Buy or Rent?

[Packerjohn]

It's nice to own a home when your young & fit but you might sing a different song when your 80 plus. Also, renting buys you freedom. You lock the door & take off to where ever. Try that with the 2,500 sq. foot bungalow.

 

[Marlene]

Everything you said about renting is true. But, there's two sides to every coin.

Houses go up in value (most of the time, anyway). With renting you end up with nothing. Homeowners are treated with better credit (banks consider them more stable). You can do whatever you want to the interior, and the exterior if there is no HOA. Taxes do go up, they also go down during recessions (mine did, anyway). Landlords can and do raise rents, many do it every year.

Renting is good for people who like the freedom of moving (you), those who can't afford a down payment on a house or don't have the credit, and those who don't want to worry about maintenance chores. I've only rented 4 times in my life, for short periods, and hated handing out that rent check and being told rules to have to follow. I own a house and when I'm too old to do certain things, I'll just hire someone after getting the best quote. I plan to age in place.

Isn't that the beauty of having the freedom to make a choice I've been co-owner of 7 houses. Loved a couple of them, hated a couple of them, but now I want the freedom to come and go as I please, and don't want the expense of maintaining a house as a single woman. Believe me, I think there are a lot more people like you than me in that most people who can afford to or have good enough credit tend to buy. I rent not because I can't afford to buy but because I no longer want to.

 

[mathjak107]

I would have a tough time renting, as I see it as flushing money down the toilet. With buying, you can expect to get a return on your investment, provided you buy at the right price, in the right place.

I also want to feel free to modify my house in ways I see fit, and make my own repairs, as I'm better at doing so than the majority of workers out there.

I would never buy in an area that has an HOA, though. To me, that would be Hell, having some dweebs telling me what I could and couldn't do with my own home. I never understood how anyone could stomach such people.

renting is exactly what allowed us to take the money we once had tied up in a house and buy a very very lucrative real estate partnership with it .

renting is never wasting money when that money can be deployed elsewhere at higher returns ..

there is a big difference between starting out and having no resourses to invest . then buying makes sense .

but once resources are developed over the years then you have options and alternatives with that money ... renting and investing elsewhere has left us in the position where we can subtract out more then a decade of rent , taxes and still buy multiple homes like we had today .

20-35% of all residential sales are all cash . so people develop substantial assets over time and that gives them choices that can be even better deals renting and investing elsewhere . this belief that somehow renters are poor losers is nonsense .. renters are just a mixed group that range from very poor to very wealthy . but there is nothing that says buying has to win .

in fact someone renting a 3 bedroom apartment when raising a family who goes to a 1 bedroom in an apartment house at retirement can see better cash flow then that homeowner still trying to support that 2500 sq ft single family home .

rents rising is no big deal if the lumop sum you would have had tied up in the house is generating far more then the rent increases .. in fact many areas like ours have stabilized rentals where rents are capped yearly for millions of tenants .

 

[Packerjohn]

Rental rates go up, paid for stays paid for.

True, rental rates go up; so do property taxes. Live in your own house & house maintenance will be a full time job. Trying climbing up a ladder to clean your eves troughs when your 80 years old & see how much fun it is? Seniors should have fun when they retire not work until the day they die!

 

[mathjak107]

True, rental rates go up; so do property taxes. Live in your own house & house maintenance will be a full time job. Trying climbing up a ladder to clean your eves troughs when your 80 years old & see how much fun it is? Seniors should have fun when they retire not work until the day they die!

think about this . when we all bought homes in the 1970's a home was 30-35k in long island . that was an insane amount of money over renting .

well today those homes are paid off and taxes are 12-15k so that paid off home represents a piece of a utility bill as far as affordability goes .. that paid off mortgage made it no easier to stay in your house in retirement . .

comparisons are usually flawed as well because rarely do we rent what we would buy . we tend to buy way more house then we rent . plus many cities have apartment buildings where the cost structure is very different and far cheaper .

a single family home here starts at a million , but you can rent a 2 bedroom 2 bath apartment for a fraction of what a single family home costs a month . so the economies of scale are different many times .

rarely is ayone actually comparing apples to apples in costs and property or do they consider opportunity cost such as when that lump sum is invested elsewhere instead of tied up in that house .

