Renting Until Retirement

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JoeHart
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Re: Renting Until Retirement

Post by JoeHart »

I know this is a personal finance site and that the purchase/rent decision can be a function of finances, but sometimes I think there is a tendency to forget why we try to accumulate money. For me, it’s not to accumulate as much as I can and die wealthy, but to make sure I can afford the most important things and hopefully have something left for security and the luxuries. I think of food and housing as among the priorities. If I have the money to get it, I want a comfortable home. Yes, it can turn out to be a positive investment, and for generations home ownership has been a path to building wealth, but a home primarily is a place where you and your family spend a lot of time. The return isn’t just financial. Renting can work, but if you really want to make a house a home, and invest in it to make it suit your lifestyle, and can make it happen financially, I don’t see how the priority would be anything other than owning. Easy for me to say as we have owned the same house for 30+ years and purchased at a very different time (though even then there was general trepidation about paying more than $200K for a house in the Boston suburbs), but I am so happy to own a place we have made fit all our wishes and not be dealing with a landlord. That the house has appreciated, and whether it is more or less than the market, is irrelevant as we are not going anywhere until we have to.
Oddball
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Re: Renting Until Retirement

Post by Oddball »

splat789 wrote: Mon Jul 08, 2024 5:50 pm
av111 wrote: Mon Jul 08, 2024 5:23 pm
splat789 wrote: Mon Jul 08, 2024 1:40 am Average single family homes here are now 600k+, and require PITI of $3680+/month with a 20% downpayment. Purchasing one of these houses now with a 20% downpayment puts the PITI at 48% of my $7700 base take home pay,
The 48% number is irrelevant in terms of qualifying for a mortgage. For that some more info is needed. What is your gross income before taxes? What are the other debts?

I generally do not recommend renting for long term unless your lifestyle is specifically designed for that. Single with no dependents and no plans to change that, travel all the time, not much family close to where you work, not overly rich etc.

If buying is possible with your income, consider two things
This is the US of A. You are allowed to spend money for your comforts. This means buying a house if that makes you happy and if it is a large part of retirement anxiety. No point in dying without the home with a lot of money in different accounts
Rates could get lower or higher than they are currently at different points in the business cycle. If you have a mortgage, you can refi it at any time
Do you think it's prudent to spend nearly 50% of take home pay for housing? Now I don't doubt there might be someone out there willing to give me the mortgage, but no way would I feel comfortable with spending more than 30% of my monthly take home pay. Almost all of my capital would need to be redirected to this house beyond my basic living expenses, and I would not be able to cover that payment if I lost my job and was forced into accepting a job that paid much less.
OP - unless I missed it somewhere, you are a single person with no kids, correct? If so, why do you need a "median single family house"? What are you renting now? Why can't you buy something that is cheaper than a single family house in your area?

2 things.
1) You don't need to pay cash for a house in 15 years when you plan to retire. My parents, both retired with a NW of $0, both just have SS and one smaller pension. They got a mortgage after 5+ years of no other income.
2) As long as you stay in the same area for the next say 10+ years, it is very very likely that your NW will be higher if you buy instead of renting all those years.
av111
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Re: Renting Until Retirement

Post by av111 »

splat789 wrote: Mon Jul 08, 2024 5:50 pm
Do you think it's prudent to spend nearly 50% of take home pay for housing?
You answered a question with another.

It is quite common to purchase homes with 36% of gross going to PITI if there are no other debts

Principal part of Piti is basically coming to your pocket. Your tax situation might change when you run numbers
AV111
BirdFood
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Re: Renting Until Retirement

Post by BirdFood »

splat789 wrote: Mon Jul 08, 2024 2:34 pm Sure it might be a preference...but its non-negotiable. It would be pretty devastating if I make it to retirement in 15 years, and end up having to rent for the rest of my life because I made the wrong choice with my investments and end up priced out of buying a house anywhere because real estate continues to experience unprecedented inflation while stocks crash or have dismal returns over this time period. I would like a small 1000-1200 sq foot 2-3 bedroom single story house with a garage and a yard. I do not want a condo, townhouse, or other multifamily dwelling.
The problem with solving this is that I don't really agree that home prices in all acceptable places will increase faster than the stock market.

