Renting vs Buying: Weighing the pros and cons

[Jarlaxle]

Originally Posted by JeffKeryk
With a mortgage payment, you know what you are gonna pay.
Rent? Not so much.


Not really. Property taxes are always rising...and with a house, you never know what you might have to fix. New roof ($25,000+)? Furnace replacement? ($10,000) Replace a bunch of windows? My mother just had the railings on her deck and front porch replaced...I recall that was about $11,000. For what she has spent on her house in the last 5 years, I could have paid most of 5 years of rent.

 

[JeffKeryk]

Originally Posted by Jarlaxle
Originally Posted by JeffKeryk
With a mortgage payment, you know what you are gonna pay.
Rent? Not so much.


Not really. Property taxes are always rising...and with a house, you never know what you might have to fix. New roof ($25,000+)? Furnace replacement? ($10,000) Replace a bunch of windows? My mother just had the railings on her deck and front porch replaced...I recall that was about $11,000. For what she has spent on her house in the last 5 years, I could have paid most of 5 years of rent.

I guess it depends on the market you are in.
In addition, your roof and furnace replacement costs are double what the are in Silicon Valley.

FYI, I live in a $2M house with no mortgage. My house would rent for $5 to $6K per month.
I am about to replace roof (in fairly good condition) and install solar for less than $20K.
My property taxes (about $4K) are a write off.

How much equity does your Mother have? A renter has zero.
Renters pay someone else's mortgage.
I believe in long term investments.

 

[hatt]

Originally Posted by Jarlaxle
Originally Posted by JeffKeryk
With a mortgage payment, you know what you are gonna pay.
Rent? Not so much.


Not really. Property taxes are always rising...and with a house, you never know what you might have to fix. New roof ($25,000+)? Furnace replacement? ($10,000) Replace a bunch of windows? My mother just had the railings on her deck and front porch replaced...I recall that was about $11,000. For what she has spent on her house in the last 5 years, I could have paid most of 5 years of rent.

All that is being passed on to the renter. Most landlords aren't running a charity. They also aren't in a hurry to replace things. That 20 year old AC unit is going to cost you big when the light bill comes each month. Never mind it breaks a couple times a year.

 

[hatt]

Originally Posted by Jarlaxle
Originally Posted by dogememe
If I could afford to buy a home I'd buy one in a heartbeat vs renting. Renting is just throwing away money.

Pablum. I'm renting for a bit more than just the property taxes on my house.

And I no longer have the unpaid part-time job that is maintaining a house. I also don't have to play "what expensive thing might break next?" anymore.

You aren't renting a house for the cost of the property taxes.

 

[Cujet]

Originally Posted by philipp10
One item people seem to miss in housing calculations is the time value of money. An example, I own a home worth approx 275,000. That money is sunk in my home (it's paid off). If I sold my home, I could make 4-5% per year off than money (that's $11,000 to $13,750) per year. That should come into your analysis also.


Yes! The opportunity cost of money is always a consideration. Today, with the volatile market, I'm not sure I have the skills to make any money there. Last year, absolutely.

However, it should come as no surprise that rental costs often mirror mortgage costs. So, for those just starting out, with some form of a monthly housing expense and no equity and not much cash in hand, there would not be much invested anyway.

 

[Wolf359]

As others mentioned before, by owning you control your own destiny. I've sold many homes where the new owners wanted the tenants out or raised their rent afterwards. Plus you have to get permission to do things and certain things just can't do like add an addition or garage if you want. Basically renting means being at the whim of the landlord. Worse ones I've done were the ones where I rented it to someone and then a year or two later the place was sold and then they got kicked out.

There's usually a calculator that allows you to factor whether you're better off renting or buying. Normally if you're going to say in an area for 7-10 years, you're better off buying than renting. If you move every 2-5 years, it's probably cheaper renting.

