Do you rent even if you can afford to buy?

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

Post by RRAAYY3 » Fri Feb 23, 2018 9:25 am

jlcnuke wrote:
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.
For that price I could have the pride of owning an 800 sq ft condo

Maybe

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

Post by jlcnuke » Fri Feb 23, 2018 1:18 pm

RRAAYY3 wrote:
Fri Feb 23, 2018 9:25 am
jlcnuke wrote:
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.
For that price I could have the pride of owning an 800 sq ft condo if I'm unwilling to consider living in a more affordable location

Maybe
ftfy ;)

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dm200
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Re: Do you rent even if you can afford to buy?

Post by dm200 » Fri Feb 23, 2018 1:42 pm

Markets differ greatly. We purchased our single family home almost 40 years ago - and the value is now (no improvements) 9-10 times what we paid back then. Most of the appreciation is the value of the land (about 6,000 sq ft).

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

Post by webdoyenne » Fri Feb 23, 2018 3:06 pm

This thread has been immensely helpful to me. I reached FRA last year but did not retire. I did cut my hours in half, and I still have all my benefits (including excellent and very inexpensive health insurance and a good 403(b) match). I work remotely, so I don't have to deal with going to an office. I've also picked up a side gig doing editing work for some therapists. So...decent money still coming in, a totally flexible schedule, and I have no plans to quit in the near future. Although who knows what will happen?

I own a house on the other side of town. My son and his fiancee moved into it when I worked out of town for five years, are still living in it, and plan to buy it from me before the year is out. It has a mortgage...a little under $100 K left. Basically I plan to sell them the house for what I paid for it...$150,000. It will need a new roof soon, the HVAC is aging, and the bathrooms and kitchen need updating.

I've been renting a large, lovely condo in a great location with a terrific water view. I'm paying slightly under the market rate for rent. The owner hasn't yet raised my rent; I'm basically a little old lady librarian who pays on time like clockwork and doesn't bug him about small stuff. He plans to hold onto the condo, which belonged to his mother, till his kids are grown, and then sell his house and move into it. (His youngest child is 2...so, not next week. 8-) )

Particularly as a single woman, I really disliked maintaining a house. I love the place I'm renting. But I'm wondering if I should go ahead and buy a condo once my son takes the house off my hands. Was discussing this with a friend, and he said he thought it was a good idea to own a place as "a hedge against inflation." I know I could not afford to buy a place like the one I'm renting now, and I'm not keen on tying up all my money in real estate. I like traveling, dining out, going to ballgames, and doing other stuff with my friends.

Also, it seems to me that the housing market right now in this area is rapidly reaching the bubble stage. Lots of new stuff being built, and the prices are crazy.

My gut feeling is to just keep on renting. But is this a good decision for someone my age?

AA3
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Re: Do you rent even if you can afford to buy?

Post by AA3 » Fri Feb 23, 2018 5:00 pm

dm200 wrote:
Fri Feb 23, 2018 1:42 pm
Markets differ greatly. We purchased our single family home almost 40 years ago - and the value is now (no improvements) 9-10 times what we paid back then. Most of the appreciation is the value of the land (about 6,000 sq ft).
Agree with this statement re: it depends on what market you are talking about.

We bought a house in 2012. It has gone up roughly $500k in value during that time. It has been a terrific investment for us so far. Maintenance has been minimal, we are not at the mercy of a landlord and the tax benefits have been nice. Rents have gone up dramatically during the same time. Friends who could've bought at the time (2012) but didn't definitely regret it.

Where we live, there is a housing shortage that will never be solved. Plenty of local and international buyers. Sure, you can argue the house value might go down. But so too can the stock market. And I can't live in the stock market.

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

Post by thx1138 » Fri Feb 23, 2018 6:54 pm

dm200 wrote:
Fri Feb 23, 2018 1:42 pm
Markets differ greatly. We purchased our single family home almost 40 years ago - and the value is now (no improvements) 9-10 times what we paid back then. Most of the appreciation is the value of the land (about 6,000 sq ft).
Not very impressive really. CPI went up by 3.97 in that forty years. Real return of 2x over forty years is really anemic for an “investment”.

