When does renting make sense

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heybro
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Re: When does renting make sense

Post by heybro » Thu Aug 10, 2017 3:57 am

I love this topic. It never gets old.

Someone already brought up a good point that when someone buys, they usually buy 'more' than if they were to rent a 'smaller' apartment.

A few more thoughts I want to bring up:

1. Does the answer change when you consider a townhouse or a condo, which may be closer in size to an apartment. In other words, would you rather own your apartment or rent it?

2. Does the answer change if everyone is renting? After the last housing crash, everyone started renting and many still do rent. This has caused rents to go up in many areas.

3. What about permutations such as owning a house and living in the basement and renting out the main-floor -or- owning a condo, renting it out, and then renting a place yourself somewhere else.

4. What about noise?! Is a house the best place to live so you don't have to hear everyone?

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VictoriaF
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Re: When does renting make sense

Post by VictoriaF » Thu Aug 10, 2017 5:43 am

Bying makes sense when:

1. You have three or more children, and finding a rental apartment in a good school district is difficult.
2. You live in a low cost of living area where houses are relatively inexpensive in comparison to rents.
3. You have a hobby that requires a lot of space, e.g., your own workshop or gardening.
4. You have dogs or cats.
5. You care what other people think.

In all other situations renting makes sense.

Victoria
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TomatoTomahto
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Re: When does renting make sense

Post by TomatoTomahto » Thu Aug 10, 2017 5:49 am

heybro wrote:4. What about noise?! Is a house the best place to live so you don't have to hear everyone?
Not necessarily. The house next door was bought, torn down, and a new house built. I have lived with noise for around a year (don't ask why it took so long).

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TomatoTomahto
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Re: When does renting make sense

Post by TomatoTomahto » Thu Aug 10, 2017 5:52 am

VictoriaF wrote:Bying makes sense when:
4. You have dogs or cats.
Not necessarily. I was recently "shopping" on Zillow for my son, and was surprised how many upscale apartments in Brooklyn allow cats and even large dogs. It's not the same as a large yard, but they do have extensive doggy parks and pet daycare.

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Re: When does renting make sense

Post by mancich » Thu Aug 10, 2017 6:21 am

LeeMKE wrote:+1 KlangFool

A house is not an investment, it is an expense. Most folks josh themselves into thinking they are making money when they sell it for more than they paid. But they also conveniently ignore the costs of buying and selling, and all the maintenance they paid for and/or performed. If you tally everything up, many of us would be better off renting. But the attraction of owning your own place is strong and makes people feel settled.
+1. If you own a home, think of all the times you've stopped in to Home Depot or Lowes to pick up this or that. $50 here, $100 there. Mundane things you need to buy to keep up maintenance on the house. It adds up to thousands and thousands of dollars over the life of owning the home. Not to mention things that break down and costs thousands more: furnaces, air conditioning, issues with plumbing, etc, etc. You pay none of these things as a renter.

Full disclosure, I own a home :oops:

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VictoriaF
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Re: When does renting make sense

Post by VictoriaF » Thu Aug 10, 2017 6:29 am

TomatoTomahto wrote:
heybro wrote:4. What about noise?! Is a house the best place to live so you don't have to hear everyone?
Not necessarily. The house next door was bought, torn down, and a new house built. I have lived with noise for around a year (don't ask why it took so long).
When you own and have noise, moving out is much more difficult than when you rent and are bothered by noise. I like city noises and have a high noise tolerance. But if motocycles or sirens in my neiborhood were common, I'd move or use earplugs.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

heybro
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Re: When does renting make sense

Post by heybro » Sat Aug 12, 2017 2:12 am

VictoriaF wrote: When you own and have noise, moving out is much more difficult than when you rent and are bothered by noise.
Victoria
I've been told this a few times. However, is it really practical to switch apartments every time you get a loud neighbor? For one, you'll have a lease which will most likely last one year. Moving costs will add up (are you moving every year, every 2 years, etc.). Also, you have to spend time finding an apartment especially a quiet one, which seems sort of rare. I'd think a house, or even a condo with owners, would be more quiet.

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ChowYunPhat
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Re: When does renting make sense

Post by ChowYunPhat » Sat Aug 12, 2017 7:54 am

It's interesting in Houston as there is no state employment taxes but that revenue is made up for in property taxes. I rent a single family home, but just relocated to the area and probably would have rented anyway.

It's curious as the annual property taxes on my single family home (rental) are in the 3x-4x range of the monthly rent I pay. Taken together with the rent $ vs. mortgage, it clearly suggests renting is our best option. My landlords could probably charge a little more, but with the odd real estate market in this town one can find situations where renting is superior to purchase. We could probably continue in this manner for many years, but the intangible benefits of owning a home will probably win out at some point (ability to remodel, customize, etc...)
A wise man and his money are friends forever...

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VictoriaF
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Re: When does renting make sense

Post by VictoriaF » Sat Aug 12, 2017 9:43 am

heybro wrote:
Sat Aug 12, 2017 2:12 am
VictoriaF wrote: When you own and have noise, moving out is much more difficult than when you rent and are bothered by noise.
Victoria
I've been told this a few times. However, is it really practical to switch apartments every time you get a loud neighbor? For one, you'll have a lease which will most likely last one year. Moving costs will add up (are you moving every year, every 2 years, etc.). Also, you have to spend time finding an apartment especially a quiet one, which seems sort of rare. I'd think a house, or even a condo with owners, would be more quiet.
You don't switch apartments every time you get a loud neighbor. You switch apartments when your loud neighbor does not respond to your comments and when your lease expires. Waiting for the lease to expire is much easier than selling a house or a condo.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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Re: When does renting make sense

Post by michaeljc70 » Sat Aug 12, 2017 10:14 am

LeeMKE wrote:
Mon Aug 07, 2017 10:31 pm
+1 KlangFool

A house is not an investment, it is an expense. Most folks josh themselves into thinking they are making money when they sell it for more than they paid. But they also conveniently ignore the costs of buying and selling, and all the maintenance they paid for and/or performed. If you tally everything up, many of us would be better off renting. But the attraction of owning your own place is strong and makes people feel settled.
How is that possible? You think the landlord is losing money and getting no return on capital? Why would anyone buy investment property? Some of the richest people I know got that way due to owning rentals. And yes, I've seen these articles proclaiming that renting might be cheaper. Funny how they all seemed to come out after the housing crash. It is like after a stock market crash all the articles about investing in CDs and bonds and gold.

