Do you rent even if you can afford to buy?

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EGARCH
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Do you rent even if you can afford to buy?

Post by EGARCH » Thu Feb 22, 2018 2:23 am

I started earning *decent* money a few years ago after living on a TA/RA salary in grad school in the preceding 7 years. Now I can afford to buy a condo/house but want to continue renting for the flexibility that comes with it.

I did a buy vs rent analysis using online tools and realized that I am throwing a few hundred dollars in the drainage when I rent (vs. buy).

The flexibility was a percieved desire at first but it became handy when I was on sabbatical as I was able to temporarily separate from my job and relocate in a new city for a short period of time relatively easy. I may also permanently move to another job which is often in a different location if/when opportinities arise (but this is not very likely).

As I write this, I realized that flexiblity can be quantified to some extent using the buying and selling transaction fees and/or the rent one may pay during temporary relocation.

In any case, do you rent even if you can afford to buy? Why?

david
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Re: Do you rent even if you can afford to buy?

Post by david » Thu Feb 22, 2018 2:55 am

I rent because it allows me to rightsize my living situation. If I bought, I'd have to think well ahead and purchase something larger than I currently need in order to accommodate a (potentially) larger family in the future. I'd also feel the need to get something forever home-like. Renting doesn't make me feel that way. I can be more utilitarian.

I rent because of flexibility. If I were to lose my job or if I found a different job or decided that I wanted to live closer to family I could do so without the costs associated with selling a home. I don't have firm plans as of yet where I want to live in 5-10 years and until I do, it doesn't make clear sense for me to own.

If I bought when I moved to the area that I am currently in, I'd likely have done pretty well. Though, I was a single guy with a girlfriend then and now am married (to that girlfriend) with a baby in a slightly larger place. I'm not sure how much ahead I would have been. Not owning has allowed me to get to a situation where I can max retirement accounts and pay off school debt.

So while I could afford to buy, I'm happy I've been renting.

Daryl
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Re: Do you rent even if you can afford to buy?

Post by Daryl » Thu Feb 22, 2018 6:09 am

Yes, for many of the same reasons already mentioned. I'm single, so my one bedroom apartment is the perfect size for me. Also, not having to worry about lawn care is awesome! Owning a home always seemed like a second job. There is always something that needs to be fixed. I'd rather spend that time on hobbies.

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TomatoTomahto
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Re: Do you rent even if you can afford to buy?

Post by TomatoTomahto » Thu Feb 22, 2018 6:58 am

I don’t, because I can’t easily rent the house/land I want, but I strongly recommend that my kids rent. They should not give up all the advantages of a rental just to have the albatross of a house around their necks, in the mistaken quest to do some “adulting.”

Orange44
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Re: Do you rent even if you can afford to buy?

Post by Orange44 » Thu Feb 22, 2018 6:59 am

I rent. I have right sized the last few years as needed. NYC rent is high along with purchasing. We have gone with renting.

Edward Joseph
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Re: Do you rent even if you can afford to buy?

Post by Edward Joseph » Thu Feb 22, 2018 7:19 am

Yes. I'm single and I rent even though I have enough of a down payment set aside to put 50%-100% down on a home depending on how much house I want to buy. I used to own a condo but needed some flexibility and mobility for work.

I work in a sales role that was pretty lucrative but had me moving around a few different places in a few years. I think I'm situated now in my current city so I may start looking. However, I'm also dating and would prefer to buy a place with my prospective wife (if that day comes) instead of buying and then potentially finding something again that works for the both of us.

My 2 bedroom 1100 sq ft apartment is brand new, clean, quiet and perfect for my situation. I'm in an upper-medium cost of living area with a hot real estate market and rent is pretty affordable relative to buying.

rhornback
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Re: Do you rent even if you can afford to buy?

Post by rhornback » Thu Feb 22, 2018 8:18 am

TomatoTomahto wrote:
Thu Feb 22, 2018 6:58 am
I don’t, because I can’t easily rent the house/land I want, but I strongly recommend that my kids rent. They should not give up all the advantages of a rental just to have the albatross of a house around their necks, in the mistaken quest to do some “adulting.”
I tell my kids that todays Corporate America only wants you for project based work. They want you for a time and then they want to let you go.

I think it is very hard to get a stable job anymore. For this reason I think it makes sense to rent: so you can go where your work takes you.

When people think of renting in many cases they are thinking of apartment. But you can also rent townhomes and houses.

I also tell my kids not to buy heavy 'heirloom' furniture for the same reasons. Buy something cheap that you can sell on craigslist so you don't have to move a bunch of stuff.

We will see how well they take my advice. But myself, when my kids are grown, I will rent and buy disposable furniture.

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TomatoTomahto
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Re: Do you rent even if you can afford to buy?

