I just heard on the radio this morning some big financial guru has claimed that owning your own home is the biggest scam that banks play on indiviauls to trap them, and renting is much better. I totally disagree with that statement. I believe the only scam is getting people to buy houses beyond their means from the starting point. I am 41, this is my second house. My first house was my starter house, the house to get married, live in, pay off, then sell it and buy a bigger house. Which I did. I paid, 24,000 for my first house, paid it off in 8 years and sold it for 32,000. Now if I would have rented, I would have had no starting point or seed money, plus I had a place to live. granted I did work on the house, new roof and furnace refurbish, but it still put a roof over my head and I more or less got the money back. Bought my second house with money from the first house, within my income level, and my house payments(with taxes and insurance) are cheaper than If I was to rent the house I live in. My next door neighbor rents and his rent is about 300.00 more a month than my payment. So he is paying for the owners house, now how can any guru of sorts come up with thats a sound plan. How about buying a house within your means, plan on paying for it, from the start(not based on market value,) but what YOU are willing to pay. These people whining about "underwater"(owe more than its worth) houses and not wanting to pay for them, they made the decision to buy. I bought a new pickup in 2006, it was "underwater", a mile from the dealership, should I not have to pay for it now?
Renting better than owning?
- Thread starter Panzerman
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Renting is throwing money away IMO. While it's true you have none of the expenses associated with upkeep, you get no tax benefits and when all is said and done you have nothing to show for it.
There was a joke on 30 Rock last season about the middle class eroding and "you'll be renting forever"...there might be some truth in it.
Key is to get a house you can afford NOW, not later. That's how banks got people: they convinced them to buy based on expected income.
There was a joke on 30 Rock last season about the middle class eroding and "you'll be renting forever"...there might be some truth in it.
Key is to get a house you can afford NOW, not later. That's how banks got people: they convinced them to buy based on expected income.
I would say it depends !!! Too many factors for a blanket statement.
If advice is for everybody, it's not for you.
Originally Posted By: Panzerman
These people whining about "underwater"(owe more than its worth) houses and not wanting to pay for them, they made the decision to buy. I bought a new pickup in 2006, it was "underwater", a mile from the dealership, should I not have to pay for it now?
I had that thought as well. I bet those people bought at the top of the market thinking the price would keep on going up forever.
These people whining about "underwater"(owe more than its worth) houses and not wanting to pay for them, they made the decision to buy. I bought a new pickup in 2006, it was "underwater", a mile from the dealership, should I not have to pay for it now?
I had that thought as well. I bet those people bought at the top of the market thinking the price would keep on going up forever.
JHZR2
Staff member
The scam really is the cost of the closing costs and raltor expenses... That comes to how many percent of the home's value?
It all depends upon the area and the rent cost versus buying cost.
I think long-term, owning a home is in no way an investment. When all is factored in, at best one would reasonably and truely make long-term, all things considered, a percent or two. I do not believe that there was/is any sustainability in real estate appreciation, though it will always have value and they are not making more land.
The benefits of renting is that you have none of the acquisition costs, in high property tax areas, the actual amount youre paying on the property (vice tax) may be extremely low, and you never undergo maintenance costs, etc. Well, you do, but it is built into the rent, which may well be lower than what the equivalent mortgage payment would be... Remember, the way landlords make money is to get properties super-cheap, not by getting exppensive ones and jacking the rent higher than the rest of the properties in the area.
The benefit to owning long-term is that the mortgage should stay the same, while a rent would constantly increase, and theoretically one's income should keep increasing. So, you buy a cheap home that is low cost, under your means, then you make marginally more income in time, the cost of the mortgage stays the same, and when paid off, it costs nothing but maintenance and tax.
It depends upon the market and time frame.
It all depends upon the area and the rent cost versus buying cost.
I think long-term, owning a home is in no way an investment. When all is factored in, at best one would reasonably and truely make long-term, all things considered, a percent or two. I do not believe that there was/is any sustainability in real estate appreciation, though it will always have value and they are not making more land.
The benefits of renting is that you have none of the acquisition costs, in high property tax areas, the actual amount youre paying on the property (vice tax) may be extremely low, and you never undergo maintenance costs, etc. Well, you do, but it is built into the rent, which may well be lower than what the equivalent mortgage payment would be... Remember, the way landlords make money is to get properties super-cheap, not by getting exppensive ones and jacking the rent higher than the rest of the properties in the area.
The benefit to owning long-term is that the mortgage should stay the same, while a rent would constantly increase, and theoretically one's income should keep increasing. So, you buy a cheap home that is low cost, under your means, then you make marginally more income in time, the cost of the mortgage stays the same, and when paid off, it costs nothing but maintenance and tax.
