have a healthy chunk of change each month that goes toward our house. That also doesn't include the man hours that go into home maintenance, like mowing the yard and working around the house. It is larger than our apt, and it takes longer to clean. In our area, if you add up all of those costs you can get a fairly nice 2 bedroom apartment for a retired couple.

Wow, now all I'm doing is reminding myself why I like renting so much. :P j/k I love our house, and it makes my wife very happy to boot! But I can definitely understand why owning isn't for everybody. I wouldn't worry too much about it if it's not in the cards for you. :beer
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Re: Any retirees here who have been life-long renters?

Post by Atgard » Tue Jul 26, 2016 10:22 am

Rent vs. buy often comes down more to lifestyle factors (wanting to own/remodel your own place vs. liking the freedom to move & not deal with maintenance). From a financial perspective, neither is a slam-dunk, and it depends too much on home price appreciation rates, inflation, etc. to say for sure which is a better deal. The key is to compare them fairly -- don't just assume the buyer pays off the mortgage & owns the home in 30 years, but the renter took the money they saved and threw it away on designer purses.

Keep in mind that a house basically has a 3.5% expense ratio -- about 2% property taxes, 1% annual maintenance, and 0.5% homeowner's insurance (your numbers may vary in different locations). How many of us would be singing the praises of a mutual fund or investment advisor with a 3.5% annual fee?! And keep in mind appreciation has historically been about 5%... so after the 3.5% fee and inflation you're lucky to break even.

If you compare the cost to rent vs. the total cost to buy (mortgage, taxes, insurance, maintenance, etc.), the cost to buy will almost always be higher. The fair comparison is to do rent + investing the difference vs. buy (owning the house at the end). In that case, in many markets, the end result is similar, and more dependent on your assumptions of stock returns, housing appreciation, etc. But you have to see if it makes sense for YOUR lifestyle in YOUR market.

P.S.: Maintaining a house/yard, etc. is a pain in the butt, kinda like active day-trading vs. passive index investing & re-balance once a year. :wink:

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Re: Any retirees here who have been life-long renters?

Post by tennisplyr » Tue Jul 26, 2016 10:39 am

soboggled wrote:
tennisplyr wrote:Owned my home for 35 years and are in process of selling it. Besides the joys of home ownership, financially this has now become my ace in the hole. Representing 1/2 of my net worth, I now have the ability and security I don't believe I'd have if I rented. I know many don't agree, but I am totally happy with my situation. :sharebeer
OK, glad it has worked out for you. Maybe you live in an area where home prices have escalated fast. But have you considered what you would have earned if you had invested the down payment and DCAed 35 years of mortgage payments, repairs/maintenance, taxes and insurance $ in the stock market? That does not include the opportunity costs of personal time spent on a house. I know many of the positives of home ownership are intangible, but the costs are tangible.

As I said, this has been a great personal success as I'm sure it has been for many millions of people.
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Re: Any retirees here who have been life-long renters?

Post by ubermax » Tue Jul 26, 2016 11:37 am

countofmc wrote:I guess I need to hear from some folks that may have been able to retire and "win the game" without having been home owners.
Count , I think your takeaway should be of course you can retire and "win the game" without owning a home ; I spoke of my inlaws in an earlier post - my FIL not only won the game but thought he had gone to heaven being able to play tennis on the red clay in Worcester, Ma in the Spring , Summer, and early Fall and then get to continue that (except on Har-Tru) with his circle of friends in Pompano Beach, Florida for another 3 months in the Winter.

I think my friend Tennisplyr might also agree that my FIL's routine was pretty appealing - and accomplished with a low budget :happy
Last edited by ubermax on Tue Jul 26, 2016 11:46 am, edited 1 time in total.

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Re: Any retirees here who have been life-long renters?