The 40 yr return with dividends reinvested for the SP500 is as of this month 9107% or 91 times what you would have invested in 1978.

Real estate is in general a poor investment barely matching inflation long term. Again it really comes down to preference rather than any particular “right” answer.

But to your larger point, yes market matters a lot! Our house has been pretty much flat over the past eight years while some markets have shot up.

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

Post by MandyT » Fri Feb 23, 2018 7:02 pm

EGARCH wrote:
Thu Feb 22, 2018 2:23 am
In any case, do you rent even if you can afford to buy? Why?
Yes. When I was married, we ran some numbers and it wasn't a slam-dunk either way, financially. Neither one of us was particularly handy so we continued to rent.

I've been divorced for 15+ years and am still a happy renter. I'm a bit of a baby about the temperature being comfortable, and my apartment is small enough that I don't mind paying to keep it 73 F year round but has more than enough space for me. My rent, which has not been raised since 2006, is very low. I like the landlord and the neighborhood.

It's likely that, in 15 or 20 years, I'll move into a Continuing Care Retirement Community or something similar. If I move between now and then, it will likely be into a smaller apartment. One project that I will get around to some day is to start throwing away stuff that I don't want to take with me next time I move.

The fact that I grew up in an apartment in New York City (rent-controlled, I assume, though my parents didn't talk to me about finances) plus the fact that I don't have any kids probably predispose me not to think it's "weird" to rent long-term, even though I can afford a house.

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

Post by Pajamas » Fri Feb 23, 2018 7:14 pm

Here's an article that you might be interested in:

https://www.nytimes.com/2017/05/19/real ... -rent.html

If you are coming up with a difference between renting and buying of only a couple of hundred dollars, perhaps re-examine your assumptions. Maybe the costs of owning are higher than you think or the properties available to rent or buy are not equivalent.

In theory it should be more expensive to rent than own as the landlord makes a profit, all else being equal. Of course, all else is rarely equal.

michaeljc70
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Re: Do you rent even if you can afford to buy?

Post by michaeljc70 » Fri Feb 23, 2018 7:28 pm

Renting isn't for me. I like customizing/updating things. I like feeling stable (let's face it, a landlord can kick you out or jack up your rent typically every year). I'll add that approx. 1/3 of my NW is from gains on homes I owned and sold over the last 18 years (all that I lived in).

If you need flexibility (might move, might need a bigger place due to kids coming, etc.) then I could see renting. Or if you need to save for a downpayment.

What I've seen is, due to ONE downturn in national housing prices, all this talk about renting being so great. When there is a downturn in stocks we don't say everyone should just buy CDs or bonds.

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

Post by halfnine » Sat Feb 24, 2018 5:39 am

TomatoTomahto wrote:
Thu Feb 22, 2018 8:55 am
...
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.....
This rings true. We've accepted similar opportunities because we rented and had a small footprint of belongings. In one case we were presented on opportunity on Tuesday but only if we could move continents and be ready for work by the next Monday. As we have children now most of those days are behind us. However, renting has still allowed us to rightsize our accommodation as the children grew and relocate for schooling.

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

Post by THY4373 » Sat Feb 24, 2018 10:20 am

mpsz wrote:
Thu Feb 22, 2018 8:01 pm
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.
+1 I should have had that on my list for renting. Still downsizing my crap from when I was married/homeowner but should be lean and mean by the end of this year.

TresBelle65
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Re: Do you rent even if you can afford to buy?

Post by TresBelle65 » Sat Feb 24, 2018 12:16 pm

I rent hotel suites by the month, sometimes even only for a week or night depending on where I am- lol. My personal items are mostly in storage. I chose this for several reasons, I am retiring soon and don't know where I will move next when I stop working, I got tired of apartment living, moving around gives me more flexibility to see friends, try new social activities, etc.....I often collect hotel points which then pay for future "rent" :)

One day I'll garden and have a home and no wall to wall carpeting or wall sharing :)

neoptolemus412
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Re: Do you rent even if you can afford to buy?