It depends upon the market and time frame.
Renting works better for me than purchasing a house IMO because we get screwed up here... Housing prices are way too inflated, the property taxes are out of control, and hydro (electric) is ridiculous as well.
I will put some math to it for you to understand....
I rent a 1,000 SQFT apartment for $700/mo + Utilities which are another $40/month (average). So lets say $750 for easy calculations.
With a house up here, you are looking at $1200/mo minimum for a 25 year mortgage at $250K and assuming 5% or less down-payment. You also have about $250-$300/month property taxes, $200-$300 Utilities and about $200/month for upkeep on average over the life of a house. So that is $650-$800/month in expenses that you never see again, plus all the interest you paid to carry that mortgage for 25 years which is an astronomical amount.
You do get a house back at the end of it that has inflated in value (hopefully) at the end of your mortgage but has it kept up with all the expenses you have paid including the interest? Not at all.
I would rather rent for $750 all in and invest the difference from not having to pay property taxes, housing maintenance/repairs, and the interest from not having a mortgage at even 8% and be way ahead of the real-estate market all the while taking the rent I paid off my income and pushing me into a lower tax bracket.
Not to mention that all the money I have invested can be touched at anytime whereas a house I have to get a HELOC or I have to sell/move which incurs more costs for real-estate agents, lawyers etc.
Now, before anyone goes chopping up this post, do the math and make sure you are sure about your answer before posting a response.
I will put some math to it for you to understand....
I rent a 1,000 SQFT apartment for $700/mo + Utilities which are another $40/month (average). So lets say $750 for easy calculations.
With a house up here, you are looking at $1200/mo minimum for a 25 year mortgage at $250K and assuming 5% or less down-payment. You also have about $250-$300/month property taxes, $200-$300 Utilities and about $200/month for upkeep on average over the life of a house. So that is $650-$800/month in expenses that you never see again, plus all the interest you paid to carry that mortgage for 25 years which is an astronomical amount.
You do get a house back at the end of it that has inflated in value (hopefully) at the end of your mortgage but has it kept up with all the expenses you have paid including the interest? Not at all.
I would rather rent for $750 all in and invest the difference from not having to pay property taxes, housing maintenance/repairs, and the interest from not having a mortgage at even 8% and be way ahead of the real-estate market all the while taking the rent I paid off my income and pushing me into a lower tax bracket.
Not to mention that all the money I have invested can be touched at anytime whereas a house I have to get a HELOC or I have to sell/move which incurs more costs for real-estate agents, lawyers etc.
Now, before anyone goes chopping up this post, do the math and make sure you are sure about your answer before posting a response.
JHZR2
Staff member
Originally Posted By: dparm
Renting is throwing money away IMO. While it's true you have none of the expenses associated with upkeep, you get no tax benefits and when all is said and done you have nothing to show for it.
There was a joke on 30 Rock last season about the middle class eroding and "you'll be renting forever"...there might be some truth in it.
Key is to get a house you can afford NOW, not later. That's how banks got people: they convinced them to buy based on expected income.
I do not know that it is throwing money away... You have to pay something to live somewere, even in a paid off home. The tax benefits are overdone... Mortgages are good debt only if there is something better that could be done with the money. To pay $1 in interest to get $.30 back in taxes is really a stupid thing. A paid off home offers good tax advantages, since property taxes and whatnot may be wrtitten off.
With a 30 year mortgage, one is effectively renting forever. That is a long time for the bank to own your asset. You buy a home on a 30 year mortgage, you pay double the home's value (or more), and get back 30% of about half of that amount... so net you get what? to pay 1.6-1.8x the home's value? That is a lot of money...
A paid off home is a good investment, and it should be paid in 15 years. Ramsey is right on that. Folks buying more than they can afford makes this unachieveable for many though.
Renting is throwing money away IMO. While it's true you have none of the expenses associated with upkeep, you get no tax benefits and when all is said and done you have nothing to show for it.
There was a joke on 30 Rock last season about the middle class eroding and "you'll be renting forever"...there might be some truth in it.
Key is to get a house you can afford NOW, not later. That's how banks got people: they convinced them to buy based on expected income.
I do not know that it is throwing money away... You have to pay something to live somewere, even in a paid off home. The tax benefits are overdone... Mortgages are good debt only if there is something better that could be done with the money. To pay $1 in interest to get $.30 back in taxes is really a stupid thing. A paid off home offers good tax advantages, since property taxes and whatnot may be wrtitten off.