Post by sperry8 » Tue Jul 26, 2016 11:42 am

I am retired and have never owned a home. I like the flexibility to be able to move (and yes, I've moved cities multiple times since retirement) and being able to pack up and go travel without leaving a home behind to worry about. Form a financial perspective I believe it is a wash. Most people who I chat with who are homeowners do not do their calculations correctly and assume they have made more than they did.
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Re: Any retirees here who have been life-long renters?

Post by rob65 » Tue Jul 26, 2016 12:09 pm

Buying vs renting is a personal decision and there isn't a right or wrong answer. Some people enjoy being able to decorate their home any way they want. Others prefer to rent and be able to move when they want. Some people enjoy DIY projects; others, not so much.

However, make sure you are accounting for all of the costs of home ownership - maintenance (Including budgeting for big ticket items like HVAC and roofs), taxes, insurance, HOA fees (if applicable), possibly higher utilities if you are moving from an apartment to a house, opportunity costs for down payment money that could have been invested, and transaction costs to buy/sell.

Real estate is very, very local. You might be lucky and buy a home that increases in value, you might not. We've now learned that it is possible for housing to go down in value. Don't buy unless you plan to stay at least 7 years.

If you are moving from an apartment/townhome/condo to a single family house, how do you feel about yardwork? My neighbor enjoys yardwork. He finds it therapeutic. Some people enyoy being able to plant a garden. Some people enjoy the outside space enough to justify yardwork. At my house, we have a weekly tradition - I go out and mow, I come in and suggest we call a real estate agent and sell the house, my wife says no. :happy

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Re: Any retirees here who have been life-long renters?

Post by Slacker » Tue Jul 26, 2016 12:33 pm

If you do own a home and the fundamentals for the area are sound along with vetting a great property management company, you have the option to turn it into a rental and all of the maintenance costs (along with other costs) become deductible.

I'm not retired, but currently a landlord in one state while renting a home in a state different from where my rental property is. Gives me the flexibility of being a renter while getting the tax advantages of being a landlord and the "sense of emotional security" of owning a piece of real estate. Working from home I need not worry about my landlord increasing the rent rates or if I dislike the change in politics / taxes / anything; I just move when the lease is up (though this can get expensive if moving from coast to coast).

However, I am a bit incredulous that people often compare apartment renting vs home ownership. If you prefer apartment living you should compare to a condo, maybe a townhome at a stretch. If you prefer a home you would compare renting the house vs owning the house. Just like you wouldn't say renting a moped is clearly cheaper than owning an SUV and then conclude that one should always rent a vehicle.

For example: The home we rent out has costs of $3150/month to us (PITI, HOA, solar panel financing, 10% reserve for maintenance/vacancy, 10% prop mgmt fees) and we rent it out for $3400 per month on a 12 month (usually takes about 2weeks max to find tenants between leases). Clearly, renting our home is more expensive than owning it. Furthermore, you don't get any principal renting our home and you have less money to invest each month. On the flip side, we get someone paying our home and solar panels off for us while giving us a little cash each month beyond taxes and reserves.

(edited to clarify an example)
Last edited by Slacker on Tue Jul 26, 2016 12:45 pm, edited 1 time in total.

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Re: Any retirees here who have been life-long renters?

Post by Rodc » Tue Jul 26, 2016 12:40 pm

Texanbybirth wrote:I'm nowhere near retiring, but perhaps I can help shed a different light. As a somewhat new homeowner, I'm nowhere near where I'd like to be when retired. We're planning for a paid off house when I'm finally able to retire, but that doesn't mean the bills stop. We're in TX where property taxes are high, about $500/mth now. There's also mortgage insurance, which is small but still larger than renter's insurance was, about $140/mth. The utility bills are somewhat higher than in our apartment. We also set aside some money each month for any eventual repairs. The general rule is 1%/yr of the value of your home; that's about $250/mth for us. So in the end although we won't be paying principal and interest by the time I retire, we probably will still have a healthy chunk of change each month that goes toward our house. That also doesn't include the man hours that go into home maintenance, like mowing the yard and working around the house. It is larger than our apt, and it takes longer to clean. In our area, if you add up all of those costs you can get a fairly nice 2 bedroom apartment for a retired couple.

