Why do Bogleheads buy houses?

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steadyeddy
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Why do Bogleheads buy houses?

Post by steadyeddy »

I have read a lot of rent vs. buy threads in the archives, but haven't found a compelling answer:

Why do Bogleheads, so concerned with minimizing expenses and building wealth, buy and (generally) recommend buying homes?

I ask this because it seems to me that homes make a terrible long-term investment (unless, perhaps, they are highly leveraged, but that is simply silly). My conclusion is that I must be making a very gray issue into something black and white, but I need some help seeing why it is gray.

And don't get me wrong, I understand when so many of you say, "It's a lifestyle choice, not an investment." But you all make a great deal of significant lifestyle choices in the name of building wealth, and home ownership is a costly enough lifestyle choice, I can't understand why Bogleheads haven't made life-long renting a community ethic.
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Post by alvinsch »

Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier. I prefer not having to listen to neighbors bodily functions but really enjoy being able to sit out in the privacy of our own yard.

Being a Boglehead doesn't mean savings above all else but rather being smart about investing so one eventually has the financial freedom to spend on the things that are most important to you. I agree that home ownership from a purely economical standpoint doesn't necessarily make sense but I have no interest in giving it up.

Just my view.
- Al
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Post by stjoe56 »

It makes my spouse happy. javascript:emoticon(':)')And if my spouse is not happy, then no one is happy.

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Post by steadyeddy »

alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier. I prefer not having to listen to neighbors bodily functions but really enjoy being able to sit out in the privacy of our own yard.
Am I wrong in thinking it would be easy to rent a home very comparable to your current home in order to enjoy these benefits?
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Post by AlohaJoe »

alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier.
What does this have to do with anything? The style of housing is orthogonal to how you pay for it.

Renting is not the same thing as Apartment Living.

My entire life growing up I lived in single family homes and we rented every single one of them. Now most of my friends "own" and they have upstairs and downstairs neighbors.
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Post by edge »

Owning a home over a long period of time is cheaper compared to rent, due to inflation.

However, few people live in their homes over long periods of time.
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Post by traineeinvestor »

The question of whether or not home ownership is a good idea from a financial perspective gets raised a lot on various discussion boards and blogs. As far as I can tell there is no uniform answer to this question - sometimes home ownership will be a good investment and sometimes it won't be. If you buy the right house at the right price at the right time you can make a good return ( often tax sheltered for those who live in high tax countries) or, at the very least, find that your costs of ownership are lower than the cost of renting. Pay too much for your home and the reverse can be true.

If this sounds like market timing.....it is.

There are (at least) two other considerations.

The first (whcih I suspect if of limited relevance to people on this forum) is that paying down a mortgage is a form of forced savings. For those who lack the discipline to save money, home equity often represents a significant part of their wealth.

The second is the feel good factor. Many people find a sense of security in owning their own home. Once the mortgage has been paid off (or reached very low levels), I can understand this although it is largely irrelevant to the financial aspects.

At various times I have been both a renter and an owner and, from both a financial and an emotional perspective, have no regrets about either.
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Re: Why do Bogleheads buy houses?

Post by Valuethinker »

steadyeddy wrote:I have read a lot of rent vs. buy threads in the archives, but haven't found a compelling answer:

Why do Bogleheads, so concerned with minimizing expenses and building wealth, buy and (generally) recommend buying homes?

I ask this because it seems to me that homes make a terrible long-term investment (unless, perhaps, they are highly leveraged, but that is simply silly). My conclusion is that I must be making a very gray issue into something black and white, but I need some help seeing why it is gray.

And don't get me wrong, I understand when so many of you say, "It's a lifestyle choice, not an investment." But you all make a great deal of significant lifestyle choices in the name of building wealth, and home ownership is a costly enough lifestyle choice, I can't understand why Bogleheads haven't made life-long renting a community ethic.
Not sure about the US but in the UK there is a massive tax subsidy to home ownership:

- property taxes are 'banded' and once you get above a certain level, you pay the same property tax as all other properties (about USD $500k in value, roughly)

- principal residence is capital gains tax exempt (for life)

This is a huge subsidy to home ownership.