With a 30 year mortgage, one is effectively renting forever. That is a long time for the bank to own your asset. You buy a home on a 30 year mortgage, you pay double the home's value (or more), and get back 30% of about half of that amount... so net you get what? to pay 1.6-1.8x the home's value? That is a lot of money...
A paid off home is a good investment, and it should be paid in 15 years. Ramsey is right on that. Folks buying more than they can afford makes this unachieveable for many though.
Renting is less expensive initially...all you need is first, last, and security up front, where buying generally requires a hefty down-payment if you want to have a decent monthly. You also don't have to pay for painting, upkeep, a new furnace, whatever.
Having said that, buying and owning a house you can afford is far better in the long run as you not only have equity, but you build credit.
Unfortunately for many, it's the down payment that keeps the American Dream just out of reach.
Having said that, buying and owning a house you can afford is far better in the long run as you not only have equity, but you build credit.
Unfortunately for many, it's the down payment that keeps the American Dream just out of reach.
Originally Posted By: Schmoe
Well, depends on the situation. If your young and moving around a lot with the job, then no. Renting is better. That's about the only scenario I can think of that would make me want to rent instead.
I have to go along with this statement as well.
My oldest son, age 28, finally bought himself a home along with 4 acres last fall. His payment is just about 100 bucks more than he paid in rent but he can afford it. He just started a new job as a locomotive electrician with the CN railroad.
Well, depends on the situation. If your young and moving around a lot with the job, then no. Renting is better. That's about the only scenario I can think of that would make me want to rent instead.
I have to go along with this statement as well.
My oldest son, age 28, finally bought himself a home along with 4 acres last fall. His payment is just about 100 bucks more than he paid in rent but he can afford it. He just started a new job as a locomotive electrician with the CN railroad.
JHZR2
Staff member
Originally Posted By: StevieC
Renting works better for me than purchasing a house IMO because we get screwed up here... Housing prices are way too inflated, the property taxes are out of control, and hydro (electric) is ridiculous as well.
I will put some math to it for you to understand....
I rent a 1,000 SQFT apartment for $700/mo + Utilities which are another $40/month (average). So lets say $750 for easy calculations.
With a house up here, you are looking at $1200/mo minimum for a 25 year mortgage at $250K and assuming 5% or less down-payment. You also have about $250-$300/month property taxes, $200-$300 Utilities and about $200/month for upkeep on average over the life of a house. So that is $650-$800/month in expenses that you never see again, plus all the interest you paid to carry that mortgage for 25 years which is an astronomical amount.
You do get a house back at the end of it that has inflated in value (hopefully) at the end of your mortgage but has it kept up with all the expenses you have paid including the interest? Not at all.
I would rather rent for $750 all in and invest the difference from not having to pay property taxes, housing maintenance/repairs, and the interest from not having a mortgage at even 8% and be way ahead of the real-estate market all the while taking the rent I paid off my income and pushing me into a lower tax bracket.
Not to mention that all the money I have invested can be touched at anytime whereas a house I have to get a HELOC or I have to sell/move which incurs more costs for real-estate agents, lawyers etc.
Now, before anyone goes chopping up this post, do the math and make sure you are sure about your answer before posting a response.
The problem with that math (sound as it is) is that it is reliant on someone having bought that home years ago for next to nothing, so that despite taxes, maintenance, etc. (which they DO pay) they can still make a few dollars and either pay their (older) mortgage or make a few dollars.
Not everybody could have those deals, or else the finances for the location as a whole would be unsustainable... or crash.
Renting works better for me than purchasing a house IMO because we get screwed up here... Housing prices are way too inflated, the property taxes are out of control, and hydro (electric) is ridiculous as well.
I will put some math to it for you to understand....
I rent a 1,000 SQFT apartment for $700/mo + Utilities which are another $40/month (average). So lets say $750 for easy calculations.
With a house up here, you are looking at $1200/mo minimum for a 25 year mortgage at $250K and assuming 5% or less down-payment. You also have about $250-$300/month property taxes, $200-$300 Utilities and about $200/month for upkeep on average over the life of a house. So that is $650-$800/month in expenses that you never see again, plus all the interest you paid to carry that mortgage for 25 years which is an astronomical amount.
You do get a house back at the end of it that has inflated in value (hopefully) at the end of your mortgage but has it kept up with all the expenses you have paid including the interest? Not at all.
I would rather rent for $750 all in and invest the difference from not having to pay property taxes, housing maintenance/repairs, and the interest from not having a mortgage at even 8% and be way ahead of the real-estate market all the while taking the rent I paid off my income and pushing me into a lower tax bracket.
