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Buying vs. renting your domicile

DiscoZombieDiscoZombie Registered User
edited June 2010 in Help / Advice Forum
So, both my parents have rented all their life and are pretty much fine. I've rented thus far too. I make more money than either of my parents do, though I am by no means wealthy. Everyone always says you're throwing your money away if you're renting, etc. However, I feel like all the expenses that go along with owning a house practically add up to rent anyway. Even after you pay it off, you're paying property tax, utilities, and maintenance. And if, god forbid, you fall on hard times after the thing is 3/4 paid off, you lose your entire investment. also, owning a house must make moving a hell of a lot harder - you have to sell the house. I feel like renting avoids that sort of stress.

So what are people's feelings on buying vs. renting? If I'm going to bother saving for a down payment, I want to be completely sold on the concept of owning.

DiscoZombie on
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  • dispatch.odispatch.o Registered User regular
    edited June 2010
    Depends on the area, the market and what stage of life you're in.

    There are thousands of things you can do to/in a house that you own vs an apartment or house you rent. It depends on whether those things matter enough to you.

    dispatch.o on
  • FeralFeral MEMETICHARIZARD interior crocodile alligator ⇔ ǝɹʇɐǝɥʇ ǝᴉʌoɯ ʇǝloɹʌǝɥɔ ɐ ǝʌᴉɹp ᴉRegistered User regular
    edited June 2010
    dispatch.o wrote: »
    Depends on the area, the market and what stage of life you're in.

    There are thousands of things you can do to/in a house that you own vs an apartment or house you rent. It depends on whether those things matter enough to you.

    Pretty much this. There are advantages and disadvantages to each.

    Feral on
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  • GungHoGungHo Registered User regular
    edited June 2010
    The "throwing your money away with rent" thing is kind of BS. I like home ownership, but don't kid yourself... you end up in about the same place either way. It's all very mental.

    GungHo on
  • mcdermottmcdermott Registered User regular
    edited June 2010
    GungHo wrote: »
    The "throwing your money away with rent" thing is kind of BS. I like home ownership, but don't kid yourself... you end up in about the same place either way. It's all very mental.

    Owning generally only puts you positive (and doesn't always) over long time horizons...like, a decade or more. The days of buying and flipping a house for profit in five years have, for the most part ended.

    However, assuming you honestly don't intend to leave the area for the next 10-15 years*, buying can be a wise financial decision. Plus it allows you to modify your living space in ways you can't when you rent.


    * - Depending primarily on the cost of rent versus mortgage, the assumed rate of return on your savings if you didn't buy, and the market for houses in your area. It's entirely possible for it to literally be a complete wash over 30 years, with the equity in your home pretty much equaling the money you could have saved (and invested) if you had rented. Not terribly likely, but possible.

    mcdermott on
  • ceresceres When the last moon is cast over the last star of morning And the future has past without even a last desperate warningRegistered User, Moderator mod
    edited June 2010
    Equity blah blah blah, but honestly I've always preferred to rent and never had ambitions of home ownership. My husband has, and now that we own one I really don't feel any differently. When something broke, it was NICE to call the apartment office and go "yo, fix my shit, chop chop". Now I have to call someone to fix it, and it costs a lot of money. And when it's time for us to move on, with the market the way it is, it will be difficult to do so.

    Basically, if you buy a house in the near future, be sure it's something you can see yourself staying in permanently if you have to, because you might not be able to get rid of it without selling at a loss, depending on the market in your area.

    ceres on
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  • mcdermottmcdermott Registered User regular
    edited June 2010
    ceres wrote: »
    Equity blah blah blah, but honestly I've always preferred to rent and never had ambitions of home ownership. My husband has, and now that we own one I really don't feel any differently. When something broke, it was NICE to call the apartment office and go "yo, fix my shit, chop chop". Now I have to call someone to fix it, and it costs a lot of money. And when it's time for us to move on, with the market the way it is, it will be difficult to do so.

    It's nice if you have a landlord that gets shit fixed in a timely manner. Otherwise it sucks. But yeah, having to write checks for repairs sucks major ass.
    Basically, if you buy a house in the near future, be sure it's something you can see yourself staying in permanently if you have to, because you might not be able to get rid of it without selling at a loss, depending on the market in your area.

    Yup.

    mcdermott on
  • CognisseurCognisseur Registered User
    edited June 2010
    I can't find it now but I saw someone do some statistics regarding this debate and came back with some surprising results.