Also zoning is tight, tight, tight. UK does not produce as many homes in any given year, as there is demand.
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Post by MWCA »

alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier. I prefer not having to listen to neighbors bodily functions but really enjoy being able to sit out in the privacy of our own yard.

Being a Boglehead doesn't mean savings above all else but rather being smart about investing so one eventually has the financial freedom to spend on the things that are most important to you. I agree that home ownership from a purely economical standpoint doesn't necessarily make sense but I have no interest in giving it up.

Just my view.
- Al
Thats absurd. You can live next to neighbors in a house that do the same thing.
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Post by MossySF »

I'm in contract to buy (probably will close next week) and the answer to why is pretty simple -- the numbers now make sense. Full PITI after tax deductions lower than rent. Prices at or lower than pre-bubble Price/Rent ratios. $8000 first-time homeowner tax credit.

Everybody needs to run the numbers for themselves.
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Post by rich »

Let's be realistic, real estate has turned out to be a heads the investor wins tails the taxpayer loses type of investment in many, albeit not all, cases. It has provided a vehicle to shift the risk of high leverage from the investor to others. Whether it will remain that way, no one knows.
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Post by linuxizer »

We own because it is nearly impossible to rent the equivalently kept-up house around here for anywhere near what we pay in mortgage (our mortgage is less than our rent was).

Given that we own, we've shied away from TIPS, CCFs, and other assets that do well in inflation. Figure the mortgage plus house is many times our stock portfolio and therefore we're already more than covered should massive inflation happen.
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Post by Mike Willis »

why do you buy anything? you can rent most things in life, cars, furniture, clothing, sports equipment, cameras, etc.. people buy because they want to -own- not just because they want to use something.. there are lots of things people own that they use infrequently enough that renting would be less expensive but its nice to own certain things. my parents bought their house and it hasn't appreciated much but it certainly served its purpose for 35 years, its been paid off for 25 years, and i doubt there was anywhere they could have rented for that period of time. my parents also bought a cottage and land on the beach for $5,000 at the same time, they were teachers so we went there every summer for six weeks (again, vs renting). its worth about $500,000 now and while we never revisit our home we always visit our cottage every year and we wouldn't sell it for five million dollars. owning can have many benefits
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Re: Why do Bogleheads buy houses?

Post by rec7 »

steadyeddy wrote:I have read a lot of rent vs. buy threads in the archives, but haven't found a compelling answer:

Why do Bogleheads, so concerned with minimizing expenses and building wealth, buy and (generally) recommend buying homes?

I ask this because it seems to me that homes make a terrible long-term investment (unless, perhaps, they are highly leveraged, but that is simply silly). My conclusion is that I must be making a very gray issue into something black and white, but I need some help seeing why it is gray.

And don't get me wrong, I understand when so many of you say, "It's a lifestyle choice, not an investment." But you all make a great deal of significant lifestyle choices in the name of building wealth, and home ownership is a costly enough lifestyle choice, I can't understand why Bogleheads haven't made life-long renting a community ethic.
I am guessing that many bogleheads live in low cost living areas. Remember these are people that look for low expense index funds.
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Post by livesoft »

steadyeddy wrote:...
Am I wrong in thinking it would be easy to rent a home very comparable to your current home in order to enjoy these benefits?
We rented for many many years and did not buy a home until we were in our late thirties after moving to another state where a new job was located.

After a year or two the family next door moved out and rented out their house for 2.5 times what our mortgage payment was. So basically yes, you are wrong in your thinking.

Thus it depends on the location and the "deal" you get on housing. I think sometimes renting is better; sometimes buying is better. You should run the numbers. Sometimes your emotions get the better of you as well

And leveraging the purchase of a home is not necessarily silly. You do have to plan ahead. If your fixed rate mortgage is 4.5% and you can purchase a CD paying 5% interest, do you see that the mortgage interest is kinda paid by your investments?
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Post by Boglenaut »

For diversification. After we have accumulated $4M, $200K in direct home ownership gives us 5% exposure to another asset class.














(I am joking, just to be clear).
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Post by nisiprius »

IMHO Bogleheads philosophy relates to investment, not to spending!