A house is not an expense. It is an asset which of course has expenses related to it.

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Re: When does renting make sense

Post by finite_difference » Sat Aug 12, 2017 12:05 pm

VictoriaF wrote:
Sat Aug 12, 2017 9:43 am
heybro wrote:
Sat Aug 12, 2017 2:12 am
VictoriaF wrote: When you own and have noise, moving out is much more difficult than when you rent and are bothered by noise.
Victoria
I've been told this a few times. However, is it really practical to switch apartments every time you get a loud neighbor? For one, you'll have a lease which will most likely last one year. Moving costs will add up (are you moving every year, every 2 years, etc.). Also, you have to spend time finding an apartment especially a quiet one, which seems sort of rare. I'd think a house, or even a condo with owners, would be more quiet.
You don't switch apartments every time you get a loud neighbor. You switch apartments when your loud neighbor does not respond to your comments and when your lease expires. Waiting for the lease to expire is much easier than selling a house or a condo.

Victoria
Isn't that what HOAs and municipal ordinances are for? Houses are a lot less impacted by sound than apartments/townhouses.

But I agree that renting gives you a ton more flexibility.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

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weltschmerz
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Re: When does renting make sense

Post by weltschmerz » Sat Aug 12, 2017 1:00 pm

VictoriaF wrote:
Sat Aug 12, 2017 9:43 am
You don't switch apartments every time you get a loud neighbor. You switch apartments when your loud neighbor does not respond to your comments and when your lease expires. Waiting for the lease to expire is much easier than selling a house or a condo.
My last few landlords have had me sign an initial 1-year lease, and then after 1 year the contract defaults to a month-to-month lease. After the first year, I then have maximum flexibility in moving whenever I get a bad neighbor. I am in that situation right now in fact. My quiet neighbor of several years moved, and my new neighbors have a bunch of loud annoying kids. So I'm checking Craigslist every few days, and if I find anything good, I can pounce on it whenever I want.

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Re: When does renting make sense

Post by Slacker » Sat Aug 12, 2017 1:13 pm

Does the majority of people here really believe that you only rent apartments and never rent houses? So many of the arguments are predicated on renting apartments, I find that astonishing.

I rent a big home with nice appliances just like what we had in the home we own elsewhere. I still end up going to home depot and lowes for little maintenance items every couple months. When something breaks, it doesn't come directly out of my pocket for repairs, but I am hostage to the landlord & owner -> Had to go 8 days without hot water, I gave them a legal notice after 3 days because nothing was getting done so they scheduled the work to occur on the last possible day before I could break the lease. Other repairs that are not classified as being imminent to the health of the renters have taken much longer. If I owned the place I could have made repair arrangements immediately or done the work myself.

Monthly rent $1450
Home value based on recent comps $170,000. Estimated ownership payment after 20% down on a 30yr mortgage with 1% maintenance, roughly 1% for taxes = $952. Add in maybe $100 for homeowner's insurance.

I would not buy this home because we will be moving soon. The owner is open to selling it (heard through one of the maintenance guys as the landlord [mgmt co] is terrible and I don't hear anything from them)

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Re: When does renting make sense

Post by michaeljc70 » Sat Aug 12, 2017 1:58 pm

The Dan wrote:
Sat Aug 12, 2017 1:00 pm
VictoriaF wrote:
Sat Aug 12, 2017 9:43 am
You don't switch apartments every time you get a loud neighbor. You switch apartments when your loud neighbor does not respond to your comments and when your lease expires. Waiting for the lease to expire is much easier than selling a house or a condo.
My last few landlords have had me sign an initial 1-year lease, and then after 1 year the contract defaults to a month-to-month lease. After the first year, I then have maximum flexibility in moving whenever I get a bad neighbor. I am in that situation right now in fact. My quiet neighbor of several years moved, and my new neighbors have a bunch of loud annoying kids. So I'm checking Craigslist every few days, and if I find anything good, I can pounce on it whenever I want.
It works both ways. They can kick you out too or raise the rent. You don't have some magical one sided benefit in a m2m lease.

I suppose it depends where you live, but in a bigger city I have seen many people that rent displaced from their preferred neighborhood due to appreciation while the ones that own are living where they want.

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weltschmerz
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Re: When does renting make sense

Post by weltschmerz » Sat Aug 12, 2017 2:11 pm

michaeljc70 wrote:
Sat Aug 12, 2017 1:58 pm
The Dan wrote:
Sat Aug 12, 2017 1:00 pm
My last few landlords have had me sign an initial 1-year lease, and then after 1 year the contract defaults to a month-to-month lease. After the first year, I then have maximum flexibility in moving whenever I get a bad neighbor. I am in that situation right now in fact. My quiet neighbor of several years moved, and my new neighbors have a bunch of loud annoying kids. So I'm checking Craigslist every few days, and if I find anything good, I can pounce on it whenever I want.
It works both ways. They can kick you out too or raise the rent. You don't have some magical one sided benefit in a m2m lease.