But if they do, and if a freestanding home is one of your primary life goals, I fear that one of the dealbreakers--being a landlord, letting a vacation home sit mostly idle, finding a job in a LCOL area now (or are there any jobs either in your profession or adjacent to it that would support telecommuting?), buying land and having a home built either now or later--may have to give.
Last edited by BirdFood on Mon Jul 08, 2024 7:09 pm, edited 1 time in total.
Topic Author
splat789
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Re: Renting Until Retirement

Post by splat789 »

Oddball wrote: Mon Jul 08, 2024 6:27 pm
splat789 wrote: Mon Jul 08, 2024 5:50 pm
av111 wrote: Mon Jul 08, 2024 5:23 pm
splat789 wrote: Mon Jul 08, 2024 1:40 am Average single family homes here are now 600k+, and require PITI of $3680+/month with a 20% downpayment. Purchasing one of these houses now with a 20% downpayment puts the PITI at 48% of my $7700 base take home pay,
The 48% number is irrelevant in terms of qualifying for a mortgage. For that some more info is needed. What is your gross income before taxes? What are the other debts?

I generally do not recommend renting for long term unless your lifestyle is specifically designed for that. Single with no dependents and no plans to change that, travel all the time, not much family close to where you work, not overly rich etc.

If buying is possible with your income, consider two things
This is the US of A. You are allowed to spend money for your comforts. This means buying a house if that makes you happy and if it is a large part of retirement anxiety. No point in dying without the home with a lot of money in different accounts
Rates could get lower or higher than they are currently at different points in the business cycle. If you have a mortgage, you can refi it at any time
Do you think it's prudent to spend nearly 50% of take home pay for housing? Now I don't doubt there might be someone out there willing to give me the mortgage, but no way would I feel comfortable with spending more than 30% of my monthly take home pay. Almost all of my capital would need to be redirected to this house beyond my basic living expenses, and I would not be able to cover that payment if I lost my job and was forced into accepting a job that paid much less.
OP - unless I missed it somewhere, you are a single person with no kids, correct? If so, why do you need a "median single family house"? What are you renting now? Why can't you buy something that is cheaper than a single family house in your area?

2 things.
1) You don't need to pay cash for a house in 15 years when you plan to retire. My parents, both retired with a NW of $0, both just have SS and one smaller pension. They got a mortgage after 5+ years of no other income.
2) As long as you stay in the same area for the next say 10+ years, it is very very likely that your NW will be higher if you buy instead of renting all those years.
Yes I am single and renting a mother in law apartment that is completely separate from my landlords house. I want my own detached house for the privacy and quiet that I will achieve with enough distance to my neighbors and no shared walls. I have lived in housing with shared walls in the past, and would never do it again by choice. I am mostly looking for 2 bedroom or smaller detached houses, but these are hard to find and there is pretty much nothing new of this size being built where I live. I would also consider something like a garage with living quarters, but again very hard to come by where I live.

1. I don't want to go into retirement with debt. I understand some people get a mortgage in retirement, but that's not something I want to do.
2. My rent is $1300/month, so it would cost me almost 3X that to buy a typical house in this area with a 20% downpayment.
Last edited by splat789 on Mon Jul 08, 2024 8:52 pm, edited 11 times in total.
Topic Author
splat789
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Re: Renting Until Retirement

Post by splat789 »

av111 wrote: Mon Jul 08, 2024 6:52 pm
splat789 wrote: Mon Jul 08, 2024 5:50 pm
Do you think it's prudent to spend nearly 50% of take home pay for housing?
You answered a question with another.

It is quite common to purchase homes with 36% of gross going to PITI if there are no other debts

Principal part of Piti is basically coming to your pocket. Your tax situation might change when you run numbers
What matters to me is take home pay not gross pay because I don't want to have to divert too much from retirement investing into the house, and I want my payment low enough that I could cover it doing gig work or other lower paid work in the event I lose my job in the future.
Topic Author
splat789
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Re: Renting Until Retirement

Post by splat789 »

BirdFood wrote: Mon Jul 08, 2024 7:06 pm
splat789 wrote: Mon Jul 08, 2024 2:34 pm Sure it might be a preference...but its non-negotiable. It would be pretty devastating if I make it to retirement in 15 years, and end up having to rent for the rest of my life because I made the wrong choice with my investments and end up priced out of buying a house anywhere because real estate continues to experience unprecedented inflation while stocks crash or have dismal returns over this time period. I would like a small 1000-1200 sq foot 2-3 bedroom single story house with a garage and a yard. I do not want a condo, townhouse, or other multifamily dwelling.
The problem with solving this is that I don't really agree that home prices in all acceptable places will increase faster than the stock market.