The house you live in is not an investment. It's shelter. If you own it, it's a prized personal possession. And you evaluate it in non-monetary terms, like any other prized personal possession.

My wife and do tend to be frugal. But, by golly, if we want a house, or an Technivorm coffeemaker, or a full-grown tree transplanted onto our property because we want it now, we'll do it if we want to and it's nobody's business but ours. I'll spend my money any darn way I please, thank you.

Why did we buy a house? Because we wanted to own a house, that's why.

"Investment" talk is just something real estate brokers say to break down your sales resistance. Salesmen do it for any expensive product you're reluctant to buy. Is a diamond ring an "investment?" Don't be silly; the market for them is illiquid and the bid/asked spreads are huge. The same thing goes for luxury cars or boats or college educations. They're not investments. Not unless you're a Chicago School theorist who's ready to monetize babies, the moon, and hebben' the whole day long.

Now, some years ago my wife and I considered buying the house next door as a rental property. That was a house as an investment. (And the numbers didn't add up, and we didn't buy it).
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Post by DiscoBunny1979 »

I live in Southern California and the reasons I buy a house to live in are:

1) I have pets. Most rentals do not allow pets, and if they do they don't allow the types of dogs I have - Akitas.

2) Buying allows one to change important details....like fencing for security, or windows for energy efficiency. With a rental property, you can not change things without the "owner's" permission. If I want to paint a room in my house black because I process film the old way - I can do it without asking first.

3) Property bought at the right price will always have value to someone. The key is to buy below market, a diamond in rough, not the largest house in the neighorhood, but one that has good bones to work with, curb appeal and hopefully a good view.

4) If renting, the renter has no control over if the property goes up for sale or if the contract for renting is not renewed by the owner. A home owner has control over where he lives as long as mortgage payments are made, health is good, and no warrants for arrest.

5) Being a home owner with a mortgage can improve one's credit score by showing on-time monthly payments over a period of years.
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Post by Qtman »

To paraphrase stjoe56, my wife wanted one. I'd be happy in a travel trailer - but domestic harmony is 'priceless'.
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Post by burt »

edge wrote:Owning a home over a long period of time is cheaper compared to rent, due to inflation.

However, few people live in their homes over long periods of time.
Very good point. Started a new job in 2007. Needed to sell the home we were in for 5 years. Had a heck of a time selling the house (at a loss). Felt like a very large anchor.

Times have changed. Today, who knows how long they are able to stay in a job or home. After 25 years of home ownership we are now renting. Feels good.

burt
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Post by Helena_Handbasket »

An apartment is never truly yours and is never truly private because other person(s) beside you have a key to it. Control of my personal space and privacy means a lot to me, therefore I own my home.
Last edited by Helena_Handbasket on Mon May 25, 2009 9:39 am, edited 1 time in total.
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Post by woof755 »

no brainer for me.

Tens of thousands of dollars I could have given away in rent is now equity in something with value. Plus, tax break on the interest. Plus, if I rent a house and someone decides to sell it, I have to move on their time frame.

All pros, few cons.
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Post by matt »

Pretty simple. If you own it, you can do whatever you want with it. If you are a renter, the owner is not going to spend money for your personal wishes, but only if it makes a good investment.

Need another bathroom? Build it. Want to get rid of that old carpet? Rip it out.

Also, if you don't own the house, you can get kicked out regardless of your good standing. Either the owner doesn't want to rent it anymore, sells it, gets foreclosed, etc. It can't really be your dream home if someone can toss you out.
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Re: Why do Bogleheads buy houses?

Post by ascenzm »

steadyeddy wrote:I have read a lot of rent vs. buy threads in the archives, but haven't found a compelling answer:

Why do Bogleheads, so concerned with minimizing expenses and building wealth, buy and (generally) recommend buying homes?

I ask this because it seems to me that homes make a terrible long-term investment (unless, perhaps, they are highly leveraged, but that is simply silly). My conclusion is that I must be making a very gray issue into something black and white, but I need some help seeing why it is gray.