I suppose it depends where you live, but in a bigger city I have seen many people that rent displaced from their preferred neighborhood due to appreciation while the ones that own are living where they want.
True, but in my case, the landlords usually don't raise the rent or kick me out. I try to make myself the ideal tenant, always paying on time, notify them about maintenance issues, even fixing things myself. Even if I did have to pay more for month-to-month, I would probably pay it, since flexibility is of utmost importance to me. Then again, you can always break a lease. I did that one time when the situation was truly awful. It cost me a few months rent, but it was worth it.

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Re: When does renting make sense

Post by windrose » Sat Aug 12, 2017 2:21 pm

Slacker wrote:
Sat Aug 12, 2017 1:13 pm
Does the majority of people here really believe that you only rent apartments and never rent houses? So many of the arguments are predicated on renting apartments, I find that astonishing.
I had a similar take, but from the other side. I own, but in a condo building with a full time staff, so repairs are done for a nominal charge, and big things are paid for by all via HOA fees.

As I am gearing up to retire, I considered both, and buying made more sense for me. My building allows rentals, and there are plenty of similar "comps" in my area, so it was close to apple/apples.

To buy: 180K-225K. HOAs around 400ish per month. Taxes 1800-2400K per year. To rent: 1800-2500K per month. (all depends on exact size, level of upgrades, and for taxes---how long you have owned it. Longer term owners pay less).

For a nest egg of 1,000,000 and 4% w/d rate to rent: $40,000 income per year-$21,600 (1800 per month)=18,400 to live on, (not including income taxes.)

For nest egg of 1,000,000 and 4% w/d rate to buy: $32,000 income per year(1million-200K for condo x.04)-$7200 (400 HOA+200 taxes per month)=24,800 to live on, (not including taxes). So I will have about $500 more per month for spending if I buy vs. rent. Not including taxes.

This is how I made my choice--I hope it was right. Taxes and HOAs will go up, but so will rents. So it really depends on the sales vs. rent price ratio, as well as whether taxes and rents go up in lock step in your area.....and assuming you are comparing like properties/locations.

The real difference will be what the 200K could earn in the market, over the long run. My home price could double, and it wouldn't matter, unless I decided to get a HELOC and start playing around with it in the market. The 200K, on the other hand, could earn some valuable, usable gains.....or losses. Since it will be for retirement, I went with the more conservative option.

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Re: When does renting make sense

Post by KSOC » Sat Aug 12, 2017 2:53 pm

I own a home. Have owned 2 in the last 26 years. My job has been eliminated, kids have moved out, wife still has 4 more years of teaching. We will likely downsize within the next year. We will rent until she is finished working, because we do not know where we want to end up in retirement. Upkeep of pool & landscaping is no longer fun (was it ever?).

What hasn't been mentioned yet in this conversation is another upside of renting. Getting rid of all the stuff one has accumulated over the years. I hope to minimize the amount crap we collect from then on & renting means less storage space & the threat of having to move all that junk when the lease is up.
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Re: When does renting make sense

Post by weltschmerz » Sat Aug 12, 2017 3:16 pm

KSOC wrote:
Sat Aug 12, 2017 2:53 pm
What hasn't been mentioned yet in this conversation is another upside of renting. Getting rid of all the stuff one has accumulated over the years. I hope to minimize the amount crap we collect from then on & renting means less storage space & the threat of having to move all that junk when the lease is up.
Indeed. Last time I sold a house, I had a full moving truck, plus it took about 10 full loads in an SUV to get everything moved. I vowed never again would I move so much stuff. Since then, I have sold many, many things. I don't think I would even use a moving truck next time, I barely have any furniture. Maybe about 5 loads in the SUV, and I would be moved.

Many years ago, everything I owned fit in 1 car, and I moved around a bit. Those were great times. Then I started buying houses, getting an accumulation mindset. It is very hard to switch that off. Even today, for example, I have rented for about 4 years, yet I still have a shovel and a bunch of irrigation repair equipment. I keep telling myself, "this stuff will be handy if i own another house." It takes years to let that stuff go.

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Re: When does renting make sense

Post by michaeljc70 » Sat Aug 12, 2017 3:31 pm

There are a couple other aspects that I didn't see touched upon:

1) Having a mortgage is forced savings. Of course, you can rent and say you are going to save the difference (if there is any) or down payment and invest it, but will everybody? No.

2) If you finance a house you are using leverage. Of course, if there is a big downturn like in 2007-2009, it will work against you. On the other hand, say you bought a house for $200k and put 20% down. That is 40k. Say the house appreciates 3% the first year. That is 6k. That means on a 40k investment (the down payment) you gained $6k or 15%. Of course, some of that is inflation and it will be be lower each year because you have less leverage.

In my view, in most areas it is worth it to buy if you plan on staying there more than 5 years. This isn't even addressing other aspects of owning (pro or con). Personally, I cannot imagine not being able to do what I want with my place (update/remodel/redecorate/reconfigure/etc.). Some people don't care.

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Re: When does renting make sense

Post by chuppi » Sat Aug 12, 2017 4:52 pm

For me living in my own house gives me stability. My older one is joining kindergarten next week. I know my two kids will complete highschool here. I don't have to worry about moving or rent increases. I can plan everything for long term.

I never viewed a house as a investment but my first condo was the best financial decision. It was probably a coincidence because I bought in 2010 but you cannot say renting is always better financially.

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Re: When does renting make sense

Post by LuigiLikesPizza » Sat Aug 12, 2017 6:50 pm

When you can deduct a reasonably decent percentage of your rental expenses due to business use/home office - and it's far less complicated at tax time, than if you owned the home - unless I suppose if you plan to be in that home for a long time.

Kompass
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Re: When does renting make sense

Post by Kompass » Sun Aug 13, 2017 12:49 pm

heybro wrote:
Sat Aug 12, 2017 2:12 am
VictoriaF wrote: When you own and have noise, moving out is much more difficult than when you rent and are bothered by noise.
Victoria
I've been told this a few times. However, is it really practical to switch apartments every time you get a loud neighbor? For one, you'll have a lease which will most likely last one year. Moving costs will add up (are you moving every year, every 2 years, etc.). Also, you have to spend time finding an apartment especially a quiet one, which seems sort of rare. I'd think a house, or even a condo with owners, would be more quiet.
I've been enjoying this thread for its varying opinions, lots of food for thought.