    The gist was that between the upkeep/maintenance, the taxes, and the interest you'll pay on your mortgage by the time you pay it off, you're actually in a worse financial position than if you had just rented and dumped the extra money into S&P500, at least according to stock market and housing data for the past 30 years.

    Cognisseur on
  • Inquisitor77Inquisitor77 2 x Penny Arcade Fight Club Champion A fixed point in space and timeRegistered User regular
    edited June 2010
    Buy to live. Otherwise, don't buy.

    Inquisitor77 on
  • DiscoZombieDiscoZombie Registered User
    edited June 2010
    good thoughts, peeps. I've been poking around fool.com and there are some articles there that answer my question as well, such as: http://www.fool.com/personal-finance/home/2008/04/29/your-home-rent-or-buy.aspx

    DiscoZombie on
  • JasconiusJasconius sword criminal mad onlineRegistered User regular
    edited June 2010
    You're still "burning money" with a house. HOA and taxes alone are your "fee", to say nothing of ongoing regular maintenance just to keep the value of the home at level equity.

    Houses are only an investment if you hold on to them long enough to be able to sell it for a legit profit (which is rare these days).

    House prices aren't going to go up any time soon. They may creep up slightly for the next year or so, but there are economists out there warning about a double dip.

    Not to mention all the ridiculous condo high rises that are just getting finished that were financed right before the collapse of the boom which are depressing real estate even further.

    You can't swing a dead cat in Tampa without hitting a 10% occupancy multi-story condo complex that still has the new carpet smell.

    Jasconius on
  • FiggyFiggy Registered User regular
    edited June 2010
    Regarding making money on your investment, take everything here with a grain of salt. It's a combo of anecdotal evidence and location. Our house has already increased in value in the year that we've owned it. It depends on so many factors that it's silly to say, "Well you usually won't make any money when it's all said and done."

    I prefer home ownership for a variety of reasons (And I rented my own place for about 8 years)

    - Freedom to do absolutely anything you want with it. There is no landlord telling you that you can't paint, you can't hang something, you can't be loud etc.
    - Pride and peace of mind in knowing everything is yours, including the work you've done. I've done almost every repair/upgrade in our place myself and it feels good knowing I save money and add value to the house.
    - No landlords to deal with. I've had my share of shitty landlords/property managers, and the fact that I don't need to deal with that shit is amazing. Who cares if I can call him up when something is broken, it's going to take so long to repair I'd rather do it myself anyway. Fun story: We had to go an entire weekend without a front door knob because the landlord wouldn't return our calls to come fix it. The knob just came off the front door one night, leaving us with no way to properly close it. I could have done it myself in 15 minutes and for under $30, but since it's not "mine" in a rental, I'm not going to do it.

    OP, it sounds like you're pretty happy renting, so keep doing that. If you need someone to sit you down and sell you on home ownership, maybe it's not for you. Some people just don't want the responsibility.

    Figgy on
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  • EggyToastEggyToast Registered User regular
    edited June 2010
    Yeah, nothing wrong with renting; there's a lot of perks to it. The quality of the domicile tends to be an issue -- the appliances and fixtures I have in my own house are a significant improvement on any rented place I've been in, even nice places. Landlords love buying the cheapest stuff at Home Depot. Homeowners like buying the next-cheapest, but there's a pretty big quality/aesthetic jump.

    Anyway, assume that house prices are flat forever. You would do better by owning in the long run because you would be paying down the principal of your house over time. The catch is that the amount you pay down has to offset closing costs -- which is why buying is dumb if you move a lot.

    If you live in 3 places for 10 years each, and the home prices are utterly flat in all 3 places and the houses cost the same, you would at the end of the 30 years own the house -- minus the closing costs you paid each time.

    The thing about owning a place outright is that, well, you don't have to pay anything to live there anymore. Just property taxes and maintenance, which are pretty damn cheap compared to a mortgage. But that's why finance people say things like it's not worth buying if you don't stay there 5 years. Typically that 5 year mark is where the cost of selling is offset by the amount of principal you've paid.

    Anyway, in a lot of ways it's like leasing vs. buying a car. If you want a new car every 2 years, leasing is great. If you want to drive the car for 5-10 years, buy it, and when you pay off the loan you don't have any more payments. Owning a house could be seen as an investment like the stock market but there's one key difference -- you HAVE to live somewhere. It's simple math to work out how much a mortgage on a house is in your area -- if the rents are a lot cheaper than the mortgages, rent! But if the houses are cheap and the rents aren't, buy! You gotta pay something every month anyway.