Also you should have some savings to handle repairs and unexpected emergencies. I've also seen people get foreclosed on or were forced into a short sale due to unanticipated problems in life. Usually those things revolved around death, divorce, disease, job loss etc. Those items are unplanned and without good savings, it's easy to lose the house when those happen.

 

[xxch4osxx]

Owning is great but when the houses are priced way out of reach for a first time buyer making an average workers wage, its not so simple.

 

[StevieC]

Originally Posted by xxch4osxx
Owning is great but when the houses are priced way out of reach for a first time buyer making an average workers wage, its not so simple.

Sadly the big cities in Canada are moving toward a Europe type model.

 

[philipp10]

Originally Posted by xxch4osxx
Owning is great but when the houses are priced way out of reach for a first time buyer making an average workers wage, its not so simple.

If your young and trying to get that first home you should be driving junk and saving the cash for a down payment. No other way around it.

 

[xxch4osxx]

Originally Posted by philipp10
Originally Posted by xxch4osxx
Owning is great but when the houses are priced way out of reach for a first time buyer making an average workers wage, its not so simple.

If your young and trying to get that first home you should be driving junk and saving the cash for a down payment. No other way around it.


Still not so easy when the rents are sky high. Hard to save paying crazy rent prices. Average house around here that isn't a mouse infest dump is around $500,000 to $600,000

 

[hatt]

Originally Posted by xxch4osxx
Originally Posted by philipp10
Originally Posted by xxch4osxx
Owning is great but when the houses are priced way out of reach for a first time buyer making an average workers wage, its not so simple.

If your young and trying to get that first home you should be driving junk and saving the cash for a down payment. No other way around it.


Still not so easy when the rents are sky high. Hard to save paying crazy rent prices. Average house around here that isn't a mouse infest dump is around $500,000 to $600,000

The answer is to move to a different area or get a better job in your current area. If you're in an area with a very high cost of living your wages should keep up. If not you have a serious problem you need to deal with.

 

[Jarlaxle]

Originally Posted by hatt
Originally Posted by Jarlaxle
Originally Posted by dogememe
If I could afford to buy a home I'd buy one in a heartbeat vs renting. Renting is just throwing away money.

Pablum. I'm renting for a bit more than just the property taxes on my house.

And I no longer have the unpaid part-time job that is maintaining a house. I also don't have to play "what expensive thing might break next?" anymore.

You aren't renting a house for the cost of the property taxes.


2BR apartment with laundry room, porch, and full 2-car garage with work space. (Fits 2 cars, 2 bikes, and extra room.)

And unlike my taxes, my rent won't triple in 4 years.

 

[Jarlaxle]

Originally Posted by JeffKeryk
Originally Posted by Jarlaxle
Originally Posted by JeffKeryk
With a mortgage payment, you know what you are gonna pay.
Rent? Not so much.


Not really. Property taxes are always rising...and with a house, you never know what you might have to fix. New roof ($25,000+)? Furnace replacement? ($10,000) Replace a bunch of windows? My mother just had the railings on her deck and front porch replaced...I recall that was about $11,000. For what she has spent on her house in the last 5 years, I could have paid most of 5 years of rent.

I guess it depends on the market you are in.
In addition, your roof and furnace replacement costs are double what the are in Silicon Valley.


New England, the land of cold winters and steep roof pitches. I don't imagine you have many houses heated with cast-iron steam radiators in California.

Quote
FYI, I live in a $2M house with no mortgage. My house would rent for $5 to $6K per month.
I am about to replace roof (in fairly good condition) and install solar for less than $20K.
My property taxes (about $4K) are a write off.

How much equity does your Mother have? A renter has zero.
Renters pay someone else's mortgage.
I believe in long term investments.


I have more, because I am BANKING most of what I had been paying for my mortgage.

 

[Jarlaxle]

Originally Posted by hatt
Originally Posted by Jarlaxle
Originally Posted by JeffKeryk
With a mortgage payment, you know what you are gonna pay.
Rent? Not so much.