I have rented for 35 years and have had some noisy neighbors and some quiet, usually some way to deal with it, once I moved. I did not have to sell a house to escape it, I was inconvenienced for a couple of months was all. Now I own a house with neighbors who are inconsiderate to say the least. It will cost me whatever it costs to make the change and the inconvenience will be much more. Owning a house short of being centered on 10 acres of wilderness will not ensure you quiet neighbors, also different sounds annoy people in different ways.

The method I found to be most effective at reducing the chances of a lot of apartment/condo noise is to rent an expensive (per sqft), small, higher quality place as it is less attractive to young families and party animals. I will consider a condo on the next round for the ability to customize but will use the same criteria for selection if I do.
The large print giveth and the fine print taketh away.

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Re: When does renting make sense

Post by THY4373 » Mon Aug 14, 2017 8:59 am

Kompass wrote:
Sun Aug 13, 2017 12:49 pm
I will consider a condo on the next round for the ability to customize but will use the same criteria for selection if I do.
One thing to look for in condos or apartments for greater noise reduction at least between floors is concrete vs wood construction for the structural aspects of building. I lived in a wood structured condo (in VA they allow this up to a height of 4 or 5 stories). I bought new construction condo in the 90s and the person above me sounded like an elephant moving around but she was short petite lady. I'll never live in a wood structure apartment or condo again.

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Re: When does renting make sense

Post by book lover » Mon Aug 14, 2017 9:17 am

As I remember, in the book The Richest Man In Babylon it is recommended " own your own domicile." That always struck me as good advice.

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Re: When does renting make sense

Post by jlcnuke » Mon Aug 14, 2017 9:55 am

Wanna know what the "rent vs buy" calculators won't tell you? They're only good for the 1st year of renting/buying.

Let's assume they tell you that it's 10% cheaper to rent vs buy. That's great, but you're going to stay there for 40 years. Over those 40 years, the PI in your PITI will stay the same, and hopefully be ~75%+ of the total payment. So only 25% of your monthly payment is subject to inflation. Renting, on the other hand, has 100% of the payment subject to inflation. So, 20 years later, that 2% inflation has pushed your rent from $1,000/month to $1,456.81/month. That $1,100 mortgage, however, is now only costing you $1,225.62/month. Year 31 comes around and you're done with paying the mortgage so now the rent is $1,811.36/month but your PITI is now just TI for $498.12/month. By the 40th year the renter is paying $2,164.74/month and the guy with the paid off house is paying $595.30 (a savings of $18,833.40/year). At 3% growth in costs instead of 2%, at that 40th year the owner is saving $27,553.20/year relative to the renter. You're going to need to replace a LOT of roofs and AC units to eat away $27k/year in savings...

This is a large reason why "how long you're going to stay there" is one of the most important considerations in the rent vs buy consideration.

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Re: When does renting make sense

Post by surfstar » Mon Aug 14, 2017 10:24 am

jlcnuke wrote:
Mon Aug 14, 2017 9:55 am
Wanna know what the "rent vs buy" calculators won't tell you? They're only good for the 1st year of renting/buying.
Check out the gold standard: https://www.nytimes.com/interactive/201 ... lator.html

It is as accurate as you can get, based on your accuracy for predicting future inflation, house/rental increases, and investment returns.

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Re: When does renting make sense

Post by jlcnuke » Mon Aug 14, 2017 10:45 am

surfstar wrote:
Mon Aug 14, 2017 10:24 am
jlcnuke wrote:
Mon Aug 14, 2017 9:55 am
Wanna know what the "rent vs buy" calculators won't tell you? They're only good for the 1st year of renting/buying.
Check out the gold standard: https://www.nytimes.com/interactive/201 ... lator.html

It is as accurate as you can get, based on your accuracy for predicting future inflation, house/rental increases, and investment returns.
Hadn't seen that one before, thanks for the link. :beer

Edit:
So, I went with all the default stuff (250k home, 20% down, all numbers as it defaulted them to). Then I said staying there for 20 years. For renting to be cheaper, it would have to be under $751/month. The mortgage, at 20% down, for just PI would be $993/month at 3.92% interest rate. So ~$1,200 with average property taxes and insurance on top to buy. I don't think you'll find many places that cost $1,200/month to buy renting out at $751/month or less.
Last edited by jlcnuke on Mon Aug 14, 2017 11:10 am, edited 1 time in total.

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monkey_business
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Re: When does renting make sense

Post by monkey_business » Mon Aug 14, 2017 11:02 am

Neither renting nor owning is unequivocally better. The answer is: it depends.

Run the numbers for your specific situation, using conservative estimates, and see what ends up being better.

I also don't understand when people say "a house is not an investment". According to Merriam-Webster:

Investment
the outlay of money usually for income or profit

Houses can be profitable. If you outlay money for a house purchase with the intent of making a profit, how is that not an investment? It might be a bad investment, or there might be better investments available, but it is an investment nonetheless.

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Re: When does renting make sense

Post by Kompass » Mon Aug 14, 2017 11:24 am

THY4373 wrote:
Mon Aug 14, 2017 8:59 am
Kompass wrote:
Sun Aug 13, 2017 12:49 pm
I will consider a condo on the next round for the ability to customize but will use the same criteria for selection if I do.
One thing to look for in condos or apartments for greater noise reduction at least between floors is concrete vs wood construction for the structural aspects of building. I lived in a wood structured condo (in VA they allow this up to a height of 4 or 5 stories). I bought new construction condo in the 90s and the person above me sounded like an elephant moving around but she was short petite lady. I'll never live in a wood structure apartment or condo again.
Looks like I forgot to add one of my cardinal rules: Only live on the top floor. :beer

I also avoid construction from the 60's-80's. There is no way to be absolutely sure, but I find it this and the previous set of rules to be a good starting place.