 

[Knight]

True, rental rates go up; so do property taxes. Live in your own house & house maintenance will be a full time job. Trying climbing up a ladder to clean your eves troughs when your 80 years old & see how much fun it is? Seniors should have fun when they retire not work until the day they die!

Owning a home vs. rent isn't a one situation fits all. As mathjak107 points out home values increase. It did for us since we had a low interest fixed mortgage rate & were able to pay off the mortgage by doubling the payment in turn cutting the amount of interest on the loan. Luck played a part since we bought in a buyers market & sold in a sellers market. Even luckier to be offered a retirement package at age 54 that exceeded what we had planned on for early retirement at age 55.

Prior to retiring living in the cold north east owning a [mortgage free] 5 bedroom 3600 sq. ft bi-level home with a detached 3 car garage on 8 acres of land fit our needs. Living in it for more than 3 years made it possible to sell with no federal tax on the 4X gain in value when we sold. That of course left us with a significant amount of cash to do with as we pleased.

Expecting to be less able to perform maintenance we bought a 3 bedroom rancher in the warm southwest. Stucco exterior, tile roof. Maintenance amounts to washing the windows with a hose & squeegee. No grass due to desert landscaping. Taxes on this property vary but have never gone above $1200.00 a year. Bought & paid cash @$105,000.00 current value placed at $265,000.00. We have no intention of selling because we are centrally located & are living exactly as we planned for.


As I began with owning a home vs. rent isn't a one situation fits all.

 

[Liberty]

True, rental rates go up; so do property taxes. Live in your own house & house maintenance will be a full time job. Trying climbing up a ladder to clean your eves troughs when your 80 years old & see how much fun it is? Seniors should have fun when they retire not work until the day they die!

Glad our house doesn't have any "eves" to clean...lol.

 

[mathjak107]

Glad our house doesn't have any "eves" to clean...lol.

When we had our house every time I got paid a little hand came out looking for it’s share ....there was always something that had to be done ,fixed or bought

 

[Catlady]

As I began with owning a home vs. rent isn't a one situation fits all.

EXACTLY! We can argue about the pros and cons of both renting or owning, what matters is one's situation or attitude.

I prefer owning, and now that I'm elderly, I pay my handyman to do what I can't do. I like being queen of my own castle and do what I want with my premises and as long as I pay my taxes no landlord can tell me to leave or raise my rent every year. As to ''opportunity costs'', other investments can go bad and you lose that investment fully or partially, nothing is guaranteed to go up forever.

 

[mathjak107]

EXACTLY! We can argue about the pros and cons of both renting or owning, what matters is one's situation or attitude.

I prefer owning, and now that I'm elderly, I pay my handyman to do what I can't do. I like being queen of my own castle and do what I want with my premises and as long as I pay my taxes no landlord can tell me to leave or raise my rent every year. As to ''opportunity costs'', other investments can go bad and you lose that investment fully or partially, nothing is guaranteed to go up forever.

As many of those who lost their homes in the Great Recession can tell you

 

[Catlady]

As many of those who lost their homes in the Great Recession can tell you

Foolish people also lost their money in stocks by selling in a panic. As always, it's best not to invest what you can't afford to lose, have an adequate emergency fund for unexpected expenses, don't buy more house than you can afford, and try to pay off debts, including mortgages, as fast as you can. No one should be without a safety net of some kind.

 

[mathjak107]

Foolish people also lost their money in stocks by selling in a panic. As always, it's best not to invest what you can't afford to lose, have an adequate emergency fund for unexpected expenses, don't buy more house than you can afford, and try to pay off debts, including mortgages, as fast as you can. No one should be without a safety net of some kind.