Not really. Property taxes are always rising...and with a house, you never know what you might have to fix. New roof ($25,000+)? Furnace replacement? ($10,000) Replace a bunch of windows? My mother just had the railings on her deck and front porch replaced...I recall that was about $11,000. For what she has spent on her house in the last 5 years, I could have paid most of 5 years of rent.


All that is being passed on to the renter. Most landlords aren't running a charity. They also aren't in a hurry to replace things. That 20 year old AC unit is going to cost you big when the light bill comes each month. Never mind it breaks a couple times a year.


Compared to my house, the utility bills are down by almost half. The furnace, hot water, and air conditioner are all Energy Star.

 

[hatt]

Originally Posted by Jarlaxle
Originally Posted by hatt
Originally Posted by Jarlaxle
Originally Posted by dogememe
If I could afford to buy a home I'd buy one in a heartbeat vs renting. Renting is just throwing away money.

Pablum. I'm renting for a bit more than just the property taxes on my house.

And I no longer have the unpaid part-time job that is maintaining a house. I also don't have to play "what expensive thing might break next?" anymore.

You aren't renting a house for the cost of the property taxes.


2BR apartment with laundry room, porch, and full 2-car garage with work space. (Fits 2 cars, 2 bikes, and extra room.)

And unlike my taxes, my rent won't triple in 4 years.

Cool story but you aren't renting it for the property taxes.

 

[JHZR2]

The challenge is that real estate is so local market dependent. Look at the numbers we're talking about. Patman is talking a million dollars for a house, OP is talking $150k. Local taxes and demand can vary so much.

In general, buying is a better bet, IMO, if you can make advantage of the interest and property tax advantages on income tax, and can afford to pay it off quick. Remember you can end up paying 1.5-2x the purchase price of your home after all the interest...

But unless someone is giving you a sweetheart deal, youre paying the same on a rental, you just dont see the breakout...

 

[dishdude]

Originally Posted by Mr Nice
All your answers point towards just buying a house unless you really want to get out of the area.


Agreed. From the information provided by the OP I see no reason why he should continue to rent.

 

[alarmguy]

Originally Posted by philipp10
One item people seem to miss in housing calculations is the time value of money. An example, I own a home worth approx 275,000. That money is sunk in my home (it's paid off). If I sold my home, I could make 4-5% per year off than money (that's $11,000 to $13,750) per year. That should come into your analysis also.


Yes it should, however the OP has not paid off a home yet, he is just wondering if he should buy one or rent.
So, he needs to buy one, then, once it is paid off and has a HUGE asset, he can determine what works best for him.
In the meantime he gets HUGE tax advantages, as you did, for purchasing a home.

and of course, even though you say you can make 4 to 5% per year off the money (equity inj your home) that is speculation, you do not know what will go up in value more, your home or your investments.
Never mind if your sold your home, you would no longer get tax break for property taxes.

 

[SwampSurvivor]

Originally Posted by dogememe
If I could afford to buy a home I'd buy one in a heartbeat vs renting. Renting is just throwing away money.


it may be, but not as bad as one would think

Here's what I have that doesn't go to my principle ; the equity I am not building
Water+Sewer: 650
Tax: 2600
PMI: 400
Mortgage Interest (est) 1505
Insurance: 520
5675 / year , thrown away

472 / month , thrown away


The water and electric bill for the house are significantly cheaper than my one bedroom apartment, so I save maybe $60 a month there

 

[KrisZ]

You have to live somewhere, so unless living in your parents basement is your thing, provided you have that option, everything else will cost money one way or another.
Home ownership is not for everyone, especially those that cannot do any simple work around the house.

Houses do cost a lot of money, but at the end of the day, they build equity and people will always need a place to live in. One can start renting out the place, if money is tight or sell it outright and move to a cheaper neighbourhood. Basically one can be more in control of the situation.

Renting puts a lot of that control into the hand of your landlord.