And don't get me wrong, I understand when so many of you say, "It's a lifestyle choice, not an investment." But you all make a great deal of significant lifestyle choices in the name of building wealth, and home ownership is a costly enough lifestyle choice, I can't understand why Bogleheads haven't made life-long renting a community ethic.
We buy residential real estate because it's an investment whose value will always go up at a rate exceeding inflation. :D They aren't making any more land.

Just kidding since I believe housing is an expense to minimized (the metric where a house should no cost more than 3x one's annual salary is a good metric to follow IMHO). IIRC, it's been shown that in most places, housing values roughly track the rate of inflation.

If you don't like adjacent neighbors your own house is a good idea. If you like to do your own maintenance and not worry about waiting for a landlord to get around to fixing that leaky faucet, owning your own house is a good idea.

Mike
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Post by Petrocelli »

I bought my first house in 1987 with a $25,000 down payment. I sold it in 1989 and made a $160,000 profit. I then bought a different house for $625,000, using the profit as a down payment. That house has over $1,000,000 in equity in it, and it is all traceable back to a $25,000 investment.

According to Zillow.com, over the past 10 years, my house has increased in value 161%.

Moreover, it would cost about twice my mortgage payment to rent this house. In a few years, I will be living rent free.

If you buy the smallest house in the best neighborhood you can afford, you can make a lot of money in real estate.
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Post by ed1837 »

livesoft wrote:
steadyeddy wrote:...
Am I wrong in thinking it would be easy to rent a home very comparable to your current home in order to enjoy these benefits?
After a year or two the family next door moved out and rented out their house for 2.5 times what our mortgage payment was. So basically yes, you are wrong in your thinking.
You didn't state how much money you put down on your house. Without knowing this, the analysis is incomplete. For example, to consider an extreme example, if I put 95% down and have a very small mortgage payment, then any amount of rent paid compared to that mortgage payment will seem very high.

The concept of capitalization rate was formed for this very reason.

The renters also don't pay property tax, maintenance, (some) property insurance, etc. If you factor all of these things in, I doubt that the renters will be at 2.5 times the true cost of owning your home.
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Post by alvinsch »

steadyeddy wrote:
alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier. I prefer not having to listen to neighbors bodily functions but really enjoy being able to sit out in the privacy of our own yard.
Am I wrong in thinking it would be easy to rent a home very comparable to your current home in order to enjoy these benefits?
Yes, the noisy neighbor is more likely with an apartment. But we've also rented houses in our lifetimes and neither was very enjoyable as they have additional concerns.

One is always under the fear that you will be given notice at an inconvenient time because the owners want to re-occupy or have sold the property to someone else to reoccupy. When you have lots of household goods and little time, every move can be a $5k-$10k additional cost.

We found the houses available for rent were always few and far between and we never found anything close to what we would really want to live in for any extended amount of time. It was always a big compromise on living conditions and house type.

With a house we had a whole bunch of additional requirements, regarding care of everything subject to their interpretation, and other rules. With notice they could "visit" and interrupt your privacy.

While some people might not be bothered by any of this, my privacy and security are a big deal and I hated it. The renting was always cheaper but never worth the cost. We only did it when we weren't sure how long we wanted to stay in an area or had gone to a new area of the country and didn't have any idea where we really wanted to live.

So glad as a dutiful boglehead to never have to be a renter again (except maybe for the nursing home). Sorry others can't seem to understand the difference.

- Al
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Post by alvinsch »

MWCA wrote:
alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier. I prefer not having to listen to neighbors bodily functions but really enjoy being able to sit out in the privacy of our own yard.

Being a Boglehead doesn't mean savings above all else but rather being smart about investing so one eventually has the financial freedom to spend on the things that are most important to you. I agree that home ownership from a purely economical standpoint doesn't necessarily make sense but I have no interest in giving it up.

Just my view.
- Al
Thats absurd. You can live next to neighbors in a house that do the same thing.
That's absurd. I've never heard my neighbors peeing every morning when living in a house. We never had any privacy in our yard except for the houses we've owned all had it.

- Al
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Post by alvinsch »

AlohaJoe wrote:
alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier.
What does this have to do with anything? The style of housing is orthogonal to how you pay for it.

Renting is not the same thing as Apartment Living.