Post by neoptolemus412 » Sat Feb 24, 2018 12:26 pm

It really depends upon where you live. Here's my personal thoughts. We live in a HCOL area and the idea of a 'starter home' is really non-existent in many HCOL areas. We live on Long Island and for $2,700/month we live in a luxury apartment building with a pool, gym, sauna, underground garage, rooftop lounge, etc. It is right next to the train, so we need 1 car. We started searching for homes and were less than satisfied. For the homes we've seen in our area, a 3 bd/2bath homes starts at $650K. We looked further east for more reasonable prices, but we're still talking $400K. At those prices, we're looking, but being very picky b/c the cost of buying is so much greater that it takes 7-10 years to break even vs. renting.

Also, I'm never a fan of letting the tax tail guide one's decisions, but the new tax bill effectively makes the cash flows very difficult to justify. Property taxes at the low end of our price range is $8K-$12K. Add in personal income taxes and you're at well over $20K in taxes that only $10K are deductible. That means $14k in mortgage interest and the few remaining deductions to make it better than the standard deduction for most families. The cost of purchasing got much higher, I'd argue by 10% higher in my area b/c the property taxes surely are not dropping.

michaeljc70
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Re: Do you rent even if you can afford to buy?

Post by michaeljc70 » Sat Feb 24, 2018 12:36 pm

neoptolemus412 wrote:
Sat Feb 24, 2018 12:26 pm
It really depends upon where you live. Here's my personal thoughts. We live in a HCOL area and the idea of a 'starter home' is really non-existent in many HCOL areas. We live on Long Island and for $2,700/month we live in a luxury apartment building with a pool, gym, sauna, underground garage, rooftop lounge, etc. It is right next to the train, so we need 1 car. We started searching for homes and were less than satisfied. For the homes we've seen in our area, a 3 bd/2bath homes starts at $650K. We looked further east for more reasonable prices, but we're still talking $400K. At those prices, we're looking, but being very picky b/c the cost of buying is so much greater that it takes 7-10 years to break even vs. renting.

Also, I'm never a fan of letting the tax tail guide one's decisions, but the new tax bill effectively makes the cash flows very difficult to justify. Property taxes at the low end of our price range is $8K-$12K. Add in personal income taxes and you're at well over $20K in taxes that only $10K are deductible. That means $14k in mortgage interest and the few remaining deductions to make it better than the standard deduction for most families. The cost of purchasing got much higher, I'd argue by 10% higher in my area b/c the property taxes surely are not dropping.
But are you comparing renting a 1 or 2 bedroom apartment to renting a 3 bed/2 bath house or are you comparing renting a 3/2 house to buying a 3/2 house of comparable quality/size/location?

You also have to take into account rents will go up (who knows at what rate) and hopefully the house will appreciate.

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

Post by EnjoyIt » Sat Feb 24, 2018 1:53 pm

TresBelle65 wrote:
Sat Feb 24, 2018 12:16 pm
I rent hotel suites by the month, sometimes even only for a week or night depending on where I am- lol. My personal items are mostly in storage. I chose this for several reasons, I am retiring soon and don't know where I will move next when I stop working, I got tired of apartment living, moving around gives me more flexibility to see friends, try new social activities, etc.....I often collect hotel points which then pay for future "rent" :)

One day I'll garden and have a home and no wall to wall carpeting or wall sharing :)
I have looked into this option and it appears hotels cost about $200 per night or about $6k a month. Do you find rates are lower when you rent long term such as a month? How do you negotiate those rates?

michaeljc70
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Re: Do you rent even if you can afford to buy?