As a side note, the last place I rented was built in 1901 with no insulation and a wood frame. I did live on the top floor and was considerate with those below me. Myself and all other tenants in this 5 unit converted victorian mansion lived there for 9 years (or more) with no problem that wasn't easy to solve, and no rent increases as the owner valued long term tenants. That's an outlier on the good side, but careful selection helps.
The large print giveth and the fine print taketh away.

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Re: When does renting make sense

Post by JGoneRiding » Mon Aug 14, 2017 11:25 am

Slacker wrote:
Sat Aug 12, 2017 1:13 pm
Does the majority of people here really believe that you only rent apartments and never rent houses? So many of the arguments are predicated on renting apartments, I find that astonishing.

I rent a big home with nice appliances just like what we had in the home we own elsewhere. I still end up going to home depot and lowes for little maintenance items every couple months. When something breaks, it doesn't come directly out of my pocket for repairs, but I am hostage to the landlord & owner -> Had to go 8 days without hot water, I gave them a legal notice after 3 days because nothing was getting done so they scheduled the work to occur on the last possible day before I could break the lease. Other repairs that are not classified as being imminent to the health of the renters have taken much longer. If I owned the place I could have made repair arrangements immediately or done the work myself.

Monthly rent $1450
Home value based on recent comps $170,000. Estimated ownership payment after 20% down on a 30yr mortgage with 1% maintenance, roughly 1% for taxes = $952. Add in maybe $100 for homeowner's insurance.

I would not buy this home because we will be moving soon. The owner is open to selling it (heard through one of the maintenance guys as the landlord [mgmt co] is terrible and I don't hear anything from them)
Crap and I felt guilty as a LL when they went 3 days and 2 days where totally their fault for not telling me there was a problem at all! Same when the fridge went out they went 2 days without telling me then told me sunday night after everything in this town was closed so of course earliest fridge was wed eve nothing I could do faster

Hustlinghustling
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Re: When does renting make sense

Post by Hustlinghustling » Mon Aug 14, 2017 11:26 am

Several here have mentioned that housing is not an investment decision. One aspect where it becomes one though, is that housing is usually one of the few ways that the average person has access to leverage. The significance of this shouldn't be discounted.

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weltschmerz
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Re: When does renting make sense

Post by weltschmerz » Mon Aug 14, 2017 12:09 pm

Kompass wrote:
Mon Aug 14, 2017 11:24 am
Looks like I forgot to add one of my cardinal rules: Only live on the top floor. :beer
I agree with this one. Having an upstairs neighbor is not acceptable, but even having a downstairs neighbor can be a problem too. The last time I had a top-floor unit, my downstairs neighbor was a door-slammer. There is nothing worse than lounging around your home and being startled by a slamming door at any time. Scared the heck out me and the cat, it really made me irate. I now prefer townhouses, no one above or below. Actually, in an ideal world, I prefer to live in a detached house with no shared walls, but in my experience, people living in those types of neighborhoods make a lot more noise and are way less respectful than in the townhouses.

heybro
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Re: When does renting make sense

Post by heybro » Mon Aug 14, 2017 10:57 pm

I started a new thread 'Best Housing To Avoid Noise.'

viewtopic.php?f=2&t=225711&newpost=3493051

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Lancelot
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Re: When does renting make sense

Post by Lancelot » Tue Aug 15, 2017 12:17 am

Interesting thread!

Previously I was firmly in the home ownership cohort. Why? Well houses always increase in value! (Don't they?) :mrgreen:

After moving abroad and mostly living long term in furnished apartments, for the past year I have leased a two bedroom unfurnished apartment.

And I love it!

My rent is super cheap and I didn't spend much on furnishing it either. I've learned that I'm happy not having a lawn to care for and being responsible for maintenance. At some point I will return to the USA and rent an apartment, but I'll probably keep my apartment abroad as well.

In the US my preference would be to rent from an individual landlord as opposed to a large property management company. I love the freedom renting gives me and no opportunity costs on tying up capital in real estate.

I'm surprised at my personal transition from home ownership to renter, but live and learn :)
No Where for Very Long...

THY4373
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Re: When does renting make sense

Post by THY4373 » Tue Aug 15, 2017 10:14 am

Lancelot wrote:
Tue Aug 15, 2017 12:17 am
Interesting thread!

Previously I was firmly in the home ownership cohort. Why? Well houses always increase in value! (Don't they?) :mrgreen:

After moving abroad and mostly living long term in furnished apartments, for the past year I have leased a two bedroom unfurnished apartment.

And I love it!

Funny until last year at the ripe old age of 46 I had been a life long owner since I graduated from grad school in my early 20s. I actually did fine with real estate ownership but my least beneficial home was the last one I owned in a low cost of living area that appreciated but not nearly as much as the previous homes in the high cost of living area I used to live in. The home here also had much higher operating costs (large home with large yard). I went back to renting a modest single family home when I got separated (soon to be divorced), mostly because it was no more expensive than a two bedroom apartment. I still have to mow a small yard but otherwise renting this place is so freeing. I also have not bothered to furnish it much beyond my share of the family furniture. It is really hard to overstate how not owning a place and all that entails is mentally freeing and it has also freeing up my ability to save more. I could easily afford to own a place but right now I like my freedom and ability to save more. My son graduates in five years and assuming I am in the same job which is location agnostic (at least within the US) I can move anywhere.

No doubt I'll own again as I get older but that is probably a couple of decades off.