My entire life growing up I lived in single family homes and we rented every single one of them. Now most of my friends "own" and they have upstairs and downstairs neighbors.
I'd never be stupid enough to buy a house with upstairs or downstairs neighbors. I assume your "friends" own a condo, townhouse or other multi-plex. Not for me. See my other post for our house renting experiences. Not for me.

- Al
Last edited by alvinsch on Mon May 25, 2009 10:39 am, edited 1 time in total.
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Post by mickeyd »

As others have noted, I own my house because I need a place to keep my stuff out of the rain and a place to flop at night. An apartment would also work, but in the long run an apartment would have cost more. Apartment owners have the same expenses that homeowners have (taxes, maintenance, etc) and they need to make a profit.

I've owned about a half dozen homes over the years and I have sold most for a gain, but not all. I did not buy them so that I could make money, that was just a bonus.
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Post by Opponent Process »

I think you're unintentionally requesting and getting a lot of survivorship biased stories here. it's pretty obvious that this topic cannot be generalized. each individual has to run their own rent vs. buy calculation in their area, and factor in other lifestyle concerns.
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Post by 'Ponine »

We lived in a 500 sq. ft. one bedroom apartment for two years which was just about the cheapest we could find in the area we wanted to live in. Unfortunately, that came with a bar downstairs and an incompetent maintenance. This allowed us to keep our rent the same for two years (and into our third year- which we almost agreed to before another major maintenance issue arose) and while we could live with these issues for a while they eventually became unbearable. It was literally to the point where I would have preferred the flexibility of being able to call a professional to fix the issues myself, even if I had to pay for it. We did consider repair/deduct but didn’t want to deal with the hassle – we just wanted to move.

When we started looking around we realized we’d be increasing our rent by about 20% going somewhere with a better track record. While home prices in the same are were astronomical we were able to buy a two bedroom 1500 sq. ft. house about 20 blocks away for a reasonable price. It’s the same distance to work, near public transit (we don’t have cars) and a short walk to two “hot” neighborhoods in the city and several parks. After the tax benefits, we pay about the same for mortgage, taxes and insurance as we would have if we rented another 500 sq. foot place. We have some work to do to fix it up but, as is, it’s just as livable as our old apartment and we’re in control of the repairs. We also got a small credit from the seller for some repairs we knew we’d need. So, so far, we haven’t had any out of pocket repair costs. Two years in we’re very happy here and I’m hoping we’ll stay at least another 6-7 years.

Could we rent somewhere in the same area for less? It’s possible – but I imagine we’d have the same problem with maintenance that we had before.
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Post by BigFoot48 »

We bought our first house for $29,500 in 1975. We are now in our 9th worth about $400,000, and this one (and the 8th) is mortgage-free. So I pay about $3,000/yr in property taxes, and another $2,000 in repairs and insurance, for a total of $5,000/yr. If I were renting a similar house it might be $24,000 a year.

Being retired, that's money I don't have to spend, and I have an asset that I will someday sell to finance our end-of-life living quite nicely, I hope.
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Post by Triple digit golfer »

alvinsch wrote:
AlohaJoe wrote:
alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier.
What does this have to do with anything? The style of housing is orthogonal to how you pay for it.

Renting is not the same thing as Apartment Living.

My entire life growing up I lived in single family homes and we rented every single one of them. Now most of my friends "own" and they have upstairs and downstairs neighbors.
I'd never be stupid enough to buy a house with upstairs or downstairs neighbors. I assume your "friends" own a condo, townhouse or other multi-plex. Not for me. See my other post for our house renting experiences. Not for me.

- Al
I guess people who buy townhouses or condos because they can't afford a house are stupid.
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Post by alvinsch »

Triple digit golfer wrote:
alvinsch wrote:
AlohaJoe wrote:
alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier.
What does this have to do with anything? The style of housing is orthogonal to how you pay for it.

Renting is not the same thing as Apartment Living.

My entire life growing up I lived in single family homes and we rented every single one of them. Now most of my friends "own" and they have upstairs and downstairs neighbors.
I'd never be stupid enough to buy a house with upstairs or downstairs neighbors. I assume your "friends" own a condo, townhouse or other multi-plex. Not for me. See my other post for our house renting experiences. Not for me.