But if they do, and if a freestanding home is one of your primary life goals, I fear that one of the dealbreakers--being a landlord, letting a vacation home sit mostly idle, finding a job in a LCOL area now (or are there any jobs either in your profession or adjacent to it that would support telecommuting?), buying land and having a home built either now or later--may have to give.
My company has a few sites in lower cost of living areas that I might be able to transfer to in the future, but these particular locations concern me because three of them are in tornado alley states, and the other is in a state prone to hurricanes. There is another site in a location that is not prone to any major natural disasters, but unfortunately the houses there only seem to be about 100K less than at my current location. I originally planned to stay with my current company until retirement, but I could try to get a job with a different company if that's what it comes to. My profession does not have remote jobs due to the need to be on site to support a production environment.
Last edited by splat789 on Mon Jul 08, 2024 9:01 pm, edited 10 times in total.
av111
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Re: Renting Until Retirement

Post by av111 »

splat789 wrote: Mon Jul 08, 2024 7:11 pm
av111 wrote: Mon Jul 08, 2024 6:52 pm
splat789 wrote: Mon Jul 08, 2024 5:50 pm
Do you think it's prudent to spend nearly 50% of take home pay for housing?
You answered a question with another.

It is quite common to purchase homes with 36% of gross going to PITI if there are no other debts

Principal part of Piti is basically coming to your pocket. Your tax situation might change when you run numbers
What matters to me is take home pay not gross pay because I don't want to have to divert too much from retirement investing into the house, and I want my payment low enough that I could cover it doing gig work or other lower paid work in the event I lose my job in the future.
You are right to be careful. Stay with option A
AV111
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cosmos
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Re: Renting Until Retirement

Post by cosmos »

splat789 wrote: Mon Jul 08, 2024 6:39 am The US median home price in 2024 is $361K according to Zillow, and I calculate that it could be as high as $1.5 million if houses continue appreciating by 10%/year for the next 15 years due to the shortage. I calculate that my $580K taxable account would only grow to 1.49 million in 15 years assuming I get the predicted 3% stock returns while also investing every extra dollar I make into the account beyond my pretax 401K contributions and basic living expenses.

The thought of spending 15 more years renting while diligently investing all of my extra money into stocks to potentially end up being much worse off than I am now where the value of my taxable account is only 1X the value of the median US house when it is currently at 1.6X frankly scares the heck out of me. I know that expert predictions have often been wrong, but this scenario seems plausible with CAPE valuations for the US stock market at 34 and a real supply shortage in housing that most experts are saying could take 15-20 years to reverse. I think I need to find another investment vehicle for my taxable account that can keep pace with or beat real estate over the next 15 years if stocks are not likely to do the job.
Heh, and average house here in coastal socal is already close to 1.5million. I don't even recall any for near 360K when I first moved here in 1996. That being said we are just a couple with no kids and no other ties here than my work so once retirement hits will look in much cheaper desert areas that we like.

I cannot predict housing prices in the future and I may not even want to buy a home ever as I absolutely hate home improvement and fix it projects or unexpected expenses. I do know that I would not be able to save hardly a dime for retirement though if I had to take on the average 8k monthly mortgage payment here even if It is likely I will end up with alot of equity in the future.

So we will see where the chips lie in about 10 years when retirement looms near. The plan is move to a VLCOL area and not stay here. Neither of us have family here or anything else other than work tying us here. In any case I am not sweating the fact I am renting and do not own a house even today when they are now seen as "investments" and get rich quick avenues rather than a place to live in and call home.
Last edited by cosmos on Mon Jul 08, 2024 9:31 pm, edited 1 time in total.
It's 106 miles to Chicago, we've got a full tank of gas, half a pack of cigarettes, it's dark... and we're wearing sunglasses. Hit it.
chrisdds98
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Re: Renting Until Retirement

Post by chrisdds98 »

splat789 wrote: Mon Jul 08, 2024 8:46 pm
BirdFood wrote: Mon Jul 08, 2024 7:06 pm
splat789 wrote: Mon Jul 08, 2024 2:34 pm Sure it might be a preference...but its non-negotiable. It would be pretty devastating if I make it to retirement in 15 years, and end up having to rent for the rest of my life because I made the wrong choice with my investments and end up priced out of buying a house anywhere because real estate continues to experience unprecedented inflation while stocks crash or have dismal returns over this time period. I would like a small 1000-1200 sq foot 2-3 bedroom single story house with a garage and a yard. I do not want a condo, townhouse, or other multifamily dwelling.
The problem with solving this is that I don't really agree that home prices in all acceptable places will increase faster than the stock market.