Not to mention that all the money I have invested can be touched at anytime whereas a house I have to get a HELOC or I have to sell/move which incurs more costs for real-estate agents, lawyers etc.
Now, before anyone goes chopping up this post, do the math and make sure you are sure about your answer before posting a response.
The problem with that math (sound as it is) is that it is reliant on someone having bought that home years ago for next to nothing, so that despite taxes, maintenance, etc. (which they DO pay) they can still make a few dollars and either pay their (older) mortgage or make a few dollars.
Not everybody could have those deals, or else the finances for the location as a whole would be unsustainable... or crash.
Now what I didn't mention because I didn't want it to cloud this argument of mine is that I own a house but have it rented out and I'm letting someone else pay for it for me. I only have 5% tied up of my own money.
Once it's paid for (another 15 years) I will sell it and move to a house that I want (fully paid for by this one) or with a tiny mortgage for a few years.
This IMO is the way to do it... Not being a shoemaker and buying it with a full mortgage and paying through the nose for almost ever and then calling it a wise investment that is better than renting when the costs don't justify it.
Once it's paid for (another 15 years) I will sell it and move to a house that I want (fully paid for by this one) or with a tiny mortgage for a few years.
This IMO is the way to do it... Not being a shoemaker and buying it with a full mortgage and paying through the nose for almost ever and then calling it a wise investment that is better than renting when the costs don't justify it.
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The conversations of people have changed in the last 5 years from "My home I got for a steal for $1 million dollars with nothing down" or "Sally and Richie just bought a $2 million dollar home and they are looking at getting a summer cottage soon" to ....
"We finally sold our home at a loss and now we can rent in peace". I guess it depends on where you live.
I been in my home for over 30 years and hope to be here till my final days. Home is home.....and that's the way I look at it.
"We finally sold our home at a loss and now we can rent in peace". I guess it depends on where you live.
I been in my home for over 30 years and hope to be here till my final days. Home is home.....and that's the way I look at it.
JHZR2
Staff member
But mongo, what those folks were engaged in was an unsustainable practice. Anyone that takes part in them are bound to get burned. Those folks are.
Most were living in areas that frankly, most folks don't want to. NV? FL? no way. the numbers are proving it... if they were wonderful places to be, folks would still be buying.
I am blessed, our homes have not decreased in value at all. Folks want to live here. There are plenty of other places like my town... they just dont sell commercials/sob stories.
Most were living in areas that frankly, most folks don't want to. NV? FL? no way. the numbers are proving it... if they were wonderful places to be, folks would still be buying.
I am blessed, our homes have not decreased in value at all. Folks want to live here. There are plenty of other places like my town... they just dont sell commercials/sob stories.
I cant agree with you StevieC, I think you are looking at this as short term. Which is what alot of people are looking at. The housing market made a correction and alot of people are freaking out, but when it comes to a 20+ year look at things, they will have made alot more than payments and interest on the worth of your home, just look at what houses sold for in 1980 and the interest amounts and what the same house sells for now, even in the slump. Too many people were buying a flipping houses for profit litterally overnight. You have to look at a house as a long term investment and a place to live, if you plan on moving even in 5 years, I would say renting is better, because the market may turn on you, which it did to alot of people.
Lots of people out there making a LOT of money owning rental properties.....just sayin.
JHZR2
Staff member
Originally Posted By: Panzerman
I cant agree with you StevieC, I think you are looking at this as short term. Which is what alot of people are looking at. The housing market made a correction and alot of people are freaking out, but when it comes to a 20+ year look at things, they will have made alot more than payments and interest on the worth of your home, just look at what houses sold for in 1980 and the interest amounts and what the same house sells for now, even in the slump. Too many people were buying a flipping houses for profit litterally overnight. You have to look at a house as a long term investment and a place to live, if you plan on moving even in 5 years, I would say renting is better, because the market may turn on you, which it did to alot of people.
I'd like to see a true return for a home bought in a number of markets across the US, bought with a traditional 20% down, and considering all the maintenance, taxes, etc.
I bet the real return, even with the gains of a few years ago is only 1-5% depending upon location.
I cant agree with you StevieC, I think you are looking at this as short term. Which is what alot of people are looking at. The housing market made a correction and alot of people are freaking out, but when it comes to a 20+ year look at things, they will have made alot more than payments and interest on the worth of your home, just look at what houses sold for in 1980 and the interest amounts and what the same house sells for now, even in the slump. Too many people were buying a flipping houses for profit litterally overnight. You have to look at a house as a long term investment and a place to live, if you plan on moving even in 5 years, I would say renting is better, because the market may turn on you, which it did to alot of people.