    EggyToast on
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  • TefTef Registered User regular
    edited June 2010
    A couple of questions I have are:

    1) Do you live in the US?

    2) Are you planning on living in the property or is it an investment property?

    3) What do you do for a living, is it stable and does is pay well?

    4) How old are you?

    I agree that buying a house for short term (less than 10 years) profit is a bad idea. People were for a while and look how THAT turned out. I guess if you've got your finger on the pulse of the market then you can make a good buck. Not many people can though and for me, it's too much of a risk.

    I own two properties in Australia, one is a 5 acre block where I live and the other one is an inner city suburb 3bed 1 bath deal. The latter is my investment property.

    My advice to you is go and see a mortgage advisor (or two!) and find out what kind of property would suit you, financially. Ask him or her what kind tax breaks you'll be eligible for with an investment property. From what I've read about tax breaks for property investors in the US, they're quite good (I had looked at buying property in California when the bottom dropped out of the market)

    Buying a home is better, financially, then renting (imho) as long as you're sure you can meet your repayments.

    Tef on
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  • MichaelLCMichaelLC In what furnace was thy brain? ChicagoRegistered User regular
    edited June 2010
    I frown so hard when Oprah and Orman talk about how fucking awesome home ownership was because it's an "asset." It's not, it's a liability for reasons already explained here.

    For us, I don't regret buying, and I'm very glad we got a condo instead of a full blown house. Not so much from the financial, since we'd probably lose money selling now, but just from a maintenance/upkeep standpoint. Keeping up with the inside is enough without worrying about the gutter and the roof and a driveway and maybe a garage too.

    So condos/townhomes still carry most of the same investment risks as a stand-alone home, but have the benefit of lower costs.

    MichaelLC on
  • TefTef Registered User regular
    edited June 2010
    MichaelLC wrote: »
    I frown so hard when Oprah and Orman talk about how fucking awesome home ownership was because it's an "asset." It's not, it's a liability for reasons already explained here.

    weeeell.... it is an asset. That's exactly what it is. People have come unstuck recently because they couldn't afford their repayments and/or the the land value decreases.

    As long as you can:

    a) meet your repayments
    b)buy in an area that at least won't decrease in value

    then you'll be on a winner. I get that it's easier said then done but with sound advice and an understanding of how the systems works, it can and does happen.

    Tef on
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  • MichaelLCMichaelLC In what furnace was thy brain? ChicagoRegistered User regular
    edited June 2010
    Tef wrote: »
    MichaelLC wrote: »
    I frown so hard when Oprah and Orman talk about how fucking awesome home ownership was because it's an "asset." It's not, it's a liability for reasons already explained here.

    As long as you can:

    a) meet your repayments
    b)buy in an area that at least won't decrease in value

    Oh, yeah, I agree it can be, but just the way they make it sound like you just buy any home and *poof* money comes pouring in. One reason so many people bought/continue to buy ARMs; not understanding increase in home value is not a guarantee. You have to do your research on the land, the area, the schools, the city, etc. It's not just "Oh, this one has a pretty porch!"

    MichaelLC on
  • TefTef Registered User regular
    edited June 2010
    heh, ain't that the truth. OP, I guess the moral of the story is (imo) Buying trumps renting, if you buy for the long term and know what you're doing

    Are you planning on settling down? If not, sod it and backpack around Europe for 3 years \o/ :P

    Tef on
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  • Niceguy MyeyeNiceguy Myeye Registered User regular
    edited June 2010
    This is a pure financial calculator for this.

    http://michaelbluejay.com/house/rentvsbuy.html

    Typically, buying is better if you intend on living in the same place for a longer time. Renting is superior over the short run.

    Niceguy Myeye on
  • useless4useless4 Registered User regular
    edited June 2010
    That last calculator is slightly misleading.

    It's assuming you are investing something if you are renting and not buying.

    In this it includes the down payment you would otherwise put on the house.

    In America, it's quite common to have family help with the down payment. They usually don't help if you just want money to play in the stock market, know what I mean? So, the calculator assumes you have that money to invest even if you don't buy a house.

    This also means if you're playing "What IF" with yourself just to prove a point internally, you have to say "I put 40k in the down payment field - this calculator proving my preconceived notion against buying only works if I am willing to invest that 40k in something right now.