But if they do, and if a freestanding home is one of your primary life goals, I fear that one of the dealbreakers--being a landlord, letting a vacation home sit mostly idle, finding a job in a LCOL area now (or are there any jobs either in your profession or adjacent to it that would support telecommuting?), buying land and having a home built either now or later--may have to give.
My company has a few sites in lower cost of living areas that I might be able to transfer to in the future, but these particular locations concern me because three of them are in tornado alley states, and the other is in a state prone to hurricanes. There is another site in a location that is not prone to any major natural disasters, but unfortunately the houses there only seem to be about 100K less than at my current location. I originally planned to stay with my current company until retirement, but I could try to get a job with a different company if that's what it comes to. My profession does not have remote jobs due to the need to be on site to support a production environment.
I agree that the effects of climate change will be unpredictable. personally, I think renting is a great option even when you're retired. Rents have remained pretty reasonable and this gives you the flexibility to move to a more desirable location. my plan of moving to Las Vegas and buying a house there has been suspended after reading about the 120 degree temps yesterday!

I think equity investments, and even TIPS will keep up with rental inflation.
bombcar
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Re: Renting Until Retirement

Post by bombcar »

splat789 wrote: Mon Jul 08, 2024 7:11 pm What matters to me is take home pay not gross pay because I don't want to have to divert too much from retirement investing into the house, and I want my payment low enough that I could cover it doing gig work or other lower paid work in the event I lose my job in the future.
It's really a whole-income consideration and should be looked at it that way - after all, buying a house is a form of retirement savings (sadly, the only one many people ever do) because it's a hedge against imputed rent.

So if you need $x in retirement and renting, you may need less owning.

Owning can also wildly affect your taxes, depending on income levels, deductibility, and more.

Small homes aren't being built but they still exist - so one option is to keep looking as you save.

If it makes you feel better, where I am prices JUMPED right around covid, just went up 50% or so, at least on the things that were on the market, but now they seem to have cooled off and I'm even seeing price cuts.

My rental has DOUBLED in value since I bought it! Over the 20 years since 2004, that's a 3.54% return! Astounding!

Of course, to actually calculate all that I'd need to do some serious math and expenses, because it was leveraged, but those 10 years or so underwater were not fun ...
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cosmos
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Re: Renting Until Retirement

Post by cosmos »

chrisdds98 wrote: Mon Jul 08, 2024 9:25 pm
I agree that the effects of climate change will be unpredictable. personally, I think renting is a great option even when you're retired. Rents have remained pretty reasonable and this gives you the flexibility to move to a more desirable location. my plan of moving to Las Vegas and buying a house there has been suspended after reading about the 120 degree temps yesterday!

I think equity investments, and even TIPS will keep up with rental inflation.
Wait for the 150F averages in 2050 ;)

One of my potential retirement choices is Borrego Springs area but yeah it is already starting to be common 120F all around that area including Palm Springs. Desert heat is dry and nowhere as oppressive as humid heat but that is getting close to a literal line in the sand when I imagine an air conditioner going on the fritz in that temp.
It's 106 miles to Chicago, we've got a full tank of gas, half a pack of cigarettes, it's dark... and we're wearing sunglasses. Hit it.
unwitting_gulag
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Re: Renting Until Retirement

Post by unwitting_gulag »

JoeHart wrote: Mon Jul 08, 2024 5:51 pm I know this is a personal finance site and that the purchase/rent decision can be a function of finances, but sometimes I think there is a tendency to forget why we try to accumulate money. For me, it’s not to accumulate as much as I can and die wealthy, but to make sure I can afford the most important things and hopefully have something left for security and the luxuries. I think of food and housing as among the priorities. If I have the money to get it, I want a comfortable home. Yes, it can turn out to be a positive investment, and for generations home ownership has been a path to building wealth, but a home primarily is a place where you and your family spend a lot of time. ...
Your analysis is a worthwhile exercise for each of us, lest we misapprehend why we invest, or why we make any large purchase, such as housing. As it happens, I almost entirely disagree with your core premise; namely my own objective is indeed to accumulate as much as possible, dying wealthy. But that's OK! Given the articulate and cogent statement of your core premise, the consequences follow. The OP may then wish to consider where his own sentiments land, on the spectrum from my version to yours. If the OP is more concerned about comfort, security, pride of ownership and so on, then it makes less sense to ruminate over potential financial-hit. On the other hand, if the OP cares about physical comfort but isn't much moved by the ownership-aspect of housing, namely that of pride, personal vitality of some sort, rootedness in the community... then the nod goes to renting... regardless (in this case) of the financial side of things.