Post by TomatoTomahto » Thu Feb 22, 2018 8:55 am

“rhornback” wrote:I think it is very hard to get a stable job anymore. For this reason I think it makes sense to rent: so you can go where your work takes you.
Even with a stable job, it is helpful to be mobile. We have turned down assignments in London, Singapore, Hong Kong, etc., in part because of the PITA that would have caused with our house. There were other reasons, but housing was part of it. Right now, we are relocating, and while the new employer has been very helpful with relocation expenses, it is still a major PITA. If we were not psychologically in the mood for a change, the relocation would have been an obstacle. Compare that to when I rented: I went from DC, to New Orleans, to NYC, in less than a year.

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jadd806
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Re: Do you rent even if you can afford to buy?

Post by jadd806 » Thu Feb 22, 2018 8:58 am

rhornback wrote:
Thu Feb 22, 2018 8:18 am
I also tell my kids not to buy heavy 'heirloom' furniture for the same reasons. Buy something cheap that you can sell on craigslist so you don't have to move a bunch of stuff.
I wish I knew this before my girlfriend and I got our first apartment together. Her parents gave us some old solid wood furniture. As we look to move in a few months it's just a liability.

I prefer my particleboard junk from IKEA.

2Birds1Stone
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Re: Do you rent even if you can afford to buy?

Post by 2Birds1Stone » Thu Feb 22, 2018 9:00 am

Yes, we could easily purchase a median priced home in our area ($450k), but that comes with $12k/yr in taxes and the related maintenance and cleaning.

We chose instead to rent a simple 1 bedroom apartment in a good location, for $1,100/month. Let our landlord deal with any headaches, and us the freedom to move by giving 30 days notice.

retire57
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Re: Do you rent even if you can afford to buy?

Post by retire57 » Thu Feb 22, 2018 9:23 am

It's apples to oranges. Homeowner expenses include repairs and maintenance. Not so renting. Examples: replacing our roof cost $8,000, pest control is about $800 per year. You'll have to pay to replace the dead refrigerator, broken dishwasher, and malfunctioning air conditioner. Crack open the wallet to buy, maintain, and replace lawn equipment. And let's not forget other costs like property taxes and homeowners insurance.

Keep renting.

RRAAYY3
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Re: Do you rent even if you can afford to buy?

Post by RRAAYY3 » Thu Feb 22, 2018 9:30 am

Why I rent:

Buying a home in a HCOL in this current market is nothing short of financial suicide, in terms of retirement saving anyway

I sat down with my girlfriend and ran the numbers. I said we would only buy under the conditions we put down at least 25% and can continue to both max our retirement accounts without limiting our current lifestyle in order to do so.

The “pride of homeownership” sure does seem to wear off quickly - at least for friends I know that have bought recently. It’s more of a deer/headlights “what did we get ourselves into?” Vibe ... but at least their “successful” in other people’s eyes

dziuniek
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Re: Do you rent even if you can afford to buy?

Post by dziuniek » Thu Feb 22, 2018 9:43 am

I think it's more of a lifestyle decision.

Wife and I are on our 2nd home - the forever one. We used to own a starter home, which I now realize might not be the greatest idea.

Buy a house if you want to settle down, once school district might be important. If you want children, how many bedrooms will you need? Will you wanting say 2 kids turn into quadruplets? Who knows?

And as you mentioned, transaction costs in real estate are nuts.

When we sold out last house:
6% of sale price - agents
0.75% - state transfer made up tax/fee
0.25% - town transfer made up tax/fee

Combined with moving furniture, other random costs (re-painting, fixing small issues from the buyer's inspection report) can add up.
I believe the total costs was somewhere around 8%. YUCK.

Still, we enjoy our new place much more than before.
We did keep our new construction house mortgage at 2x our gross income.

jlcnuke
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Re: Do you rent even if you can afford to buy?

Post by jlcnuke » Thu Feb 22, 2018 9:53 am

I rent AND I own...

I own my retirement home (well, I will once I pay off the mortgage in ~9 years), but I don't live there (I moved my parents in there for their retirement home, I'll move there later). It's a bit farther from the city and wouldn't be a pleasant commute while I work in the city, but it's pretty much exactly what I'd like for my retirement home.

I rent my current residence (well, part of it actually) because it's financially advantageous and more comfortable for me. I had a friend moving here at the same time as I did and we agreed he'd buy a place and I'd rent from him and we'd split the bills for the place. When the house was paid off the bills dropped significantly. At this point my rent is about the same cost as the utilities, so there's no way I could get another place of similar size for the same price. As a bonus, it's his place so he covers significant maintenance, takes care of the house and the yard etc, yet I still have use of the house features I wouldn't have in an apartment (such as a garage, yard, deck, etc).

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simplesimon
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Re: Do you rent even if you can afford to buy?

Post by simplesimon » Thu Feb 22, 2018 9:54 am

Currently renting because we can't buy a house the size of our apartment, a starter home would be too big for us now but too small for our ideal future, and it's likely our needs will change in the next couple of years.

remomnyc
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Re: Do you rent even if you can afford to buy?