RRAAYY3
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Re: When does renting make sense

Post by RRAAYY3 » Tue Aug 15, 2017 10:53 am

LeeMKE wrote:
Mon Aug 07, 2017 10:31 pm
+1 KlangFool

A house is not an investment, it is an expense. Most folks josh themselves into thinking they are making money when they sell it for more than they paid. But they also conveniently ignore the costs of buying and selling, and all the maintenance they paid for and/or performed. If you tally everything up, many of us would be better off renting. But the attraction of owning your own place is strong and makes people feel settled.
i can't help but roll my eyes when my friends, family, and other elders instantly pull the "it's an investment" card.

Are people brainwashed? Or was their a time where actually buying a home/property was a justifiable investment? Between the 20% down payment, mortgage interest, taxes, maintenance, general upkeep - it seems more like a sink hole than an "investment"

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Re: When does renting make sense

Post by McGilicutty » Tue Aug 15, 2017 12:31 pm

KlangFool wrote:
Tue Aug 08, 2017 4:27 pm
So, all those rent versus buy calculator does not make any sense when you are comparing Apple versus Orange.
I disagree. The New York Times rent v. buy calculator is great even when comparing apples to oranges. For example, I live in a VLCOL area. I was surprised to discover that I could buy a SFH for about the same monthly payment (including insurance and taxes) as I was paying for renting my townhouse. However, when I entered all the information into the NY Times rent v. buy calculator (low tax rate, low housing appreciation, low rental price appreciation, 4% return on the potential down payment if otherwise invested) I discovered that my rent would need to go up about $300 to making buying a better choice.

The NY Times rent v. buy calculator can be a real eye-opener even when comparing apples to oranges.

jlcnuke
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Re: When does renting make sense

Post by jlcnuke » Tue Aug 15, 2017 12:42 pm

McGilicutty wrote:
Tue Aug 15, 2017 12:31 pm
KlangFool wrote:
Tue Aug 08, 2017 4:27 pm
So, all those rent versus buy calculator does not make any sense when you are comparing Apple versus Orange.
I disagree. The New York Times rent v. buy calculator is great even when comparing apples to oranges. For example, I live in a VLCOL area. I was surprised to discover that I could buy a SFH for about the same monthly payment (including insurance and taxes) as I was paying for renting my townhouse. However, when I entered all the information into the NY Times rent v. buy calculator (low tax rate, low housing appreciation, low rental price appreciation, 4% return on the potential down payment if otherwise invested) I discovered that my rent would need to go up about $300 to making buying a better choice.

The NY Times rent v. buy calculator can be a real eye-opener even when comparing apples to oranges.
How long of a time-frame were you using?

McGilicutty
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Re: When does renting make sense

Post by McGilicutty » Tue Aug 15, 2017 12:58 pm

jlcnuke wrote:
Tue Aug 15, 2017 12:42 pm
McGilicutty wrote:
Tue Aug 15, 2017 12:31 pm
KlangFool wrote:
Tue Aug 08, 2017 4:27 pm
So, all those rent versus buy calculator does not make any sense when you are comparing Apple versus Orange.
I disagree. The New York Times rent v. buy calculator is great even when comparing apples to oranges. For example, I live in a VLCOL area. I was surprised to discover that I could buy a SFH for about the same monthly payment (including insurance and taxes) as I was paying for renting my townhouse. However, when I entered all the information into the NY Times rent v. buy calculator (low tax rate, low housing appreciation, low rental price appreciation, 4% return on the potential down payment if otherwise invested) I discovered that my rent would need to go up about $300 to making buying a better choice.

The NY Times rent v. buy calculator can be a real eye-opener even when comparing apples to oranges.
How long of a time-frame were you using?
9 years.

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weltschmerz
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Re: When does renting make sense

Post by weltschmerz » Tue Aug 15, 2017 1:21 pm

THY4373 wrote:
Tue Aug 15, 2017 10:14 am
...renting this place is so freeing. I also have not bothered to furnish it much beyond my share of the family furniture. It is really hard to overstate how not owning a place and all that entails is mentally freeing and it has also freeing up my ability to save more. I could easily afford to own a place but right now I like my freedom and ability to save more...
I just saw this other thread on the Bogleheads website:
Is $9000 too much for a sectional sofa ?

Homeowners spend staggering amounts of money on their home furnishings. I know it, because I have done it too. I once owned a nice home, and I decided to put a really nice pool table in it. Not just any crappy pool table, it had to be custom made using the finest walnut woods. Cost me about $7k!!! I shudder when thinking about it now, but at the time it seemed sensible, since my home was my castle. As a renter, I don't waste my money like that anymore.

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Lancelot
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Re: When does renting make sense

Post by Lancelot » Tue Aug 15, 2017 8:45 pm

THY4373 wrote:
Tue Aug 15, 2017 10:14 am
Lancelot wrote:
Tue Aug 15, 2017 12:17 am
Interesting thread!

Previously I was firmly in the home ownership cohort. Why? Well houses always increase in value! (Don't they?) :mrgreen:

After moving abroad and mostly living long term in furnished apartments, for the past year I have leased a two bedroom unfurnished apartment.

And I love it!

Funny until last year at the ripe old age of 46 I had been a life long owner since I graduated from grad school in my early 20s. I actually did fine with real estate ownership but my least beneficial home was the last one I owned in a low cost of living area that appreciated but not nearly as much as the previous homes in the high cost of living area I used to live in. The home here also had much higher operating costs (large home with large yard). I went back to renting a modest single family home when I got separated (soon to be divorced), mostly because it was no more expensive than a two bedroom apartment. I still have to mow a small yard but otherwise renting this place is so freeing. I also have not bothered to furnish it much beyond my share of the family furniture. It is really hard to overstate how not owning a place and all that entails is mentally freeing and it has also freeing up my ability to save more. I could easily afford to own a place but right now I like my freedom and ability to save more. My son graduates in five years and assuming I am in the same job which is location agnostic (at least within the US) I can move anywhere.