I'd like to see a true return for a home bought in a number of markets across the US, bought with a traditional 20% down, and considering all the maintenance, taxes, etc.
I bet the real return, even with the gains of a few years ago is only 1-5% depending upon location.
the Property owners association in my neighborhood charge what would be 4 months worth of my rent every year just in homeowners feed paid to the neighborhood.
That, on top of the new AC system, new stove, new dishwasher and overall upkeep - I think I'm getting the good end of the deal when renting.
Plus, since my lease expired and I'm paying month to month - I can move on a whim if I find a better job etc without having to worry about selling a house, and that alone makes me feel much better.
When you have a cool land lord - I really think renting has it's own advantages. I KNOW the foundation on our house is bad - we live lakefront. It's nice knowing that's not money out of my pocket when the time comes to repair it.
That, on top of the new AC system, new stove, new dishwasher and overall upkeep - I think I'm getting the good end of the deal when renting.
Plus, since my lease expired and I'm paying month to month - I can move on a whim if I find a better job etc without having to worry about selling a house, and that alone makes me feel much better.
When you have a cool land lord - I really think renting has it's own advantages. I KNOW the foundation on our house is bad - we live lakefront. It's nice knowing that's not money out of my pocket when the time comes to repair it.
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Originally Posted By: JHZR2
Originally Posted By: Panzerman
I cant agree with you StevieC, I think you are looking at this as short term. Which is what alot of people are looking at. The housing market made a correction and alot of people are freaking out, but when it comes to a 20+ year look at things, they will have made alot more than payments and interest on the worth of your home, just look at what houses sold for in 1980 and the interest amounts and what the same house sells for now, even in the slump. Too many people were buying a flipping houses for profit litterally overnight. You have to look at a house as a long term investment and a place to live, if you plan on moving even in 5 years, I would say renting is better, because the market may turn on you, which it did to alot of people.
I'd like to see a true return for a home bought in a number of markets across the US, bought with a traditional 20% down, and considering all the maintenance, taxes, etc.
I bet the real return, even with the gains of a few years ago is only 1-5% depending upon location.
I did the math over 5 years ago and I don't have the spreadsheet but I worked it out to the penny with taxes, utilities and interest and a $250K house ends up costing you almost triple by the time you are finished paying for it if you buy it with 5% down over 25 years and it won't triple in value in that time. Not saying this is ideal but this is what most people do. Then your money is tied up in the house until you sell it so it's not making money for you and only the houses initial value keeps up with inflation and this is nowhere near the rate it would have to rise to pay you back all the interest, taxes, and utilities you pay versus renting IMO so it's not an investment.
You have to look at long term renting say for 50 years versus home ownership for 50 years to see it doesn't pay to own.
Don't forget that you aren't earning interest on your houses value once paid for you are merely keeping up with inflation, but my investments continue to grow at lets say a conservative 8% all the while I pay less tax because I'm in a smaller income tax bracket by writing off my rent costs.
Who's ahead?
Originally Posted By: Panzerman
I cant agree with you StevieC, I think you are looking at this as short term. Which is what alot of people are looking at. The housing market made a correction and alot of people are freaking out, but when it comes to a 20+ year look at things, they will have made alot more than payments and interest on the worth of your home, just look at what houses sold for in 1980 and the interest amounts and what the same house sells for now, even in the slump. Too many people were buying a flipping houses for profit litterally overnight. You have to look at a house as a long term investment and a place to live, if you plan on moving even in 5 years, I would say renting is better, because the market may turn on you, which it did to alot of people.
I'd like to see a true return for a home bought in a number of markets across the US, bought with a traditional 20% down, and considering all the maintenance, taxes, etc.
I bet the real return, even with the gains of a few years ago is only 1-5% depending upon location.
I did the math over 5 years ago and I don't have the spreadsheet but I worked it out to the penny with taxes, utilities and interest and a $250K house ends up costing you almost triple by the time you are finished paying for it if you buy it with 5% down over 25 years and it won't triple in value in that time. Not saying this is ideal but this is what most people do. Then your money is tied up in the house until you sell it so it's not making money for you and only the houses initial value keeps up with inflation and this is nowhere near the rate it would have to rise to pay you back all the interest, taxes, and utilities you pay versus renting IMO so it's not an investment.
You have to look at long term renting say for 50 years versus home ownership for 50 years to see it doesn't pay to own.
Don't forget that you aren't earning interest on your houses value once paid for you are merely keeping up with inflation, but my investments continue to grow at lets say a conservative 8% all the while I pay less tax because I'm in a smaller income tax bracket by writing off my rent costs.
Who's ahead?
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