Wow, now all I'm doing is reminding myself why I like renting so much. :P j/k I love our house, and it makes my wife very happy to boot! But I can definitely understand why owning isn't for everybody. I wouldn't worry too much about it if it's not in the cards for you. :beer
If it makes you feel better, those costs do not go away if you rent. You still pay them but since they are included in your rent they are harder to see. True the connection is not 100% clean as due to supply and demand rent could fall below actual cost to the owner, but that is not likely.
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Re: Any retirees here who have been life-long renters?

Post by Rodc » Tue Jul 26, 2016 12:42 pm

Atgard wrote:Rent vs. buy often comes down more to lifestyle factors (wanting to own/remodel your own place vs. liking the freedom to move & not deal with maintenance). From a financial perspective, neither is a slam-dunk, and it depends too much on home price appreciation rates, inflation, etc. to say for sure which is a better deal. The key is to compare them fairly -- don't just assume the buyer pays off the mortgage & owns the home in 30 years, but the renter took the money they saved and threw it away on designer purses.

Keep in mind that a house basically has a 3.5% expense ratio -- about 2% property taxes, 1% annual maintenance, and 0.5% homeowner's insurance (your numbers may vary in different locations). How many of us would be singing the praises of a mutual fund or investment advisor with a 3.5% annual fee?! And keep in mind appreciation has historically been about 5%... so after the 3.5% fee and inflation you're lucky to break even.


If you compare the cost to rent vs. the total cost to buy (mortgage, taxes, insurance, maintenance, etc.), the cost to buy will almost always be higher. The fair comparison is to do rent + investing the difference vs. buy (owning the house at the end). In that case, in many markets, the end result is similar, and more dependent on your assumptions of stock returns, housing appreciation, etc. But you have to see if it makes sense for YOUR lifestyle in YOUR market.

P.S.: Maintaining a house/yard, etc. is a pain in the butt, kinda like active day-trading vs. passive index investing & re-balance once a year. :wink:
But if you buy a house those expenses mean you do not have to pay rent which may or may not fully offset those expenses. So those cost of ownership have to be compared to rent not paid.

*************

A lot of this comes down to housing inflation (both cost to own like property tax and the amount you get back when and if you sell) vs rental inflation. Often rent is cheaper in the early years but more expensive in the later years. So how long you stay in the house plays a strong role. Landlords tend to make money because if you keep a house long enough owning is cheaper than renting. But this tends to only be true in the long run.

I agree with a post above that life style issues are really an important driver - you run the financials just to make sure the costs are sane vs the lifestyle benefits. If a rational analysis says making money is likely great, but at least make sure it is unlikely you will lose your shirt. :)
Last edited by Rodc on Tue Jul 26, 2016 12:47 pm, edited 1 time in total.
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Re: Any retirees here who have been life-long renters?

Post by sperry8 » Tue Jul 26, 2016 12:47 pm

rob65 wrote:Buying vs renting is a personal decision and there isn't a right or wrong answer. Some people enjoy being able to decorate their home any way they want. Others prefer to rent and be able to move when they want. Some people enjoy DIY projects; others, not so much.

However, make sure you are accounting for all of the costs of home ownership - maintenance (Including budgeting for big ticket items like HVAC and roofs), taxes, insurance, HOA fees (if applicable), possibly higher utilities if you are moving from an apartment to a house, opportunity costs for down payment money that could have been invested, and transaction costs to buy/sell.

Real estate is very, very local. You might be lucky and buy a home that increases in value, you might not. We've now learned that it is possible for housing to go down in value. Don't buy unless you plan to stay at least 7 years.