Post by remomnyc » Thu Feb 22, 2018 9:55 am

We've been renting and looking for 3 years. The one thing we really liked, we bid 150k over ask and were outbid by 150k. Right now, it would cost us 27x rent to buy. The last time we bought we paid 13x rent to buy. Financially, we just can't justify buying, especially in our neighborhood. We also like maintaining flexibility in case we want to leave the country. We were anxious to buy initially but now we are enjoying our maintenance free lifestyle.

Random Poster
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Re: Do you rent even if you can afford to buy?

Post by Random Poster » Thu Feb 22, 2018 9:55 am

Yes, because:

(1) I don't to own a house where I currently live; and

(2) my wife and I can't figure out where we want to live permanently.

Once we figure out the answer to the second point, I suspect that we will buy a house.

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Sandtrap
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Re: Do you rent even if you can afford to buy?

Post by Sandtrap » Thu Feb 22, 2018 10:04 am

DW and I rented for many years because:
1 Lived in a UHCOL State
2 Preferred to live well below our means though many of our peers chose mortgages.
3 Chose to take the money we saved and reinvest it in our company. (worked out well)
4 At some point knew we were going to relocate to a LCOL State.

It seems that purchasing a home and taking on mortgage debt is a given for those that are able to.
But, the fact that one can afford it is not necessarily a reason to do so.

mahalo,
j :D

chevca
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Re: Do you rent even if you can afford to buy?

Post by chevca » Thu Feb 22, 2018 10:10 am

retire57 wrote:
Thu Feb 22, 2018 9:23 am
It's apples to oranges. Homeowner expenses include repairs and maintenance. Not so renting. Examples: replacing our roof cost $8,000, pest control is about $800 per year. You'll have to pay to replace the dead refrigerator, broken dishwasher, and malfunctioning air conditioner. Crack open the wallet to buy, maintain, and replace lawn equipment. And let's not forget other costs like property taxes and homeowners insurance.

Keep renting.
I agree, it's apples and oranges. But, I can't stand this argument for renting. Guess what... one's rent covers all these things too. You think the landlord just foots the bill for all these things? It's just that the renter doesn't see the individual checks go out for these things nor have to hire and schedule the jobs. It is easy being a renter, but you pay all the same things. Don't kid yourself.

I feel it's more a personal and lifestyle choice. If one is single and unsettled, I'd say keep renting no matter what you can afford. If one is single and very certain they're settled, go ahead and buy. Pretty similar for married couples or families. There's more to it than rent vs. buy calculators, IMO.

Also, I feel it's true one tends to rent a lesser place than they would buy. So, priorities come into play... saving/investing, or home is one's castle...

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simplesimon
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Re: Do you rent even if you can afford to buy?

Post by simplesimon » Thu Feb 22, 2018 11:02 am

chevca wrote:
Thu Feb 22, 2018 10:10 am
Guess what... one's rent covers all these things too. You think the landlord just foots the bill for all these things? It's just that the renter doesn't see the individual checks go out for these things nor have to hire and schedule the jobs. It is easy being a renter, but you pay all the same things. Don't kid yourself.
While it's true the rent includes all these things, when home ownership pays off (monetarily speaking) it's mainly because of 1) luck 2) leverage and 3) staying in the same place for a long time (inflation protection).

In my area cap rates are less than 4%...it's much better to rent.

jminv
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Re: Do you rent even if you can afford to buy?

Post by jminv » Thu Feb 22, 2018 12:06 pm

I rent because I move fairly frequently, I prefer my assets to be liquid, and homes have high transaction costs. Even if I wasn't moving at this stage in my life, I would like the flexibility to do so. I have owned before and it was fine but I moved for something better and if you do it frequently enough, it is a costly hassle.

Another factor is that I live in a HCOL area overseas and rental yields are low. It's the same in HCOL areas in the USA: rental yields are also low. This is a bargain for renters. For buyers, it could be equated to buying a relatively illiquid stock with high transaction costs at a very high P/E multiple where the multiple is high because people are expecting exceptional future growth in the value of the underlying asset. This may or may not be a good assumption. In any case, it leads to a low rental yield. Buyers can make their investment much more attractive in these areas through the use of leverage. You can also make a home buy in a slower growing market more attractive through leverage, of course, your expected capital gains returns just won't be as high although the rental yield you would receive while owning the house would be higher than in a HCOL (the 'flipside').

There's a psychological appeal to owning your own home and if you know you are going to stay in an area for a long time then probably a good idea to buy. Rentals are also less secure in that you might be forced by the landlord to move, which is an inconvenience.