The trouble obtrudes, if indeed we think of housing as an investment, and are angling for the best investment, never mind the quality of life, or pride of ownership. If prices keep rising, the OP's chances as a housing investor dwindle. If prices stagnate, let alone fall, then his 15-year-wait may be handsomely rewarded.
Topic Author
splat789
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Re: Renting Until Retirement

Post by splat789 »

unwitting_gulag wrote: Mon Jul 08, 2024 10:10 pm
JoeHart wrote: Mon Jul 08, 2024 5:51 pm I know this is a personal finance site and that the purchase/rent decision can be a function of finances, but sometimes I think there is a tendency to forget why we try to accumulate money. For me, it’s not to accumulate as much as I can and die wealthy, but to make sure I can afford the most important things and hopefully have something left for security and the luxuries. I think of food and housing as among the priorities. If I have the money to get it, I want a comfortable home. Yes, it can turn out to be a positive investment, and for generations home ownership has been a path to building wealth, but a home primarily is a place where you and your family spend a lot of time. ...
Your analysis is a worthwhile exercise for each of us, lest we misapprehend why we invest, or why we make any large purchase, such as housing. As it happens, I almost entirely disagree with your core premise; namely my own objective is indeed to accumulate as much as possible, dying wealthy. But that's OK! Given the articulate and cogent statement of your core premise, the consequences follow. The OP may then wish to consider where his own sentiments land, on the spectrum from my version to yours. If the OP is more concerned about comfort, security, pride of ownership and so on, then it makes less sense to ruminate over potential financial-hit. On the other hand, if the OP cares about physical comfort but isn't much moved by the ownership-aspect of housing, namely that of pride, personal vitality of some sort, rootedness in the community... then the nod goes to renting... regardless (in this case) of the financial side of things.

The trouble obtrudes, if indeed we think of housing as an investment, and are angling for the best investment, never mind the quality of life, or pride of ownership. If prices keep rising, the OP's chances as a housing investor dwindle. If prices stagnate, let alone fall, then his 15-year-wait may be handsomely rewarded.
I am looking for the option that allows me to obtain a paid off house within 15 years while also accumulating the most wealth possible in liquid assets.
stickstickly
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Re: Renting Until Retirement

Post by stickstickly »

bombcar wrote: Mon Jul 08, 2024 4:04 pm Maybe a portion of your investments could be in REITs.
OP this is your answer. To minimize your potential regrets in missing out on real estate, and feeling strongly that housing will only keep going up and stocks won't be a good investment, you can invest a large sum of money in REITs so you reap the rewards of the runaway house appreciation that you seem fairly sure will happen. This will ensure your money keeps up with the housing market. Only hindsight will tell you if that was a better investment than just leaving in the stock market for the next 15 years. However, investing based on emotions could turn out badly for you.
smitcat
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Re: Renting Until Retirement

Post by smitcat »

splat789 wrote: Mon Jul 08, 2024 10:23 pm
unwitting_gulag wrote: Mon Jul 08, 2024 10:10 pm
JoeHart wrote: Mon Jul 08, 2024 5:51 pm I know this is a personal finance site and that the purchase/rent decision can be a function of finances, but sometimes I think there is a tendency to forget why we try to accumulate money. For me, it’s not to accumulate as much as I can and die wealthy, but to make sure I can afford the most important things and hopefully have something left for security and the luxuries. I think of food and housing as among the priorities. If I have the money to get it, I want a comfortable home. Yes, it can turn out to be a positive investment, and for generations home ownership has been a path to building wealth, but a home primarily is a place where you and your family spend a lot of time. ...
Your analysis is a worthwhile exercise for each of us, lest we misapprehend why we invest, or why we make any large purchase, such as housing. As it happens, I almost entirely disagree with your core premise; namely my own objective is indeed to accumulate as much as possible, dying wealthy. But that's OK! Given the articulate and cogent statement of your core premise, the consequences follow. The OP may then wish to consider where his own sentiments land, on the spectrum from my version to yours. If the OP is more concerned about comfort, security, pride of ownership and so on, then it makes less sense to ruminate over potential financial-hit. On the other hand, if the OP cares about physical comfort but isn't much moved by the ownership-aspect of housing, namely that of pride, personal vitality of some sort, rootedness in the community... then the nod goes to renting... regardless (in this case) of the financial side of things.