If you are moving from an apartment/townhome/condo to a single family house, how do you feel about yardwork? My neighbor enjoys yardwork. He finds it therapeutic. Some people enyoy being able to plant a garden. Some people enjoy the outside space enough to justify yardwork. At my house, we have a weekly tradition - I go out and mow, I come in and suggest we call a real estate agent and sell the house, my wife says no. :happy
This is a good example of what many people don't consider. Once you have a certain amount of equity in your home (or if you pay cash) you must include the opportunity cost of that money. Even in a 1% money market with Ally Bank - must be taken into account. More if that money would've been in stocks/bonds.
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Re: Any retirees here who have been life-long renters?

Post by Rodc » Tue Jul 26, 2016 12:49 pm

rob65 wrote:Buying vs renting is a personal decision and there isn't a right or wrong answer. Some people enjoy being able to decorate their home any way they want. Others prefer to rent and be able to move when they want. Some people enjoy DIY projects; others, not so much.

However, make sure you are accounting for all of the costs of home ownership - maintenance (Including budgeting for big ticket items like HVAC and roofs), taxes, insurance, HOA fees (if applicable), possibly higher utilities if you are moving from an apartment to a house, opportunity costs for down payment money that could have been invested, and transaction costs to buy/sell.

Real estate is very, very local. You might be lucky and buy a home that increases in value, you might not. We've now learned that it is possible for housing to go down in value. Don't buy unless you plan to stay at least 7 years.

If you are moving from an apartment/townhome/condo to a single family house, how do you feel about yardwork? My neighbor enjoys yardwork. He finds it therapeutic. Some people enyoy being able to plant a garden. Some people enjoy the outside space enough to justify yardwork. At my house, we have a weekly tradition - I go out and mow, I come in and suggest we call a real estate agent and sell the house, my wife says no. :happy
Might be cheaper to get a lawn service. :)
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Re: Any retirees here who have been life-long renters?

Post by Atgard » Tue Jul 26, 2016 1:13 pm

Rodc wrote: But if you buy a house those expenses mean you do not have to pay rent which may or may not fully offset those expenses. So those cost of ownership have to be compared to rent not paid.
Right, that's kinda what I was saying: you have to compare rent (which is all-inclusive) to mortgage + other ownership costs/taxes. Just that many people don't look at or don't know how to calculate the total picture.

The rest of your post I agree, amount of time in the home is an important factor as the mortgage is (usually) fixed while rents can rise. On the other hand, taxes, insurance, maintenance, etc. usually increase over time.

One final point: I think the saying "renting is throwing money away" is very inaccurate. You are paying for a place to live (which is hardly throwing money away), which you also do when you buy. Yes, a (relatively small, especially in the first several years) portion of your housing costs go to equity, but interest, PMI, taxes, insurance, maintenance, etc. are all also "throwing money" away to live. But, if you like a roof over your head, it is an expense we all pay, unless we live with mom & dad. (I suppose you could also say buying food is "throwing money away," but I wouldn't call it that.)

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Re: Any retirees here who have been life-long renters?

Post by Rodc » Tue Jul 26, 2016 1:27 pm

Atgard wrote:
One final point: I think the saying "renting is throwing money away" is very inaccurate. You are paying for a place to live (which is hardly throwing money away), which you also do when you buy. Yes, a (relatively small, especially in the first several years) portion of your housing costs go to equity, but interest, PMI, taxes, insurance, maintenance, etc. are all also "throwing money" away to live. But, if you like a roof over your head, it is an expense we all pay, unless we live with mom & dad. (I suppose you could also say buying food is "throwing money away," but I wouldn't call it that.)
Right. You get something of value with rent - a place to live. And with low strings attached.
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Re: Any retirees here who have been life-long renters?

Post by stoptothink » Tue Jul 26, 2016 2:05 pm

8foot7 wrote:
Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.
LOL :confused
Same poster has cut and paste this exact response into almost every rent/buy thread the last few months. Has to be a troll.

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Re: Any retirees here who have been life-long renters?