As far as the financial appeal of homes, I don't normally invest based on tax reasons in any asset. The mortgage deduction is interesting but if I were buying a home, that's not what I would be interested in per se. Personal homes are a very interesting asset because of the amount of leverage you can use (and re-use through refinancing) when purchasing it which can give you outsized gains over time. Your personal equity (investment) in the house can remain very low and you can juice the returns with debt. Unlike using margin in investing in , eg, stocks, the bank will never sell the underlying asset (house) to pay off the margin if the value of your house suddenly declines below the value of the mortgage debt because of a temporary property crash - assuming you keep paying your mortgage (not a good assumption if you don't have emergency funds, stable jobs, etc). Assuming you keep your job or have an emergency fund, you will still keep making mortgage payments and wait out the temporary drop. If you use the same amount of leverage through margin in stocks/index funds, it's easy to get wiped out if there's a significant market downturn, even though, at some point, the stocks are likely to regain their value. This is because your broker will have already sold all of your holdings to repay the margin and if it wasn't enough, you'll owe more, ie, have a debt to the broker. If you happen to work and live in an area with strong projected home value growth you can use this leverage to achieve an interesting return over time while simultaneously living in the home.

aceoperations
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Re: Do you rent even if you can afford to buy?

Post by aceoperations » Thu Feb 22, 2018 12:29 pm

We currently rent a 3 br house even though we can afford to buy the same house that we are in. If we were to buy, we would go with a larger home and that would cost us more $$ / mo. Once childcare costs drop off for our 2 kids, then there is a lot more flex room for putting some money down into a mortgage, while keeping our current high % of retirement savings. There are other reasons we have not bought so far. One is that our immigration situation only settled down a couple of years ago, and we were not ready to plunk down major moolah before that was settled. The other is that the spouse has gotten back into full time work after said immigration situation was solved. We want to have a stable 2-income household for a few years, and see how to balance childcare, housing, general spending and saving. The researcher in me wants to collect data on our spending habits before we make a major home commitment. Lastly, yes, our HCOL area has some seriously inflated home prices. We want to strengthen our cash position before we are ready to buy. When we are ready, we will buy the right sized home for us, for the money we want to spend, regardless of things like interest rates at the time, which we have no control over anyway.

warner25
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Re: Do you rent even if you can afford to buy?

Post by warner25 » Thu Feb 22, 2018 12:46 pm

As an active duty military officer, I've been reassigned across state lines or overseas almost annually for the past decade. We have money set aside to buy a home when I leave the military (enough to pay cash today in any lower-cost area), but we rent because the stress and risks and transaction costs of repeated buying and selling would eat us alive. I know a lot of people who do it, and sometimes it works out OK for them, but sometimes they get left holding the bag with orders to move and a house they can't afford to sell.

One of my best friends works for a big company, and he moves around quite a bit, essentially every time he gets another internal promotion. He buys instead of renting, but his company pays most of the transactions costs, and it puts a cap on his losses if the housing market crashes.

My only complaints are: (1) It's getting harder to find suitable rental housing as our family grows. Good 1BR apartments are plentiful. Good 3BR houses in a nice place for kids are not. Where we live now, in the neighborhoods that look really great, there are simply no rentals. (2) It's frustrating that much of American society still sees me as less of a grown-up adult than someone who's drowning in debt but "owns" their home.

BeneIRA
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Re: Do you rent even if you can afford to buy?

Post by BeneIRA » Thu Feb 22, 2018 1:01 pm

I rent due to the flexibility. I am more than willing to jump to a different job or a different state if I want to and if I buy, then that's it. It doesn't help that I live in a very high cost of living area and buying would make no financial sense. I would rather rent, possibly move down the line and not have to worry about it. I second not buying amazing furniture or making any long-term commitments in the area if you plan to do this. I don't value my furniture very highly and it has been very helpful.

As an aside, I do wonder how different the housing market will be down the line. With so much movement among employees from one employer to another, either voluntarily or involuntarily, how can someone put down roots and buy a house when they could be out of a job within the next couple of years? Does said theoretical person truly believe they will be employed in that area for the next 20-30 years? I know I can't confidently say that.

thx1138
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Re: Do you rent even if you can afford to buy?

Post by thx1138 » Thu Feb 22, 2018 1:04 pm

One oft overlooked downside to owning is that it tends to make people consume more housing than if they rented (i.e. they buy a bigger more expensive place than they would rent). That can quickly offset any of the “savings” advantages of buying. Of course if you are disciplined in selecting what you buy you can avoid that downside but it seems rare for people to do so. The high transaction costs sometimes drive that - people buying what they think they might need 5-10 years from now rather than what they actually need right now.

Having both rented and owned a few times there are pluses and minuses to both but I’d say in general it is always a reasonable decision to rent while there are a more limited set of situations where buying makes sense.

thx1138
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Re: Do you rent even if you can afford to buy?

Post by thx1138 » Thu Feb 22, 2018 1:12 pm

BeneIRA wrote:
Thu Feb 22, 2018 1:01 pm
As an aside, I do wonder how different the housing market will be down the line. With so much movement among employees from one employer to another, either voluntarily or involuntarily, how can someone put down roots and buy a house when they could be out of a job within the next couple of years? Does said theoretical person truly believe they will be employed in that area for the next 20-30 years? I know I can't confidently say that.
Well there are a lot of institutional owners of homes for rent now so I expect the market will continue to answer people’s needs one way or another!