Post by michaeljc70 » Sat Feb 24, 2018 2:12 pm

EnjoyIt wrote:
Sat Feb 24, 2018 1:53 pm
TresBelle65 wrote:
Sat Feb 24, 2018 12:16 pm
I rent hotel suites by the month, sometimes even only for a week or night depending on where I am- lol. My personal items are mostly in storage. I chose this for several reasons, I am retiring soon and don't know where I will move next when I stop working, I got tired of apartment living, moving around gives me more flexibility to see friends, try new social activities, etc.....I often collect hotel points which then pay for future "rent" :)

One day I'll garden and have a home and no wall to wall carpeting or wall sharing :)
I have looked into this option and it appears hotels cost about $200 per night or about $6k a month. Do you find rates are lower when you rent long term such as a month? How do you negotiate those rates?
When I looked into it due to a potentially large gap in closing dates on homes, I found the extended stay type places ran around $70-$80 a night in the suburbs when booking by the week. I didn't ask if they gave a discount for monthly. I think if you want to be downtown in a big city, it is much more expensive.

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

Post by halfnine » Sat Feb 24, 2018 4:44 pm

EnjoyIt wrote:
Sat Feb 24, 2018 1:53 pm
TresBelle65 wrote:
Sat Feb 24, 2018 12:16 pm
I rent hotel suites by the month, sometimes even only for a week or night depending on where I am- lol. My personal items are mostly in storage. I chose this for several reasons, I am retiring soon and don't know where I will move next when I stop working, I got tired of apartment living, moving around gives me more flexibility to see friends, try new social activities, etc.....I often collect hotel points which then pay for future "rent" :)

One day I'll garden and have a home and no wall to wall carpeting or wall sharing :)
I have looked into this option and it appears hotels cost about $200 per night or about $6k a month. Do you find rates are lower when you rent long term such as a month? How do you negotiate those rates?
I am not TresBelle65 but I essentially did the same thing for about 5 years. Lived out of hotels and belongings were in storage. However, I didn't use hotel chains nor collect hotel points. I looked around and was able to find hotel rooms that had a kitchen and the owner/manager were willing to negotiate extended stay deals. I'd probably pay for about 3-6 months in a given year. The other months were spent traveling for work or traveling abroad. Sometimes the timing wouldn't work out and I might stay with friends, in a hostel, or at a campground for a few days until a room was available. Other times I would have already paid and wouldn't be needing the room and I'd let friends use the room. At the end of the stint I was looking at costs of around $1000/month but that was about 10 years ago.

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

Post by EGARCH » Sun Feb 25, 2018 6:22 pm

Great discussion!

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

Post by webdoyenne » Sun Feb 25, 2018 10:55 pm

<deleted>

liberty53
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Re: Do you rent even if you can afford to buy?

Post by liberty53 » Sun Feb 25, 2018 11:41 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...
Completely wrong. While every landlord would love a net a positive return, the market determines whether a rental property will be profitable or not. If you pay attention to these types of forums you will hear countless stories of accidental landlords that are renting out properties even though they are cash flow negative, wondering whether to hold on and hope property appreciation will bail them out. One can't generalize and say that rent always covers an owners costs. It's simply not true. Trust me - I have been there and it's painful.

aj44
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Re: Do you rent even if you can afford to buy?

Post by aj44 » Mon Feb 26, 2018 12:03 am

I could definitely buy but much prefer renting, I doubt I ever own a home again. I love when something breaks I don't have to deal with it. I much prefer the flexibility over owning and have some great amenities in my building including a workout center and BBQ area. I'm single but I do splurge for a 2 bedroom apt vs a one bedroom as I have a lot of visitors staying overnight.

I find it irritating when people say you are throwing money away renting, I owned a townhome for 14 years and lost a lot on it, I would have been much better off renting during that time.