Post by wolf359 » Tue Jul 26, 2016 2:42 pm

dziuniek wrote:
Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.
I've seen a couple people post this.
That's just not realistic and I'm not even talking HCOL areas. Maybe in Midwest?
I don't think it's a couple of people. I think it's the same person, but s/he is posting it in a lot of threads.

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Re: Any retirees here who have been life-long renters?

Post by Trader/Investor » Tue Jul 26, 2016 2:56 pm

I didn't buy my first home (all cash) until I was 60. Will be buying a vacation home next year when I am 70. I had no choice but to rent because I was always dirt poor and never held much of a real job. Renting worked for me if only because it was so cheap - $300 to $400 a month. Obviously, some pretty run down rentals.

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Re: Any retirees here who have been life-long renters?

Post by celia » Tue Jul 26, 2016 3:02 pm

rob65 wrote:At my house, we have a weekly tradition - I go out and mow, I come in and suggest we call a real estate agent and sell the house, my wife says no. :happy
Why don't you remove the grass and yet a non-mowable ground cover?
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Re: Any retirees here who have been life-long renters?

Post by celia » Tue Jul 26, 2016 3:09 pm

Dontridetheindexdown wrote:Owning your own home is delightful, but remember, you are always "renting" it from the tax authorities.
I assume you jest. Property taxes pay for public services like schools, fire, police, mosquito abatement. Renters also pay for these as part of their rent.
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Re: Any retirees here who have been life-long renters?

Post by TonyDAntonio » Tue Jul 26, 2016 3:33 pm

I certainly agree with lots of what has been said here:

Don't buy too much house
Lots of hidden costs and maintenance
You are sort of locked into an area unless you want to sell and move
Not a 'for sure' that your house will be a great source of wealth that you can tap
etc.

Here is the kicker to me for owning a modest house: living in the San Francisco Bay Area and walking in SF multiple times per week I see every day renters complaining about rents going up or being evicted (for some ticky-tack reason). That's the 'gotcha', renters. You are at the mercy of a landlord. Sorry, not for me. Have fun in the courts or packing up and moving somewhere else not on your own timeline.

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Re: Any retirees here who have been life-long renters?

Post by unclescrooge » Tue Jul 26, 2016 3:51 pm

If you believe that renting is cheaper than owning in most cases, then you must also believe that landlords, as a rule, subsidize the rent.

I have a hard time believing this.

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Re: Any retirees here who have been life-long renters?

Post by investnoob » Tue Jul 26, 2016 4:04 pm

unclescrooge wrote:If you believe that renting is cheaper than owning in most cases, then you must also believe that landlords, as a rule, subsidize the rent.

I have a hard time believing this.
Some do (not sure about most cases). Sometimes you can find a deal. My father and his girlfriend lived in a nice three bedroom home for about $1000 a month. He was in there for 5 years. The owner was 85 years old and just wanted a quite tenant that she knew would be problem free. When she died, the house was sold for about $600,000. My father moved out. There was no way he could rent a comparable property for $1,000 a month.

You can find good deals from landlords that are not really in the rental business and just have one or two properties to let out. When people say that renting is cheaper than owning, I think they are referring to these types of landlords.

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Re: Any retirees here who have been life-long renters?

Post by PandaBear » Tue Jul 26, 2016 4:17 pm

I think owning a house really depends on your mindset. If you hate doing maintenance, repairing things, working on your yard, then yeah I would not suggest being a homeowner. That said, my wife and I enjoy fixing things and keeping things "tidy" as it were, so a weekend spent on yard work or cleaning the chimney or whatever isn't a chore for us--it gives us something to do that we enjoy.

Some houses also have hidden benefits. Like if you have a large lot of land, you can plant trees and do some logging every few years or grow your own food/grapes for wine.