Buying can make sense at time scales much less than 20-30 years as well. Something like seven years of ownership is probably a decent break even point for many markets. Job stability for say a decade is quite achievable once out of the early career years where hopping is advantageous. If you are still hopping around that much mid career it often starts to be a big negative on the resume anyway so people tend to settle down while employers are also much more incentivized to retain mid-career workers. Plus many families with kids would prefer 7-10 years of stability just to make things easier on the kids (by no means required of course but many folks think that way).

almostretired1965
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Re: Do you rent even if you can afford to buy?

Post by almostretired1965 » Thu Feb 22, 2018 1:27 pm

We went in the opposite direction a couple years back. We've lived in the same house in NoVA we purchased shortly after getting married in the early 1990s. Sold it to relocate to a lake community near a college town, where we got a rental on the water. If I can get away with it, I will never own a house or condo for the rest of my life. In my opinion, stay liquid!

If you are young and do not have children, I think it is a mistake to own. Career-wise you want to be able to pick up and go, whenever, where ever. I say this even though I did the exact opposite and stayed put for 25 years! That house can be an anchor. In addition, while it may work out spectacularly, on average, residential housing is a poor investment.

We may well end up buying a place after we figure out where to settle down after retirement. At that point, we will buy the smallest place that we find comfortable, say, 1500 square feet tops. The older I get, the less I understand the desire to have a big house.

It will be nice to be in a position where if the homestead is a complete loss, I can just blow it off.....

A

dacalo
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Re: Do you rent even if you can afford to buy?

Post by dacalo » Thu Feb 22, 2018 1:38 pm

We rented past 5 years and bought a home 4 months ago and we love it. We were home owners before renting but due to the cost of living here, we had to rent for a while. No more noisy neighbors upstairs and no more worrying about rising rent every year. It gives us a peace of mind that this is our place and we don't have to move around for a while.

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Re: Do you rent even if you can afford to buy?

Post by raisinsaregrapes » Thu Feb 22, 2018 1:45 pm

warner25 wrote:
Thu Feb 22, 2018 12:46 pm
(2) It's frustrating that much of American society still sees me as less of a grown-up adult than someone who's drowning in debt but "owns" their home.
Also active duty here, I have a rule. Only buy a house if I would be happy living there forever. I have bought one house (still own it), currently renting where we live now. I know what you mean about the grown-up adult thing. Landlords who want to do multi-week application processes never get my business. I show them a pay stub and tell them about myself, write a check day-of, then move in the next day.

gowri
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Re: Do you rent even if you can afford to buy?

Post by gowri » Thu Feb 22, 2018 1:49 pm

We rent because
1. We live in a small town with one big employer (I work for that employer). It is very difficult to find another job in this town in case of a job loss.
2. House prices are very high. I checked in zillow and it ranks the market as "very hot".
3. Want to move back to my home country in a few years. I don't want to risk buying high and selling low in case of housing market crash/correction.
4. In general don't want to take on so much liability in terms of mortgage and general house repairs and maintenance.
5. Fixed costs helps in planning other investments.

Things that I don't like about renting:
1. Cannot have a decent garden (not even a patio garden as it gets very few hours of direct sunlight).
2. I don't like carpet. I would have changed to wooden flooring if we owned a house.

DVMResident
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Re: Do you rent even if you can afford to buy?

Post by DVMResident » Thu Feb 22, 2018 1:50 pm

We do. The main reason is it's cheaper in our VHCOLA (0.24%/mo rent to market price). A 1%/mo rent to market price makes a very clear 'buy' signal. 0.5~1%/mo is a grey area.

OP, I'd be a little careful with the buy vs rent calculators outputs. There are couple assumptions which you can't know in advance that really change the results:
-You have to guess how long you will stay. This is difficult to predict with jobs, family issues, etc.
-You have to guess at appreciation rate. A downward turn will wipe equity (assuming a typical mortgage LTV).
-Repair costs. Owners take on a lot more risk here.

I take these calculators with a grain of salt and make a 3x3x3 matrix. One axis is appreciation [high, mid, low]. The other axis is duration. Another axis is repairs.

Then rerun the simulation to fill out the 3x3x3 to get an idea of the spectrum of possibilities.

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VictoriaF
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Re: Do you rent even if you can afford to buy?

Post by VictoriaF » Thu Feb 22, 2018 2:31 pm

I have been renting all my life, and I think this was a significant factor in my ability to accumulate assets and retire early. I have always lived in larger, older, cheaper apartment complexes. Several times I have moved because of the job, which provided me with better career opportunities. I usually lived very close to work and the time I saved on the commute I spent on getting degrees and certifications and writing papers.

Now, I am retired and can easily buy an apartment in my area. There will not be job related reasons to move and I like to live here. But the cost of ownership in this area is much higher than the cost of renting. Condominiums do not only cost $500k-$600k but also require $500-$600 in monthly payments. And so I continue to rent.

Victoria
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Chris K Jones
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Re: Do you rent even if you can afford to buy?