The trouble obtrudes, if indeed we think of housing as an investment, and are angling for the best investment, never mind the quality of life, or pride of ownership. If prices keep rising, the OP's chances as a housing investor dwindle. If prices stagnate, let alone fall, then his 15-year-wait may be handsomely rewarded.
I am looking for the option that allows me to obtain a paid off house within 15 years while also accumulating the most wealth possible in liquid assets.
"I am looking for the option that allows me to obtain a paid off house within 15 years while also accumulating the most wealth possible in liquid assets."
This is your goal .... you have also described a bunch of desires and limitations above that are also requirements.
Reading them all in total you best bet is to continue renting and revisit this topic/choice/decision in a few years.
north2016
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Re: Renting Until Retirement

Post by north2016 »

I have to agree with OP that one does not want to be renting in their older years. Who wants to live with the concern that they might be forced to relocate at age 70 or 80?

However, if he is currently happy where he is living and working, he should not move just to own a house. So much can and will change in the next 15 years. OP should sacrifice some living standard now and save as much as possible to be prepared to buy a house in the future. It will work out, OP has time on his side.
qBxCA
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Re: Renting Until Retirement

Post by qBxCA »

OP, You can afford anything, but not everything. Given your criteria, one sensible thing you can do is work longer, or get a new job with a higher salary so that you can afford a house and keep accumulating wealth.
av111
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Re: Renting Until Retirement

Post by av111 »

unwitting_gulag wrote: Mon Jul 08, 2024 10:10 pm
JoeHart wrote: Mon Jul 08, 2024 5:51 pm I know this is a personal finance site and that the purchase/rent decision can be a function of finances, but sometimes I think there is a tendency to forget why we try to accumulate money. For me, it’s not to accumulate as much as I can and die wealthy, but to make sure I can afford the most important things and hopefully have something left for security and the luxuries. I think of food and housing as among the priorities. If I have the money to get it, I want a comfortable home. Yes, it can turn out to be a positive investment, and for generations home ownership has been a path to building wealth, but a home primarily is a place where you and your family spend a lot of time. ...
Your analysis is a worthwhile exercise for each of us, lest we misapprehend why we invest, or why we make any large purchase, such as housing. As it happens, I almost entirely disagree with your core premise; namely my own objective is indeed to accumulate as much as possible, dying wealthy. But that's OK! Given the articulate and cogent statement of your core premise, the consequences follow. The OP may then wish to consider where his own sentiments land, on the spectrum from my version to yours. If the OP is more concerned about comfort, security, pride of ownership and so on, then it makes less sense to ruminate over potential financial-hit. On the other hand, if the OP cares about physical comfort but isn't much moved by the ownership-aspect of housing, namely that of pride, personal vitality of some sort, rootedness in the community... then the nod goes to renting... regardless (in this case) of the financial side of things.

The trouble obtrudes, if indeed we think of housing as an investment, and are angling for the best investment, never mind the quality of life, or pride of ownership. If prices keep rising, the OP's chances as a housing investor dwindle. If prices stagnate, let alone fall, then his 15-year-wait may be handsomely rewarded.
Would you still disagree with the core idea if you subscribe to OP's expectations of 15% growth in RE as mentioned upthread
AV111
unwitting_gulag
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Re: Renting Until Retirement

Post by unwitting_gulag »

av111 wrote: Tue Jul 09, 2024 9:50 am Would you still disagree with the core idea if you subscribe to OP's expectations of 15% growth in RE as mentioned upthread
My impression was that the OP (like many of us renters) felt excluded during the recent run-up in prices, resulting in what might be termed a desperate forecast of future real estate price growth. If it really were 15%/year for the next 15 years, one supposes a massive dislocation in the economy, where we'd have a bevy of problems. But if somehow the economy could sustain this, then yes, if we prioritize financial considerations, it would make sense to do whatever it takes, to buy a house as soon as possible... and possibly several houses, as investments.

In VHCOL markets we generally find two concomitant trends:

1. Rent is much cheaper than purchase.
2. Income tax tends to also be high.

The result if (2) is that retiring in that locale is going to be costly, even if somebody buys a house wisely and thus locks-in housing costs. The result of (1) is that late-career employees would do well to keep renting. Combine (1) and (2), and the implication is to move-away upon retiring. If we replace the 15%/year prediction with something that instead tracks inflation, then some version of the OP's plan, to keep renting while working and then to buy elsewhere 15 years later, sound sensible.
bombcar
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Re: Renting Until Retirement

Post by bombcar »

My family felt quite like this when we bought in 2004 I think it was. Everything was going up and up and each week the houses we’d look at in our price range seemed crappier and crappier.