In my area, renting is getting cost prohibitive. The rent on a 1 bedroom apartment is almost as much as the payment (P&I) on a 15 year mortgage for a normal sized (3bdr, 2.5bathroom) house. From what I can tell, given that demand is outpacing supply (for now), I can only see rent increasing in the next handful of years.

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Re: Any retirees here who have been life-long renters?

Post by unclescrooge » Tue Jul 26, 2016 4:58 pm

investnoob wrote:
unclescrooge wrote:If you believe that renting is cheaper than owning in most cases, then you must also believe that landlords, as a rule, subsidize the rent.

I have a hard time believing this.
Some do (not sure about most cases). Sometimes you can find a deal. My father and his girlfriend lived in a nice three bedroom home for about $1000 a month. He was in there for 5 years. The owner was 85 years old and just wanted a quite tenant that she knew would be problem free. When she died, the house was sold for about $600,000. My father moved out. There was no way he could rent a comparable property for $1,000 a month.

You can find good deals from landlords that are not really in the rental business and just have one or two properties to let out. When people say that renting is cheaper than owning, I think they are referring to these types of landlords.
So markets are efficient, except when it comes to real estate! :mrgreen:

But to your point, I was able to benefit from the flexibility of renting.

I sold my condo in 2006 for a large profit and rented it back for 2 years. The new owner lost money on it every month and it eventually went into foreclose when it's value dropped in half.

Not having a house tying me down enabled me to move cities a few times until I bought again in 2014.

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Re: Any retirees here who have been life-long renters?

Post by badbreath » Tue Jul 26, 2016 6:26 pm

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Re: Any retirees here who have been life-long renters?

Post by Lars_2013 » Tue Jul 26, 2016 6:45 pm

dziuniek wrote:
Non7WoodUser wrote:Don't be fooled by the homeowner zealots who conveniently ignore the massive hidden costs associated with home ownership. Houses are horrible investments for the average person. If you insist on home buying, do so if and only if the price per sq ft < $100 OR the purchase price < 30% of your net worth.
I've seen a couple people post this.
That's just not realistic and I'm not even talking HCOL areas. Maybe in Midwest?
The house I live in currently, and my rental property (my former primary residence), cost less than $100/sq/ft to buy (in 2010 and 2006, respectively), and are worth less than $100/sq/ft now. Both are in mid-sized, moderate cost-of-living cities on the east coast (not DC/NY/Boston). Buying more expensive houses in more expensive neighborhoods might have been a smarter financial choice, but is not in line with my personal goals / values.

That said, purchase price that's less than $100 x monthly rent seems like a more reasonable rule-of-thumb (and one that I've heard more often), since it does a better job of following inflation and relating to the potential income stream from the property.

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Re: Any retirees here who have been life-long renters?

Post by rocket354 » Tue Jul 26, 2016 7:10 pm

unclescrooge wrote:
But to your point, I was able to benefit from the flexibility of renting.

I sold my condo in 2006 for a large profit
Sounds like you benefited from owning, as well.

The only argument that makes any sense in favor of renting is the short time-frame argument. If you're going to move very soon then it might very well be cheaper to rent. $1000/month for a year is $12,000, a number that could very quickly be eaten up by transaction costs + mortgage payments + maintenance if one were to buy a comparable place.

Everything else espoused in this thread in favor of renting just reinforces the utter lack of arguments in favor of renting. You can leave for vacation without having a home to worry about? In what sense? I worry about my place the same whether I'm renting or buying. Your homeowner friends have to call the appliance man, but you only have to call the front office? What difference does that make? It's still a phone call, and in fact it puts another person (and opportunity for miscommunication) between you and who gets the job done. Since I've owned, I've had fewer issues with getting maintenance done because I call who I want and have them come out when I want; I don't have to trust the complex's handyman's shoddy work when he can fit me in two Mondays from now. As for the expense of repairs, a business rents out places so that after all expenses, they still make money. Therefore you're paying for all the repairs the place will need in the process of paying the rent--PLUS some on top.