Post by Chris K Jones » Thu Feb 22, 2018 2:39 pm

I rent for flexibility. My job is unstable and I want to be able to leave without the hassle of selling a house if things fall apart. If job doesnt work out here, a long distance move will probably be required. I do plan to buy a house when I am sure I am going to stay, be it here or elsewhere.

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bligh
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Re: Do you rent even if you can afford to buy?

Post by bligh » Thu Feb 22, 2018 2:55 pm

We rent a nice place for our family in VHCOL area. The kind of place we could see ourselves buying. If we wanted to, I believe we could quite easily afford a more expensive place than this.

We still choose to rent instead of buying. Mostly because we don't have a strong desire to own. There is no question that in our area we would have come out ahead financially if we had chosen to own. However owning (or not owning one) at this time, is not a financial decision but a quality of life decision for us. We are setting aside funds specifically for purchasing a house in cash at some point. When we feel the need to settle down and own a home, we will pull the trigger. For now we are happy to rent and see no real need to go buy it.

I suppose we aren't the "home is our castle" type people. At least not right now. I do think this will change, and we may decide to buy a "forever home" when we are older and retired. If nothing else, for financial reasons, even if it affects quality of life.

THY4373
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Re: Do you rent even if you can afford to buy?

Post by THY4373 » Thu Feb 22, 2018 2:57 pm

I have stable job and could very easily buy where I live but rent currently.

Main reasons I rent are:

I recently divorced and once my son goes to college I won't have any reason to stay where I am (my job is somewhat location agnostic). This could happen within five years so with the generally low appreciation in my area would likely breakeven if sold then at best.

I am willing to rent a lesser place than I'll buy so allows me to save more money.

After doing all home maintenance and yard work when married on a large house and yard I am burned out on both.
Last edited by THY4373 on Thu Feb 22, 2018 6:42 pm, edited 1 time in total.

EnjoyIt
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Re: Do you rent even if you can afford to buy?

Post by EnjoyIt » Thu Feb 22, 2018 3:09 pm

thx1138 wrote:
Thu Feb 22, 2018 1:04 pm
One oft overlooked downside to owning is that it tends to make people consume more housing than if they rented (i.e. they buy a bigger more expensive place than they would rent). That can quickly offset any of the “savings” advantages of buying. Of course if you are disciplined in selecting what you buy you can avoid that downside but it seems rare for people to do so. The high transaction costs sometimes drive that - people buying what they think they might need 5-10 years from now rather than what they actually need right now.

Having both rented and owned a few times there are pluses and minuses to both but I’d say in general it is always a reasonable decision to rent while there are a more limited set of situations where buying makes sense.
This is the perfect response to the question. People will spend more buying than renting out a smaller place. Owning also adds stress and time commitment. I am a home owner (or at least own 50% of it. The bank own the other half.) I can honestly say that my life was easier when we rented and would love to go back to a smaller rental place if my spouse wouldn't object to vehemently.

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Re: Do you rent even if you can afford to buy?

Post by feehater » Thu Feb 22, 2018 6:20 pm

jadd806 wrote:
Thu Feb 22, 2018 8:58 am
rhornback wrote:
Thu Feb 22, 2018 8:18 am
I also tell my kids not to buy heavy 'heirloom' furniture for the same reasons. Buy something cheap that you can sell on craigslist so you don't have to move a bunch of stuff.
I wish I knew this before my girlfriend and I got our first apartment together. Her parents gave us some old solid wood furniture. As we look to move in a few months it's just a liability.

I prefer my particleboard junk from IKEA.
I have had mostly decent experiences hiring laborers from the uhaul affiliated website. I think it's movinghelp.com. You rent and drive the uhaul, they show up at the old place, load the truck up, follow you to the new place and unload it. They are so much stronger and faster than the average person that they can unload or load a 2 br apartment in an hour or two. Best $120 I ever spent.

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Re: Do you rent even if you can afford to buy?

Post by mcraepat9 » Thu Feb 22, 2018 6:34 pm

EGARCH wrote:
Thu Feb 22, 2018 2:23 am
I started earning *decent* money a few years ago after living on a TA/RA salary in grad school in the preceding 7 years. Now I can afford to buy a condo/house but want to continue renting for the flexibility that comes with it. Congrats

I did a buy vs rent analysis using online tools and realized that I am throwing a few hundred dollars in the drainage when I rent (vs. buy).Those calculators are useless - you need to do your own analysis based on particular circumstances. You should disabuse yourself of the notion that you are throwing money away by renting. This is fundamentally not true.

The flexibility was a percieved desire at first but it became handy when I was on sabbatical as I was able to temporarily separate from my job and relocate in a new city for a short period of time relatively easy. I may also permanently move to another job which is often in a different location if/when opportinities arise (but this is not very likely). Permanency is definitely a scenario when buying could be advantageous. The hold period is key for purchasing a house. If you are likely to stay put for the long haul,
then it can make sense to buy.