No doubt I'll own again as I get older but that is probably a couple of decades off.
If I were to stumble on to a super bargain, I might consider owning again. But not owning a home since 2003 has been super liberating, financially and time wise. Before I retired, I spent most of my weekends taking care of my stuff. By renting -and no car- I've freed up so much extra time. I'm single, but I can fully understand why families want to own their own place.

But again, my personal experience with renting has been a real eye opener.
No Where for Very Long...

eye.surgeon
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Re: When does renting make sense

Post by eye.surgeon » Wed Aug 16, 2017 5:05 pm

The rent vs buy decision is not completely a financial decision. Buying provides stability that renting does not. Many will find that stability provides more quality of life than does the money saved renting. You have to put a monetary value on the stability of home ownership, and compare it to the money saved renting. That answer will be different depending on circumstances and priorities.

THY4373
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Re: When does renting make sense

Post by THY4373 » Wed Aug 16, 2017 5:46 pm

eye.surgeon wrote:
Wed Aug 16, 2017 5:05 pm
The rent vs buy decision is not completely a financial decision. Buying provides stability that renting does not. Many will find that stability provides more quality of life than does the money saved renting. You have to put a monetary value on the stability of home ownership, and compare it to the money saved renting. That answer will be different depending on circumstances and priorities.
I completely agree however the same argument can be made in reverse. Renting provides flexibility and many (or at least some) will find that flexibility provides higher quality of life than does money saved (or spent) on buying. So you have to put a monetary value on flexibility as well at least for the persons who value that over stability. I am without a doubt happier as a renter than an owner at this time. I think the lesson of this thread is the decision to buy or rent is complicated and in many cases goes well beyond the purely financial aspects of the decision.

THY4373
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Re: When does renting make sense

Post by THY4373 » Wed Aug 16, 2017 5:52 pm

weltschmerz wrote:
Tue Aug 15, 2017 1:21 pm
I just saw this other thread on the Bogleheads website:
Is $9000 too much for a sectional sofa ?

Homeowners spend staggering amounts of money on their home furnishings. I know it, because I have done it too. I once owned a nice home, and I decided to put a really nice pool table in it. Not just any crappy pool table, it had to be custom made using the finest walnut woods. Cost me about $7k!!! I shudder when thinking about it now, but at the time it seemed sensible, since my home was my castle. As a renter, I don't waste my money like that anymore.
Ha I have totally been there as well. I shed a tear or two when I think about all the time and money I spent on fixing up the house, buying high end furniture (at least it was mostly used but still expensive and time consuming to find and buy) and everything else that goes with home ownership at least the way many of us practice it today.

My first epiphany came when I moved out when my wife and I separated and started renting but it was really driven home when I operated for a month travelling internationally out of a very small backpack with nothing but rapidly drying travel clothes (would dry overnight), a cell phone, a small laptop and a camera. I realized that honestly I could go a long time with nothing more. Less really is more and this comes from a long time collector of things. I cannot wait until I retire and can vagabond around the world with nothing more than my backpack.

bighatnohorse
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Re: When does renting make sense

Post by bighatnohorse » Wed Aug 16, 2017 6:22 pm

wannabogle wrote:
Mon Aug 07, 2017 10:01 pm
When does renting a home make more sense than buying?
When you hate doing yard work.
When you hate cleaning gutters.
When you hate having your own lawn mower and keeping it running.
When you hate the barking dog next door and the drug dealers move in on the other house.
When you hate faulty appliances, leaky faucets, stuck windows, clogged drains, fogged dual pane windows, etc,etc.

According to Ken Rockwell:
After selling my condo of 17 years, sure, I sold it at the top of California's recent real estate bubble for four times what I paid. But wait: unlike a financial investment, I had to pay mortgage interest, taxes, utilities, repairs, homeowner associations and loads of other expenses. I added it all up, and I made an average of only 1% a year!
http://www.kenrockwell.com/tech/how-to- ... ything.htm

IMO
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Re: When does renting make sense

Post by IMO » Wed Aug 16, 2017 6:58 pm

RRAAYY3 wrote:
Tue Aug 15, 2017 10:53 am
LeeMKE wrote:
Mon Aug 07, 2017 10:31 pm
+1 KlangFool

A house is not an investment, it is an expense. Most folks josh themselves into thinking they are making money when they sell it for more than they paid. But they also conveniently ignore the costs of buying and selling, and all the maintenance they paid for and/or performed. If you tally everything up, many of us would be better off renting. But the attraction of owning your own place is strong and makes people feel settled.
i can't help but roll my eyes when my friends, family, and other elders instantly pull the "it's an investment" card.

Are people brainwashed? Or was their a time where actually buying a home/property was a justifiable investment? Between the 20% down payment, mortgage interest, taxes, maintenance, general upkeep - it seems more like a sink hole than an "investment"
Yes there has been a time and a place. You may not want to agree, but people actually have done well in places like California OVER time. I have friends / family where it is easy arguable that not only has their home provided them stability (on a number of factors including rent), an ability to raise a family in a desirable setting (in a number of ways), but has become a significant "investment" even if by default. California has prop 13 which keeps property taxes very low/stable for long term residents. What you see in many housing markets (levels of current appreciation rates) in many areas of the country are a result of the California exodus, cashing out on their "investment". They can sell their home, take up to $500K (married) tax free, and can buy a much less expensive home in another area, often for cash.

I know many elder retirees where my parents currently live that bought homes for $40K to $75K back in the late 60's in California. That was a lot at the time. From knowing many of the retirees/widows that live near my elderly parents, some have put in $50K to $200K for various upgrades over time but they have stayed put for reasons other than financial reasons. Those homes they've lived in for 50+ years are worth $1.6 million and up. (Don't use "well they could have invested $50K in the stock market back then argument because they didn't pay for the house all at once and they didn't pay rent). Should they need to, anyone of them can cash out on their "investment" and use the money for things like long term care, etc. People that have owned a home for even 10 yrs in California, if desired/needed, could very easily cash out and make some good money on their homes.