- Al
I guess people who buy townhouses or condos because they can't afford a house are stupid.
That seems like a really harsh view of people in my opinion but you have a right to your opinion.

It would be stupid for me to essentially buy an apartment (condo, townhouse, etc.), and take on all the risk of ownership when the downsides are so negative for me. Others obviously value things differently.

- Al
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Post by Triple digit golfer »

alvinsch wrote:
Triple digit golfer wrote:
alvinsch wrote:
AlohaJoe wrote:
alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier.
What does this have to do with anything? The style of housing is orthogonal to how you pay for it.

Renting is not the same thing as Apartment Living.

My entire life growing up I lived in single family homes and we rented every single one of them. Now most of my friends "own" and they have upstairs and downstairs neighbors.
I'd never be stupid enough to buy a house with upstairs or downstairs neighbors. I assume your "friends" own a condo, townhouse or other multi-plex. Not for me. See my other post for our house renting experiences. Not for me.

- Al
I guess people who buy townhouses or condos because they can't afford a house are stupid.
That seems like a really harsh view of people in my opinion but you have a right to your opinion.

It would be stupid for me to essentially buy an apartment (condo, townhouse, etc.), and take on all the risk of ownership when the downsides are so negative for me. Others obviously value things differently.

- Al
So what is your alternative to those who can't afford houses, but could afford a condo, townhouse, or to rent an apartment?
cheapskate
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Re: Why do Bogleheads buy houses?

Post by cheapskate »

steadyeddy wrote: Why do Bogleheads, so concerned with minimizing expenses and building wealth, buy and (generally) recommend buying homes?

I ask this because it seems to me that homes make a terrible long-term investment (unless, perhaps, they are highly leveraged, but that is simply silly). My conclusion is that I must be making a very gray issue into something black and white, but I need some help seeing why it is gray.

And don't get me wrong, I understand when so many of you say, "It's a lifestyle choice, not an investment." But you all make a great deal of significant lifestyle choices in the name of building wealth, and home ownership is a costly enough lifestyle choice, I can't understand why Bogleheads haven't made life-long renting a community ethic.
This is a very personal thing.

I live in an area where the home ownership/renting ratio is about 2.5x-3x. I rent a 4BR/2BA SFH for $2100. This house, if put on the market today will fetch about 850K-900K (after some relatively minor remodelling).

I have beeen renting for 20 years now. Early on because I did not have enough money for a downpayment (would've needed 60K-80K to buy even a modest home in the early part of my working life, which I didn't have). Now I can buy a home cash down, but the valuations make no sense to me (and I don't buy the EMH when applied to real estate).

I think it boils down to how you weight the intangible benefits of home ownership. For some people, the intangible benefits are worth a lot (even to the point of being saddled with a mortgage that makes them a wage slave for the next 30 years). For people like me, the intangible benefits are worthless. I much prefer to live as a debt free, stress free renter. I would buy a home if/when the ownership/rent ratio is close to 1. It does not look like that will happen where I live in my lifetime (Silicon Valley), so when I retire, I just plan to move to an area where it is close to 1 or I'll be a lifelong renter.
saurabhec
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Re: Why do Bogleheads buy houses?

Post by saurabhec »

Valuethinker wrote: Not sure about the US but in the UK there is a massive tax subsidy to home ownership:

- property taxes are 'banded' and once you get above a certain level, you pay the same property tax as all other properties (about USD $500k in value, roughly)

- principal residence is capital gains tax exempt (for life)

This is a huge subsidy to home ownership.
There is a mortgage interest exemption in the US, but ends up being roughly the same as the property taxes incurred (in at least my situation), so that is a wash. In the US property taxes are set by the local government, but are usually a % of home value, and not subject to a ceiling. There are also large transaction costs on a home buy-and-sell roundtrip, probably 10% when all is said and done.

I think the one thing that helps homeownership is the fact that it is the one asset you can leverage cheaply, and capital gains from sale of primary residence can be largely tax-exempt in many cases.