As I write this, I realized that flexiblity can be quantified to some extent using the buying and selling transaction fees and/or the rent one may pay during temporary relocation. That extent is rather limited frankly. The flexibility gets tested when the economy tanks and your next job is in another part of the country. It's not something that is easily quantifiable.

In any case, do you rent even if you can afford to buy? Why? I do, but lifestyle choice.
I've also been a landlord so I know the ownership game. This puzzle is best put together when you have a specific desire for owning a house (lifestyle) and can make apples to apples comparisons to comparable rentable houses. Bottomline, every situation is different and the idea that owning vs. renting your primary residence is susceptible to a clear financial calculation is silly. Most people will tell you it's a lifestyle decision.
Amateur investors are not cool-headed logicians.

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Re: Do you rent even if you can afford to buy?

Post by DVMResident » Thu Feb 22, 2018 7:14 pm

chevca wrote:
Thu Feb 22, 2018 10:10 am
retire57 wrote:
Thu Feb 22, 2018 9:23 am
It's apples to oranges. Homeowner expenses include repairs and maintenance. Not so renting. Examples: replacing our roof cost $8,000, pest control is about $800 per year. You'll have to pay to replace the dead refrigerator, broken dishwasher, and malfunctioning air conditioner. Crack open the wallet to buy, maintain, and replace lawn equipment. And let's not forget other costs like property taxes and homeowners insurance.

Keep renting.
I agree, it's apples and oranges. But, I can't stand this argument for renting. Guess what... one's rent covers all these things too. You think the landlord just foots the bill for all these things? It's just that the renter doesn't see the individual checks go out for these things nor have to hire and schedule the jobs. It is easy being a renter, but you pay all the same things. Don't kid yourself.
^ Sure, it's true the average renter pays for the average landlord repair. But landlord costs are not evenly spread over months or even years until you start accumulating a large number of units (diversification). The average renter's costs are smoother than the (small time) landlord's or owner's.

Renting is a hedge against unpredictable repairs. Renting is analogous to insurance: a terrible deal if nothing goes wrong and a great deal when things go south.

Landlords keep large cash reserves because repairs (and vacancies) are so unpredictable. Cash reverse cost money via 'cash drag' (not earning much ROI). A BH renter's cash drag should be smaller.

I'd say the renter is compensated for paying for the average repair via the lower cash reverse requirements being deployed somewhere else and budget/cash-flow smoothing. The landlord IMO is the loser on this point because of the asymmetry of greater downward risk and cost of remedy (large piles of cash) is expensive. I say this as a former landlord and current renter.

After thought: landlords are partially compensated for repair risks from security deposits and tax write offs. IMO repair risk are best for renters > landlords >>> owners.
Last edited by DVMResident on Thu Feb 22, 2018 9:26 pm, edited 1 time in total.

mpsz
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Re: Do you rent even if you can afford to buy?

Post by mpsz » Thu Feb 22, 2018 8:01 pm

I rent even though I could afford to buy. The main reason is I value the flexibility to pick up and move with minimal hassle and expense.

Renting also keeps me from filling up my home with useless crap. I think twice before buying stuff because I know I'll have to move it some day.

RRAAYY3
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Re: Do you rent even if you can afford to buy?

Post by RRAAYY3 » Thu Feb 22, 2018 8:06 pm

This thread has been a godsend and excellent reminder of why I may never live the “American Dream”

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Re: Do you rent even if you can afford to buy?

Post by CheeseFlip » Thu Feb 22, 2018 8:19 pm

I'm active duty as well. I've moved 13 times in just over 20 years.

We'll buy when we can live somewhere longer than 3 years.

Unlike some others in this thread, I'm always looking to rent something similar to what we'd buy. And I'm willing to pay -- but for some reason there always seems to be a shortage of custom homes in the rental market...

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Re: Do you rent even if you can afford to buy?

Post by randomizer » Thu Feb 22, 2018 8:20 pm

I've rented my entire life (40s now). Always prized the flexibility, and scared of debt. In recent years though (low fixed rates) I've become more comfortable with the idea of debt, and I have a solid income stream to pay it off, so my unwillingness to buy has changed.
87.5:12.5, EM tilt — HODL the course!

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Re: Do you rent even if you can afford to buy?

Post by retire57 » Thu Feb 22, 2018 10:31 pm

chevca wrote:
Thu Feb 22, 2018 10:10 am
retire57 wrote:
Thu Feb 22, 2018 9:23 am
It's apples to oranges. Homeowner expenses include repairs and maintenance. Not so renting. Examples: replacing our roof cost $8,000, pest control is about $800 per year. You'll have to pay to replace the dead refrigerator, broken dishwasher, and malfunctioning air conditioner. Crack open the wallet to buy, maintain, and replace lawn equipment. And let's not forget other costs like property taxes and homeowners insurance.