Maintenance is always a real issue, but real life experience (parents/friends/family/self) shows that a quality built home really shouldn't break the bank. People who don't like buying seem to overestimate "everything" that can go wrong on maintenance, when the reality is most things are expected. For my parents mostly it's $80/month for yardwork, and with an automatic pool cleaner, it's just a few chemicals/pool tablets that somehow they can manage without any big deal, and on rare occasion something else (water heater, roof once in 50 yrs, etc).

Honestly, if you were trying to compare apples to apples with renting on the above, you'd need about $5+K/month to pay for the rent on the home. And, you'd still be on the hook to take care of the yard/pool, etc as a renter typically is required in these areas. In no way, shape or form would they have been better to have rented a similar home all these years and been able to stay in that home that they have no desire to leave.

Sometimes you get lucky, sometimes you don't. We're up $100K appreciation in 3 yrs (on $65K downpayment), rent increases are way above COLA and our PITI/maintenance is well below a comparable rental (if we could even find one), and if we rented there is a good chance we'd already would have been forced to move.

But we don't think of this as a "investment" per se, but when the time comes, my child will inherit this "sink hole."
Last edited by IMO on Wed Aug 16, 2017 7:11 pm, edited 2 times in total.

ascension
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Re: When does renting make sense

Post by ascension » Wed Aug 16, 2017 7:09 pm

I agree with all the replies above.

Owning is just too costly due to

1. Property Tax
2. Maintenance
3. Closing cost and etc

Even if the house appreciates, it is really hard to get any return for it. Not worth it IMHO. Some of the property tax and maintenance cost in NYC is borderline ridiculous.

Traveler
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Re: When does renting make sense

Post by Traveler » Wed Aug 16, 2017 9:10 pm

When I changed companies I decided I wanted to move to reduce my 90 minute one-way commute. Lucky for me it was the bottom of the housing market in Atlanta. Unlucky for me, a single family homeowner, it was the bottom of the housing market in Atlanta.

So I looked at condos and townhomes and couldn't believe what I was able to find in the area I wanted to live (it's a decent area, not a gang-ridden dump). There were 2bd 2bath flats ~1100 sq ft going for $35,000. I found a 2 bed 1.5 bath townhouse, ~1000 sq ft for $45K. I ended up with a 2 bed, 2.5 bath ~1350 sq ft for $60K. I couldn't rent even a small 1 bedroom apartment in this area for less than what I pay in HOA, utilities, maintenance and taxes (it's paid off). For me, buying was definitely better than renting. And I could sell the place for at least $150K right now. I won't talk about the hit I took on my old house, selling it in a down market. Oh, and I'm now <2 miles from work (~7 minutes door to door). And, there were no closing costs through PenFed (1.99% five year home equity loan), only a $350 appraisal.

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VictoriaF
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Re: When does renting make sense

Post by VictoriaF » Thu Aug 17, 2017 12:20 am

IMO wrote:
Wed Aug 16, 2017 6:58 pm
Honestly, if you were trying to compare apples to apples with renting on the above, you'd need about $5+K/month to pay for the rent on the home. And, you'd still be on the hook to take care of the yard/pool, etc as a renter typically is required in these areas. In no way, shape or form would they have been better to have rented a similar home all these years and been able to stay in that home that they have no desire to leave.
This is false logic.

In reality:
1. People buy expensive homes because of their resale value. People don't care about the resale value of their apartments.
2. A $5,0000 per month rent is a lifestyle decision, not a financial decision.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

IMO
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Re: When does renting make sense

Post by IMO » Thu Aug 17, 2017 2:15 am

VictoriaF wrote:
Thu Aug 17, 2017 12:20 am
IMO wrote:
Wed Aug 16, 2017 6:58 pm
Honestly, if you were trying to compare apples to apples with renting on the above, you'd need about $5+K/month to pay for the rent on the home. And, you'd still be on the hook to take care of the yard/pool, etc as a renter typically is required in these areas. In no way, shape or form would they have been better to have rented a similar home all these years and been able to stay in that home that they have no desire to leave.
This is false logic.

In reality:
1. People buy expensive homes because of their resale value. People don't care about the resale value of their apartments.
2. A $5,0000 per month rent is a lifestyle decision, not a financial decision.

Victoria
Just about everything about where you live, if/what you rent/buy is a "lifestyle" decision. Otherwise you'd simply live in the lowest priced apartment which is probably the least desirable part of a town/city. Furthermore, you'd have to move to the least expensive state, no matter if you didn't like the weather, the culture, the outdoor (or lack thereof) activities, no matter how far from family/friends etc. You can argue you're living somewhere during your working years for a specific job, but that logic is now gone once you retire and it's then it's all lifestyle decision in your housing choice.

My example is a real life example. It would cost $5K plus per month to rent my parents house. Instead, they pay their $4000 yearly tax bill and the monthly/yearly maintenance expenses on the home. How can they logically rent a comparable home in their neighborhood for the $4000 yr taxes and the home maintenance expense? There has likely never been a year where renting a comparable home/neighborhood would have been less expensive, all things like maintenance/taxes/mortgage considered (in their case, sorry just a reality). I don't see the false logic. They never bought their home because some future resale value, they bought it to live in a desirable neighborhood (vs. the lousy apartment they lived in before the house) to raise a family - crazy thought.

I'm not arguing it always makes more sense to buy vs. rent. Far from it. The post I responded to said that people who buy are brainwashed into thinking owning a home can never amount to an "investment, and the example was one that apparently there was a time in history when owning a home could turn out to be an investment, even if that wasn't the original reason.

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