The point is you can lose money through poor investor behavior in real estate as well as the markets ..... for those who say you can’t live in a stock , the flip side is you can’t spend the closet at the super market either ....so poor handling of ones money is poor handling

 

[Knight]

The point is you can lose money through poor investor behavior in real estate as well as the markets ..... for those who say you can’t live in a stock , the flip side is you can’t spend the closet at the super market either ....so poor handling of ones money is poor handling

This is about owning a home or renting, investing is a whole other animal. What works for people is what people do.

 

[mathjak107]

This is about owning a home or renting, investing is a whole other animal. What works for people is what people do.

No it isn’t .. because renting Is going to usually be far more costly then owning ,especially over time so renting and getting nothing in return to offset the higher costs is a poor financial choice , it ends up just being an expensive lifestyle choice ... the idea is to rent and be able to cover living expenses and the greater expenses by having the money not tied up in the house work for you so it covers not only the addition expenses but gives you improved cash flow too which you get simply by putting the money in something like Wellesley income.

the choices between renting or owning have a lot of moving pieces to them

 

[Knight]

Quote
"the choices between renting or owning have a lot of moving pieces to them"

Exactly that's why I ended with this.
What works for people is what people do.

 

[mathjak107]

Quote
"the choices between renting or owning have a lot of moving pieces to them"

Exactly that's why I ended with this.
What works for people is what people do.

Well that is also why I am saying that what you do with that money not in the house is a factor ...you will have higher housing costs and how you offset them can be a crucial part of the decision

 

[Catlady]

This is about owning a home or renting, investing is a whole other animal. What works for people is what people do.

@Knight = I am the one that deviated into investing because @mathjak107 said homeowners lost their houses during the recession. I pointed out that people can also lose money in the market if they're foolish enough to sell the stocks in a panic.

It's all like you said, renting or owning depends entirely on the individual person, their attitude and circumstances.

 

[Gardenlover]

You know what it's like to own, try the renting route, then you'll have first hand experience to know if renting fits your lifestyle. If it's not for you, your just out the rent money and moving expenses. I own a home and a condo, both are good and bad in different ways.

Another thing to consider if renting is which floor to rent on, do they have elevators if your not on the first floor? There's less noise if you live on the top floor, but the rent can be higher. Do you need covered parking? Is the complex close to things you like to do? Are shopping and restaurants nearby? Is it a senior only community or mixed ages? (To put it nicely, both have their own set of opportunities.)

 

[Packerjohn]

The privacy you get in owning a private home can't be beat.

I rent now and that's what I miss.

Well, that is true to a certain point but what do you do if your neighbour has some big dog that goes out in the evening & barks his fool head off until someone lets him back in or some little Yorkie that barks at everyone that comes around? Been there, done it & don't want to do it anymore.

 

[mathjak107]

We had a driveway between us and another home many years ago ...they guy there was doing auto repairs at 7am every weekend .... owning a home has zero to do with whether neighbors will make your life miserable or not ...in fact in many areas homes are attached ..

 

[Liberty]

When we had our house every time I got paid a little hand came out looking for it’s share ....there was always something that had to be done ,fixed or bought

That's sad. We must be extremely fortunate. Hub was very skilled in project engineering and this joint is not a "stick built" house. Never have to paint it or do much at all. We have a standing metal roof and about 50 some 72 long 3/4" pane windows.

We like wide open views of nature. Our excuse for not cleaning the second floor windows is the birds fly into it now, like what would happen if they were squeaky clean...lol. Pedro, mows the acreage around the house. Life is good.

Built in 1/4 mile exercise driveway...lol. We've enjoyed so much here, it would have been hard to imagine living anywhere else. Life and Texas has been very very good to us.