Keep renting.
I agree, it's apples and oranges. But, I can't stand this argument for renting. Guess what... one's rent covers all these things too. You think the landlord just foots the bill for all these things? It's just that the renter doesn't see the individual checks go out for these things nor have to hire and schedule the jobs. It is easy being a renter, but you pay all the same things. Don't kid yourself.

I feel it's more a personal and lifestyle choice. If one is single and unsettled, I'd say keep renting no matter what you can afford. If one is single and very certain they're settled, go ahead and buy. Pretty similar for married couples or families. There's more to it than rent vs. buy calculators, IMO.

Also, I feel it's true one tends to rent a lesser place than they would buy. So, priorities come into play... saving/investing, or home is one's castle...
Well, I'm hardly "kidding myself. I'm well aware that that maintenence, repair, proprty taxes, and insurance costs are covered in the rental rates. But, as a renter, I never had to write an 8K check to a roofer. Or a $3,600 check to the guy who just replaced our HAC unit. The point is that the OP's analysis shows that he is losing "a few hundred dollars" by renting rather than owning and my intention is to make sure he knows he will be on the hook for much much more.

chevca
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Re: Do you rent even if you can afford to buy?

Post by chevca » Fri Feb 23, 2018 7:13 am

Then why did you say, homeowners expenses include..... and then say, not so renting?? :wink:

itsgot8
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Re: Do you rent even if you can afford to buy?

Post by itsgot8 » Fri Feb 23, 2018 8:09 am

If I were single, I'd very much still be renting for all the reasons posted already that home ownership entails. The cost and time of maintenance and upkeep puts a damper on the whole ownership thing for me. The time spent on cutting the grass I wish could be spent elsewhere. I look at some of my colleagues who are single and own homes and I can't but think to myself, "WHY?!" I couldn't imagine being single and having to take care of everything on my own.

Renting offers a level of freedom and flexibility that makes it more attractive than owning a home.

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Re: Do you rent even if you can afford to buy?

Post by Spedward » Fri Feb 23, 2018 8:24 am

david wrote:
Thu Feb 22, 2018 2:55 am
I rent because it allows me to rightsize my living situation. If I bought, I'd have to think well ahead and purchase something larger than I currently need in order to accommodate a (potentially) larger family in the future. I'd also feel the need to get something forever home-like. Renting doesn't make me feel that way. I can be more utilitarian.

I rent because of flexibility. If I were to lose my job or if I found a different job or decided that I wanted to live closer to family I could do so without the costs associated with selling a home. I don't have firm plans as of yet where I want to live in 5-10 years and until I do, it doesn't make clear sense for me to own.

If I bought when I moved to the area that I am currently in, I'd likely have done pretty well. Though, I was a single guy with a girlfriend then and now am married (to that girlfriend) with a baby in a slightly larger place. I'm not sure how much ahead I would have been. Not owning has allowed me to get to a situation where I can max retirement accounts and pay off school debt.

So while I could afford to buy, I'm happy I've been renting.
This - We are in the same boat! Minus the school debt and add a second kid to the mix.

There are far more reasons to rent v. buy, and visa versus, than the financial aspects. And although the financial aspects obviously are a big part of the choice, when one really peals back the onion, you may not be comparing apples to apples when you factor in all opportunity cost, and there may very well be many of them.

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Re: Do you rent even if you can afford to buy?

Post by RRAAYY3 » Fri Feb 23, 2018 8:52 am

Maybe I’ll consider a home during the next recession

Otherwise, home prices for what you actually get in my area are ridiculous

If I’m spending half a million on something - I better love 99% of it at least. There’s a lot of “oh we’d just need to tear down several walls, update the kitchen, and finish the basement before we update the exterior” kind of homes that somehow still cost 500K+

It’s insane.

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Re: Do you rent even if you can afford to buy?

Post by jlcnuke » Fri Feb 23, 2018 9:04 am

RRAAYY3 wrote:
Fri Feb 23, 2018 8:52 am
Maybe I’ll consider a home during the next recession

Otherwise, home prices for what you actually get in my area are ridiculous

If I’m spending half a million on something - I better love 99% of it at least. There’s a lot of “oh we’d just need to tear down several walls, update the kitchen, and finish the basement before we update the exterior” kind of homes that somehow still cost 500K+

It’s insane.
That's one of the many reasons I don't live in a HCOL area. My ~2,200 sq ft, 3/2, on 1/2 an acre cost me $167k and was "move in ready" when I bought it. In 9-10 years I'll have it paid off and my housing costs will drop by 75% for the rest of my life. With rare exception, a paid off home costs much less annually than renting a similar home.

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Re: Do you rent even if you can afford to buy?

Post by lostdog » Fri Feb 23, 2018 9:21 am

RRAAYY3 wrote:
Thu Feb 22, 2018 8:06 pm
This thread has been a godsend and excellent reminder of why I may never live the “American Dream”
+1

If I could go back in time we would have never bought our house and continued to rent. We own our hone now. If we move this will be our last home. We will rent moving forward. We're still contemplating selling but the hassle and high costs of selling... :shock:

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