And that link about why a home is an awful investment. I agree with everything it says because a house IS an awful investment. However, that's not the discussion going on here. This is renting vs owning. Owning a house is an awful investment...except in comparison with renting, which is significantly worse (and the only other real alternative).

Back to the $1000/month example. After 30 years, the renter has paid $360,000 + whatever rent inflation has increased over that time. Since 30 years is a typical time for inflation to double goods, renter might be up to $2000 at that point, meaning a total outlay of $500,000+. What does he get back? Nothing. For owning not to make more sense, the homeowner only has to beat -$500,000. Now, the homeowner has put in a down payment and has put in monthly payments (which only rise gently due to taxes/insurance increases). Let's say the homeowner has even spent $500,000 over that same time period (unlikely, but still). Fine...but they have a house with all its value that they could sell and go back to renting if they wanted. Or tap for equity.

I actually used to work out the numbers in one of the financial math classes I used to teach and using very conservative estimates, over a lifetime, owning still worked out to be hundreds of thousands of dollars more profitable than renting. It's not even close, and it's financially disastrous to prefer renting to owning. If you're going to be moving around a lot as a young adult then definitely rent for the time being. But otherwise, look into owning. If you want to move, convert it to a rental property. Or limit your moves to every 5/6 years or so. If you're just a person that likes to move every year or so as a lifestyle choice--that's fine, rent away. But just realize the cost of doing so is exorbitant and likely a more expensive a habit than fancy cars or smoking or drugs or anything else like that.

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Re: Any retirees here who have been life-long renters?

Post by Slacker » Tue Jul 26, 2016 7:37 pm

rocket354 wrote: The only argument that makes any sense in favor of renting is the short time-frame argument. If you're going to move very soon then it might very well be cheaper to rent. $1000/month for a year is $12,000, a number that could very quickly be eaten up by transaction costs + mortgage payments + maintenance if one were to buy a comparable place.
...
Back to the $1000/month example. After 30 years, the renter has paid $360,000 + whatever rent inflation has increased over that time. Since 30 years is a typical time for inflation to double goods, renter might be up to $2000 at that point, meaning a total outlay of $500,000+. What does he get back? Nothing. For owning not to make more sense, the homeowner only has to beat -$500,000. Now, the homeowner has put in a down payment and has put in monthly payments (which only rise gently due to taxes/insurance increases). Let's say the homeowner has even spent $500,000 over that same time period (unlikely, but still). Fine...but they have a house with all its value that they could sell and go back to renting if they wanted. Or tap for equity.

I actually used to work out the numbers in one of the financial math classes I used to teach and using very conservative estimates, over a lifetime, owning still worked out to be hundreds of thousands of dollars more profitable than renting. It's not even close, and it's financially disastrous to prefer renting to owning. If you're going to be moving around a lot as a young adult then definitely rent for the time being. But otherwise, look into owning. If you want to move, convert it to a rental property. Or limit your moves to every 5/6 years or so. If you're just a person that likes to move every year or so as a lifestyle choice--that's fine, rent away. But just realize the cost of doing so is exorbitant and likely a more expensive a habit than fancy cars or smoking or drugs or anything else like that.
I agree. Worked out the numbers for where we live currently (just moved) and it is roughly 39 months before ownership turns out more profitable using 2% inflation and 7% market returns on the 20% down payment (however, the lower ownership monthly cost resulted in additional money for investing which helps to quickly catch up to the renter's initial investment). Also plugged in 1% maintenace costs and a once every 7year 2% cost for large capital expenditures on ownership. Finally, the inflation was used to adjust rents and property tax calcs. Since we aren't sure if we want to live here permanently we are just renting for a few years in several locations around the area and then we'll likely buy if we want to stay.

Even better - when you can buy with a VA loan for zero down, there is nearly no way that renting the house ever comes out on top unless the rental market fundamentals are absolutely broken (such as in a few non US countries).

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