It worked out but man that purchase was breeeety bad as a financial one.
hiduplex
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Re: Renting Until Retirement

Post by hiduplex »

If you can buy a small duplex. I think that's ideal. I bought a duplex in a small town that is a low cost of living area in my twenties had it paid off by my thirties.
Now I have a paid off house that payout money every month. The rent from the other unit covers my property taxes, property insurance, utilities, and then some. Anything above my cost. I just put in a high-yield savings account so I can use that money for any repairs or maintenance etc.
I reinvested money into the place when a storm hit and I upgraded the roof to class 4 shingles I upgraded the insulation from r11 to r49 that drastically cut my utility bills. I had a home energy audit and my property loses less than $50 a year to energy loss.
I feel like if there were more options like this it would help reduce housing costs and overall cost of living.
smitcat
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Re: Renting Until Retirement

Post by smitcat »

hiduplex wrote: Tue Jul 09, 2024 12:44 pm If you can buy a small duplex. I think that's ideal. I bought a duplex in a small town that is a low cost of living area in my twenties had it paid off by my thirties.
Now I have a paid off house that payout money every month. The rent from the other unit covers my property taxes, property insurance, utilities, and then some. Anything above my cost. I just put in a high-yield savings account so I can use that money for any repairs or maintenance etc.
I reinvested money into the place when a storm hit and I upgraded the roof to class 4 shingles I upgraded the insulation from r11 to r49 that drastically cut my utility bills. I had a home energy audit and my property loses less than $50 a year to energy loss.
I feel like if there were more options like this it would help reduce housing costs and overall cost of living.

I tried that one yesterday - here was his response....
"I do not want to be a landlord, so purchasing a multifamily that I live in or buying a house and renting out rooms is not something I would consider as an option for myself."
evoeco
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Re: Renting Until Retirement

Post by evoeco »

This is entirely an anecdotal point, but my apartment building in a VHCOL area is packed with retired and near-retired people, some of whom moved to this building from single-family homes. They get maintenance help, a gym, and a location in a neighborhood with great amenities, walkability, and access to transit. Building staff keep an eye on some of the residents to make sure they're ok. Rent does go up, but so do incidental expenses for homeowners. I'm a some years from retirement so I don't have to make a decision any time soon, but I see no reason to leave this building unless I decide to leave this city. I could in theory buy a condo, or a single-family house in the suburbs, but I don't feel compelled to do so and neither, apparently, do my retired neighbors.

Bottom line, as many people point out on Bogleheads, buying vs renting is a complex decision with no single right answer. It's about individual choices on a range of emotional and financial and logistical axes.
sailaway
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Re: Renting Until Retirement

Post by sailaway »

evoeco wrote: Tue Jul 09, 2024 2:43 pm This is entirely an anecdotal point, but my apartment building in a VHCOL area is packed with retired and near-retired people, some of whom moved to this building from single-family homes. They get maintenance help, a gym, and a location in a neighborhood with great amenities, walkability, and access to transit. Building staff keep an eye on some of the residents to make sure they're ok. Rent does go up, but so do incidental expenses for homeowners. I'm a some years from retirement so I don't have to make a decision any time soon, but I see no reason to leave this building unless I decide to leave this city. I could in theory buy a condo, or a single-family house in the suburbs, but I don't feel compelled to do so and neither, apparently, do my retired neighbors.

Bottom line, as many people point out on Bogleheads, buying vs renting is a complex decision with no single right answer. It's about individual choices on a range of emotional and financial and logistical axes.
Many VHCOL areas also have 55+ communities that are cheaper than market pricing.
unwitting_gulag
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Re: Renting Until Retirement

Post by unwitting_gulag »

evoeco wrote: Tue Jul 09, 2024 2:43 pm This is entirely an anecdotal point, but my apartment building in a VHCOL area is packed with retired and near-retired people, some of whom moved to this building from single-family homes. They get maintenance help, a gym, and a location in a neighborhood with great amenities, walkability, and access to transit. Building staff keep an eye on some of the residents to make sure they're ok. Rent does go up, but so do incidental expenses for homeowners. ...
From a lifestyle point of view, the main tension here is privacy vs. security. By "security" we mean a kind of paternalism (in the positive sense) where institutional resources attend to the various travails and chores of daily life, such as mowing the lawn and making sure that the water supply is clean. "Privacy" would mean being untrammeled by neighbors' noise, while feeling free to oneself make noise... but also worrying about bacteria or other pollutants in well-water, for example. There is no comprehensive best solution, but one does have to be honest about one's limitations, preferences, skills, and tolerance for either intrusion against privacy or the stresses of individual fortitude. The other factor of course, is how this passel of factors changes, as one ages.