So I think a leveraged home purchase might make sense for a lot of folks, but don't understand the folks who insist in purchasing it for cash. I wouldn't like to see a huge portion of my financial assets tied up in illiquid property that appreciates at inflation rates over the long run.
Last edited by saurabhec on Mon May 25, 2009 1:19 pm, edited 1 time in total.
MWCA
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Post by MWCA »

alvinsch wrote:
Triple digit golfer wrote:
alvinsch wrote:
AlohaJoe wrote:
alvinsch wrote:Quality of life. Nothing like apartment living where the upstairs neighbor is an early riser and the downstairs neighbor is a late partier.
What does this have to do with anything? The style of housing is orthogonal to how you pay for it.

Renting is not the same thing as Apartment Living.

My entire life growing up I lived in single family homes and we rented every single one of them. Now most of my friends "own" and they have upstairs and downstairs neighbors.
I'd never be stupid enough to buy a house with upstairs or downstairs neighbors. I assume your "friends" own a condo, townhouse or other multi-plex. Not for me. See my other post for our house renting experiences. Not for me.

- Al
I guess people who buy townhouses or condos because they can't afford a house are stupid.
That seems like a really harsh view of people in my opinion but you have a right to your opinion.

It would be stupid for me to essentially buy an apartment (condo, townhouse, etc.), and take on all the risk of ownership when the downsides are so negative for me. Others obviously value things differently.

- Al
He was just using the same faulty logic that you seem to be using :)
CaptMidnight
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Post by CaptMidnight »

In my experience, people simply want to own houses. Despite the reasons they give, I think it is mostly status or membership in the middle class. They usually do not have an analytical basis for the expectation that they will be better off financially, but they believe it anyway, even now. Of course, throughout most of the post-war period home ownership did generally provide a financial benefit.

Anyway, I bought years ago on the same basis and did better in the end than I had expected. But now that I understand how important the financial basis of decisions is, I wouldn't buy and I wouldn't recommend it.

For example, I just did some planning with a friend who is retiring now and wants a house. Under conservative assumptions his annual consumption level will decline for life by 5.6% if he buys the house he wants. I am sure he'll buy it anyway. His money is in CDs. If I told him he could increase his return on them from 3% to 8.6% after tax, he would be ecstatic. But he won't give up home ownership on the same basis.
The history of thought and culture is ... a changing pattern of great liberating ideas that inevitably turn in suffocating straightjackets... | --Isaiah Berlin
rr2
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Post by rr2 »

From youtube, here's George Carlin on stuff

http://www.youtube.com/watch?v=MvgN5gCuLac
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Post by jh »

...
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tarnation
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Post by tarnation »

nisiprius wrote: But, by golly, if we want a ...Technivorm coffeemaker..
Yeah! I'm not the only one here :)
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DiscoBunny1979
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Post by DiscoBunny1979 »

[quote="CaptMidnight"]In my experience, people simply want to own houses. Despite the reasons they give, I think it is mostly status or membership in the middle class. They usually do not have an analytical basis for the expectation that they will be better off financially, but they believe it anyway, even now. Of course, throughout most of the post-war period home ownership did generally provide a financial benefit.
quote]
--------

I didn't list Status as a reason, but I suppose that that is another reason. I like having a garden, a house with curb appeal and enjoy folks that pass by admiring the front of the house.

But the other thing that hasn't been discussed, is that in California, one can Homestead their house. This Homestead filing allows for someone to claim $50,000+ in equity in their house as something creditors can't touch in case of a bankruptcy.

Another reason to own a house in California is that if one believes that due to medical issues, they will have medical bills that could be covered under MediCal, the state run welfare medical system for those with low means, a person can own a house outright . . . it doesn't matter the value . . . and still qualify for Medical, providing all taxable financial holdings are limited.

Finally, as other have pointed out, the need to pay property taxes can be high. However, certain California counties Grandfather original cost basis when determining property taxes owed. For instance, if you move within the same county. . .House #1 was bought at $100K and sold for $180K and House #2 was bought for $175K . . . the property taxes could be based on the $100K, not the $175K if you live in one of those counties that do that.
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Post by alvinsch »

Triple digit golfer wrote:
alvinsch wrote:
Triple digit golfer wrote:
alvinsch wrote:
AlohaJoe wrote: What does this have to do with anything? The style of housing is orthogonal to how you pay for it.