 

[mathjak107]

Quote
"the choices between renting or owning have a lot of moving pieces to them"

Exactly that's why I ended with this.
What works for people is what people do.

the problem for most though is that in life what works may not be the best choice , it is just a choice they selected , so they make it work , but that does not mean there weren't better choices had they been better informed.

people make living on social security alone work , they may hate that life and the stress of every unexpected bill or increase so that does not mean because it works it was a good way to end up .

you have owners who end up house rich and cash poor , you have renters throwing money in to a place with no other assets working for them either because they don't have assets to invest or they are anti investing , or they are just poorer .

so those who do have choices need to look at all the options and then choose a path , but most again do not know all the options because most americans are financially not very well informed .

you see it all the time as you hear others go renting is throwing money away or renters are losers .

they fail to realize the renter may have bought a business , a practice or made very lucrative investments with that money not tied up in the house so their view is very narrow or skewed as the renter may be well a head of them

 

[Pecos]

True, rental rates go up; so do property taxes. Live in your own house & house maintenance will be a full time job. Trying climbing up a ladder to clean your eves troughs when your 80 years old & see how much fun it is? Seniors should have fun when they retire not work until the day they die!

I am totally on board with you on this. We have owned homes for 36 years and been quite satisfied with the experience. But I am getting to the point where I dread: cleaning rain gutters, crawling under the house, repairing appliances myself, dealing with people who repair appliances, pushing a mower around, raking, and I have a lifelong hatred of painting.
We intend to move into a senior independent living facility in a few years and let other people deal with all that stuff including cooking and cleaning. I don't want my wife to be rattling around in this big house cooking for one and getting lonely.
Will it be expensive? But we have live frugally for decades and we can't take it with us.

 

[Knight]

the problem for most though is that in life what works may not be the best choice , it is just a choice they selected , so they make it work , but that does not mean there weren't better choices had they been better informed.

people make living on social security alone work , they may hate that life and the stress of every unexpected bill or increase so that does not mean because it works it was a good way to end up .

you have owners who end up house rich and cash poor , you have renters throwing money in to a place with no other assets working for them either because they don't have assets to invest or they are anti investing , or they are just poorer .

so those who do have choices need to look at all the options and then choose a path , but most again do not know all the options because most americans are financially not very well informed .

you see it all the time as you hear others go renting is throwing money away or renters are losers .

they fail to realize the renter may have bought a business , a practice or made very lucrative investments with that money not tied up in the house so their view is very narrow or skewed as the renter may be well a head of them

I think you just outlined some of the reasons people do what works for them. What works as you point out may not be financially the best choice but it's their only option. I'd say those that had choices to look at all the options & chose a path could for many reasons change that path. Circumstance change so I'll stick with what works for people is what people do.

 

[mathjak107]

I think you just outlined some of the reasons people do what works for them. What works as you point out may not be financially the best choice but it's their only option. I'd say those that had choices to look at all the options & chose a path could for many reasons change that path. Circumstance change so I'll stick with what works for people is what people do.

based on my own experience i found i did things because i had no idea about how to evaluate PROPERLY the options .

as an example i was always a big believer in taking a mortgage and investing , a no brainier at these low rates ...

however as i learned more from michael kitces he made me aware of something i never looked at .

keeping a mortgage or not and investing our money is not as simple as just investing....

In effect you are buying equities leveraged with borrowed money . We tend to miss this factor ...

So you need to ask yourself if you were buying stocks on margin what would you want as a risk premium to make it worth doing .... you have 3-4% interest ...you have a risk free treasury bond paying 2% to 3% so how much of a risk premium over a risk free treasury bond would you want to not only buy equities but buy equities on leverage .. maybe 2-3% ?

If you were going to put that borrowed money in a balanced fund with a 6-8% return would you borrow money and do it knowing you have 3-4% interest and an investment with zero risk is paying 2-3% ?

That is a very different question now compared to just get more than the interest you pay.

In effect you are leveraged and your downside is now greater .....

Think this point through very carefully ....we don’t realize we can consider either one the investment bought on leverage when we borrow money and use our cash too.

We like to think it is our money in the stocks and the mortgage in the house but that is only mental masturbation when we do this ....it can be considered either way in effect in reality-because the situation has been altered from either just buying a house or just investing.

The risk premium as it is called becomes very important when using leverage because the downside is greater with leverage and that makes this a very different decision then we usually make.
We just have been fooling ourselves by taking our own money and the borrowed money and applying its use in a way that makes comfortable sense to us but the truth is all that money both your own and borrowed is coming from the same pocket and used interchangeably