Here, I am intentionally exaggerating the chores of home-ownership, by pointing towards isolated rural properties.
cbs2002
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Re: Renting Until Retirement

Post by cbs2002 »

OP it sounds like perhaps you were not a prospective home buyer through the mid-90s to 2008 period of the housing market. During this time, at least in the markets I am familiar with, home prices were on a steady upward climb outpacing inflation. Things were interrupted a bit by the dot.com crash but generally many folks saw their home values rise substantially during that time. I myself sold a condo in 2007 and did well.

In those same areas, there are many properties that did not recover to their nominal 2008 price until a decade after the 2008 crash. Many have just now recovered to the point that they are keeping up with inflation since 2008, and that's only in the last three years.

A person buying in 2008 would have faced a severe paper loss of value in their home followed by years/a decade of uncertainty.

You cannot predict where home prices will go. Anyone who claims that the single house that you happen to choose to buy in the one place you happen to live WILL outpace inflation over the next decade has their hand in your pocket.

I think it's fine to rent in perpetuity if that lifestyle choice is satisfying. If living in one place with no landlord appeals to you, then by all means buy a home. Just don't confuse what is really a lifestyle decision for a financial one.
RetireWhen
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Re: Renting Until Retirement

Post by RetireWhen »

JoeHart wrote: Mon Jul 08, 2024 5:51 pm I know this is a personal finance site and that the purchase/rent decision can be a function of finances, but sometimes I think there is a tendency to forget why we try to accumulate money. For me, it’s not to accumulate as much as I can and die wealthy, but to make sure I can afford the most important things and hopefully have something left for security and the luxuries. I think of food and housing as among the priorities. If I have the money to get it, I want a comfortable home. Yes, it can turn out to be a positive investment, and for generations home ownership has been a path to building wealth, but a home primarily is a place where you and your family spend a lot of time. The return isn’t just financial. Renting can work, but if you really want to make a house a home, and invest in it to make it suit your lifestyle, and can make it happen financially, I don’t see how the priority would be anything other than owning. Easy for me to say as we have owned the same house for 30+ years and purchased at a very different time (though even then there was general trepidation about paying more than $200K for a house in the Boston suburbs), but I am so happy to own a place we have made fit all our wishes and not be dealing with a landlord. That the house has appreciated, and whether it is more or less than the market, is irrelevant as we are not going anywhere until we have to.
Exactly what I was going to write. To us the place where we live is a home first and a house second. From simply a financial standpoint if you include the P&I, taxes, maintenance, improvements, etc. I'm sure we would have been better off renting. But when raising a family it was important to use to own the home so we can do whatever we want with it. Just two years before we built our home 30 years ago, we were renting as a young couple getting ready to buy a home. We rented a little single place from a guy who owned the property. When he had a child with medical issues he needed family to live close by so he asked us to leave when the lease was up. I fully understood and had no issue, but I remember thinking I don't what to have to do that if I had a family and had to explain to my kids why we had to move. Because moving then may have caused them to switch schools and friends. We were and are fortunate that we could afford to purchase. I understand this isn't always the case and is becoming more of an issue. My son now lives in SoCal with a very good paying job, but the prices of houses are making him consider if he will stay or even can stay in the area, even though he loves it there.

There is a difference between a house and a home. Where I live is my home and I don't worry about it from a financial gain or loss point of view.
Leesbro63
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Re: Renting Until Retirement

Post by Leesbro63 »

z3r0c00l wrote: Mon Jul 08, 2024 6:15 am Owning a home isn't all its cracked up to be. It is very expensive on multiple fronts, not only do you tie up large amounts of money that can't be invested, but you also have new expenses that renters (like me) don't have to worry about. A new roof, insurance, property taxes, water taxes, etc. Then in addition to all that, if the market has a downturn and you need the money or want to move, selling can take months or years, or you could sell at a major loss.

I live in a VHCOL and my apartment ($1900 a month) would cost perhaps $500-600,000 to buy. Then on top of that purchase price would be mortgage interest and maintenance costs of a minimum of $600 a month, over $1200 a month for a fancy building.

Buying makes more sense when the leverage situation is cheaper. If mortgage rates are cut in half, I would think it more interesting. 7.4%? I don't think so. And by the way, this very conversation we are having is what the FED wants us to do.
Also the cost of buying and selling is high. Perhaps to high for today's era where you can sell millions of dollars of stock for pennies. It's crazy expensive to buy and sell real estate.
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