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

Post by chevca » Mon Feb 26, 2018 11:42 pm

liberty53 wrote:
Sun Feb 25, 2018 11:41 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...
Completely wrong. While every landlord would love a net a positive return, the market determines whether a rental property will be profitable or not. If you pay attention to these types of forums you will hear countless stories of accidental landlords that are renting out properties even though they are cash flow negative, wondering whether to hold on and hope property appreciation will bail them out. One can't generalize and say that rent always covers an owners costs. It's simply not true. Trust me - I have been there and it's painful.
The accidental landlord is a different story. I wasn't talking about them. I have also been there and felt the pain. Towards the end though, before selling it, I was getting the PITI covered by rent and a whopping $100 extra a month. Of course, one repair comes along... or, when I had to replace the roof before selling... yea, there went any sort of extra.

I didn't mean to generalize. But, most professional landlords are getting all those items paid for and them some by the renters and you know it. So no, not "completely wrong".

liberty53
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Re: Do you rent even if you can afford to buy?

Post by liberty53 » Tue Feb 27, 2018 9:27 am

chevca wrote:
Mon Feb 26, 2018 11:42 pm

The accidental landlord is a different story. I wasn't talking about them. I have also been there and felt the pain. Towards the end though, before selling it, I was getting the PITI covered by rent and a whopping $100 extra a month. Of course, one repair comes along... or, when I had to replace the roof before selling... yea, there went any sort of extra.

I didn't mean to generalize. But, most professional landlords are getting all those items paid for and them some by the renters and you know it. So no, not "completely wrong".
I apologize for my brusque comment, especially since you have had to endure the joys of being a landlord too. I was hoping to get the point across that renters can take advantage of the fact that all markets have winners and losers, and renters may have the advantage at times.

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

Post by simplesimon » Sun Mar 04, 2018 4:32 pm

This last nor'easter made me glad I'm a renter...just a little bit.

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

Post by cinsea » Sun Mar 04, 2018 5:53 pm

I hate debt and I hate the limits on my freedom that debt results in. So currently I rent.

I also own a home in another city that I have rented out to someone else. Mortgage on the home is paid off, it is just income now.

I will eventually buy another home where I live now, but not until I have saved up enough of a down payment that the mortgage will be easy to service even if I lose my job for a year. I'd like to put at least a third down on a home that is not bigger than what I need.

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

Post by denovo » Sun Mar 04, 2018 6:17 pm

cinsea wrote:
Sun Mar 04, 2018 5:53 pm
I hate debt and I hate the limits on my freedom that debt results in. So currently I rent.

If you rent your freedom is limited by your ability to pay your rent. If you don't,you will be evicted.

If you buy a home with mortgage debt, the bank will evict if you don't make your mortgage payments.

It ultimately is not as different as you think it is.
"Don't trust everything you read on the Internet"- Abraham Lincoln

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

Post by cinsea » Sun Mar 04, 2018 7:29 pm

denovo wrote:
Sun Mar 04, 2018 6:17 pm
If you rent your freedom is limited by your ability to pay your rent. If you don't,you will be evicted.
There's a huge difference in my opinion:

1. A lease is for a shorter duration. I have ~1 yr of emergency savings, that's longer than the duration of my lease
2. A lease is typically for a lot lower monthly payment than a mortgage, unless you put down a substantial amount (as I mentioned I plan to)
3. Defaulting on a mortgage and facing foreclosure is much more financially devastating than the penalties for breaking a lease early (comp landlord a couple months rent until a new tenant can be found) and even if you get out of the mortgage through a fast sale you're looking at tens of thousands in closing costs

I believe in home ownership, and as I mentioned, I already own a home in my previous city--which rather than sell, I decided to rent out to someone else. I will buy a home again in my new city, but only once I've amassed enough savings that I can make the mortgage payment (and other fees) less than what I pay today in rent. That's going to take a LARGE down payment.
Last edited by cinsea on Sun Mar 04, 2018 7:38 pm, edited 2 times in total.

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

Post by ChowYunPhat » Sun Mar 04, 2018 7:37 pm

I kind of feel like the outlier on the thread, but we have been home owners since marriage of 11 years. My employer absorbed the transaction costs in our latest move, on both selling our old house and buying the new one so the math works a bit better. My wife and I also enjoy home renovation, landscaping and gardening as hobbies so we can deal with maintenance and upkeep through a difference lens than most people. This is our 5th home, and we've seen mixed results on residential real estate as an investment. However, we buy below our means, and enjoy the control and ability to change our living space at will without asking other owners for approval. Are we better off having owned vs. rented over the past 11 years, that's a tough one to call. But we don't regret any of the decisions.
A wise man and his money are friends forever...