Renting is not the same thing as Apartment Living.

My entire life growing up I lived in single family homes and we rented every single one of them. Now most of my friends "own" and they have upstairs and downstairs neighbors.
I'd never be stupid enough to buy a house with upstairs or downstairs neighbors. I assume your "friends" own a condo, townhouse or other multi-plex. Not for me. See my other post for our house renting experiences. Not for me.

- Al
I guess people who buy townhouses or condos because they can't afford a house are stupid.
That seems like a really harsh view of people in my opinion but you have a right to your opinion.

It would be stupid for me to essentially buy an apartment (condo, townhouse, etc.), and take on all the risk of ownership when the downsides are so negative for me. Others obviously value things differently.

- Al
So what is your alternative to those who can't afford houses, but could afford a condo, townhouse, or to rent an apartment?
Huh? I think they should buy condo's, townhouse or rent if that's the right decision for them. You implied they are stupid for doing so, so what would you have them do?

- Al
Triple digit golfer
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Post by Triple digit golfer »

alvinsch wrote:
Triple digit golfer wrote:
alvinsch wrote:
Triple digit golfer wrote:
alvinsch wrote: I'd never be stupid enough to buy a house with upstairs or downstairs neighbors. I assume your "friends" own a condo, townhouse or other multi-plex. Not for me. See my other post for our house renting experiences. Not for me.

- Al
I guess people who buy townhouses or condos because they can't afford a house are stupid.
That seems like a really harsh view of people in my opinion but you have a right to your opinion.

It would be stupid for me to essentially buy an apartment (condo, townhouse, etc.), and take on all the risk of ownership when the downsides are so negative for me. Others obviously value things differently.

- Al
So what is your alternative to those who can't afford houses, but could afford a condo, townhouse, or to rent an apartment?
Huh? I think they should buy condo's, townhouse or rent if that's the right decision for them. You implied they are stupid for doing so, so what would you have them do?

- Al
Then what did you mean by:
I'd never be stupid enough to buy a house with upstairs or downstairs neighbors. I assume your "friends" own a condo, townhouse or other multi-plex. Not for me. See my other post for our house renting experiences. Not for me.
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VictoriaF
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Post by VictoriaF »

Victoria
Last edited by VictoriaF on Wed Feb 23, 2011 2:27 pm, edited 1 time in total.
chaz
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Post by chaz »

Renting is OK for some, but owning allows the buildup of equity, which is very good IMO.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
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VictoriaF
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Post by VictoriaF »

Victoria
Last edited by VictoriaF on Wed Feb 23, 2011 2:27 pm, edited 1 time in total.
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alvinsch
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Post by alvinsch »

Triple digit golfer wrote:
alvinsch wrote:
Triple digit golfer wrote:
alvinsch wrote:
Triple digit golfer wrote: I guess people who buy townhouses or condos because they can't afford a house are stupid.
That seems like a really harsh view of people in my opinion but you have a right to your opinion.

It would be stupid for me to essentially buy an apartment (condo, townhouse, etc.), and take on all the risk of ownership when the downsides are so negative for me. Others obviously value things differently.

- Al
So what is your alternative to those who can't afford houses, but could afford a condo, townhouse, or to rent an apartment?
Huh? I think they should buy condo's, townhouse or rent if that's the right decision for them. You implied they are stupid for doing so, so what would you have them do?

- Al
Then what did you mean by:
I'd never be stupid enough to buy a house with upstairs or downstairs neighbors. I assume your "friends" own a condo, townhouse or other multi-plex. Not for me. See my other post for our house renting experiences. Not for me.
I was replying to the post that said one could buy a house (multi dwelling I assume) with all the same problems as an apartment. If I hate all the issues of a multi-tenant apartment, why would I be stupid enough to actually BUY essentially the same thing that I hated when I rented?

So when you said:
I guess people who buy townhouses or condos because they can't afford a house are stupid.
Did you really mean to call those people stupid or where you just trying to be a jerk by putting words in someone else's mouth who wasn't even replying to you?

Sure wish this forum had an ignore poster feature!!!
- Al
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