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

Post by cinsea » Sun Mar 04, 2018 7:42 pm

Buying below your means is the key! I did buy my home in my previous city for exactly the reasons you outlined--control of my own living space. And that's why eventually I will buy again. But I don't want a monthly payment that would become scary if I lost my job. I want a monthly payment that I could service from emergency savings for a reasonable duration of time in that case. Which speaks to your point about buying below your means.

I guess what's complicating my case is I'm not selling the prior home, I'm accumulating assets and planning to buy a 2nd home.

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VictoriaF
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Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

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

Post by VictoriaF » Sun Mar 04, 2018 7:53 pm

cinsea wrote:
Sun Mar 04, 2018 7:29 pm
denovo wrote:
Sun Mar 04, 2018 6:17 pm
If you rent your freedom is limited by your ability to pay your rent. If you don't,you will be evicted.
There's a huge difference in my opinion:

1. A lease is for a shorter duration. I have ~1 yr of emergency savings, that's longer than the duration of my lease
2. A lease is typically for a lot lower monthly payment than a mortgage, unless you put down a substantial amount (as I mentioned I plan to)
3. Defaulting on a mortgage and facing foreclosure is much more financially devastating than the penalties for breaking a lease early (comp landlord a couple months rent until a new tenant can be found) and even if you get out of the mortgage through a fast sale you're looking at tens of thousands in closing costs
There is another huge difference:

If you have money and your landlord wants you to leave, you can find another place to rent. If your landlord raises rent, you can move to a cheaper place. If necessary, you can move farther away from your job. If you are retired, you can live anywhere in the U.S. and in the world.

Houses, on the other hand, may become devalued or get destroyed in a variety of circumstances. Fires, floods, hurricanes, earthquakes, landslides, radiation, pollution of underground waters, contamination of drinking water, and acts of terrorism can destroy the equity even if the house is insured. Most of these are rare events, but they happen all the time to someone. (I mentioned terrorism because right after September 11, 2001, the prices for lower Manhattan apartments have dropped significantly.)

Even if the house is not destroyed, various normal events may affect its value: a neighbor creating excessive noise or infringing on your property, new construction of the type "not in my backyard," a new highway nearby, a new route for landing airplanes, the state raising taxes, the local municipality reducing services, etc. When events like these happen, selling the house and moving out becomes very difficult. By contrast, a renter can move our within 12 months.

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

TresBelle65
Posts: 147
Joined: Sun Apr 12, 2015 2:44 pm

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

Post by TresBelle65 » Sun Mar 18, 2018 11:53 am


I have looked into this option and it appears hotels cost about $200 per night or about $6k a month. Do you find rates are lower when you rent long term such as a month? How do you negotiate those rates?


If you contact the hotel directly, the management will often negotiate long term rates that are much more favorable. Further, depending on location and length, taxes may be waived. Further, prudent use of hotel programs and promotions can substantially reduce the per night cost.

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

Post by randomizer » Sun Mar 18, 2018 12:00 pm

I rented for the first four decades of my life. Finally ready to "settle", and the price being right, bought a house.
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MathWizard
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Joined: Tue Jul 26, 2011 1:35 pm

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

Post by MathWizard » Sun Mar 18, 2018 12:33 pm

We bought a house after I was out of grad school and had kids, but I advised my sons to rent until they have stable employment and probably until the have a family of their own.

Once you have a spouse and kids, it's much harder to move anyway.

Owning was better for us with kids, because bought a fixer upper next to an elementary school in a good single family neighborhood and in a highly rated public school district.

My kids were more important than the house I lived in. My wife and I have made lots of improvements over the years, most done with our own labor, which saved a great deal of money.

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