    I think this shows if you are not investing, not buying and just renting you are making someone else's real estate investment profitable. You are literally giving money to people or companies so they can buy property. It's no different then simply giving me money to invest for my own profit. I can send my address via PM if you would like to help me make money!

    useless4 on
  • VeritasVRVeritasVR Registered User regular
    edited June 2010
    useless4 wrote: »
    That last calculator is slightly misleading.

    It's assuming you are investing something if you are renting and not buying.

    In this it includes the down payment you would otherwise put on the house.

    In America, it's quite common to have family help with the down payment. They usually don't help if you just want money to play in the stock market, know what I mean? So, the calculator assumes you have that money to invest even if you don't buy a house.

    This also means if you're playing "What IF" with yourself just to prove a point internally, you have to say "I put 40k in the down payment field - this calculator proving my preconceived notion against buying only works if I am willing to invest that 40k in something right now.

    I think this shows if you are not investing, not buying and just renting you are making someone else's real estate investment profitable. You are literally giving money to people or companies so they can buy property. It's no different then simply giving me money to invest for my own profit. I can send my address via PM if you would like to help me make money!

    You can set the investment to as little as 1%. Probably assumes your cash is making money not sitting under your mattress. It also has a "before investment" net cost in the calculations.

    VeritasVR on
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  • useless4useless4 Registered User regular
    edited June 2010
    Why does it show the value of the house being less in the first few years then the purchase price if it's including inflation? The first year the house value should go up or is this some different definition of the word value then "the expected selling price for the house in a given time period"

    useless4 on
  • TefTef Registered User regular
    edited June 2010
    useless4 wrote: »
    It's no different then simply giving me money to invest for my own profit. I can send my address via PM if you would like to help me make money!

    Except, ya know, you get a place to live and all...

    Agreed with the comments about the calculator. Dodgy.

    Tef on
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  • VeritasVRVeritasVR Registered User regular
    edited June 2010
    How about this one from the NY Times?

    VeritasVR on
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  • DisrupterDisrupter Registered User regular
    edited June 2010
    Tax write offs for interest and taxes will likely put owning a home as a financially better situation then renting, if you can afford the down payment.

    Disrupter on
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  • useless4useless4 Registered User regular
    edited June 2010
    Disrupter wrote: »
    Tax write offs for interest and taxes will likely put owning a home as a financially better situation then renting, if you can afford the down payment.

    That interest thing is a dodgy subject to entice people to buy houses they have to finance (read: can't afford to buy with cash)

    Look at it this way:
    You are able to deduct interest you paid from your total tax bill.

    So unless you are at the bottom of a higher tax bracket and this amount will drop you into the lower tax bracket, you are basically getting a smallish "cash back" award basically.

    If you buy your house cash, or simply don't own a house and rent etc., then you never pay this interest in the first place.

    Using the house I bought last year (Full disclosure, cash only for the reason I am now outlining) as an example... My original "traditional" purchase option of a mortgage would have incurred $11,413 in interest this year alone.

    That's $11,413 this year alone I didn't have to spend! Granted I didn't have a tax deduction of this amount - but I am firmly in the middle of the tax bracket so it wouldn't push me either way unless my wife decided to work.

    Edit: That seems like a lot of interest? I think I am reading that calculator correctly .

    useless4 on
  • MalkorMalkor Registered User regular
    edited June 2010
    Nothing is worse than being underwater in your mortgage.

    I am!

    The only thing that makes it not actually bad is that I don't particularly care to sell it any time soon (maybe I'll rent it out or something) and I get back a huge ass tax check from the interest I pay.

    I also like knowing that I can do whatever the hell I want when I want who I want.

    Malkor on
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  • DisrupterDisrupter Registered User regular
    edited June 2010
    I dont know many people who dont need a morgage.

    And if you dont need a morgage, then buying is vastly superior to renting.

    If you take the monthly payments from renting compared to buying, they are close. Buying is more then renting an apartment, but less then renting a house. At least, in my area.

    So once you factor in the interest and taxes being deductable, you could argue you cut both of those down by like 30%. That 30% pushes the buying monthly payment to be profitable over renting. Plus the remainder that isnt deductable is an investment.

    Also...
    So unless you are at the bottom of a higher tax bracket and this amount will drop you into the lower tax bracket

    Thats not really how taxes work. Id only be paying the higher tax amount on the small amount of money that pushes me over that limit. So, lowering my tax bracket wouldnt save much money at all.

    Disrupter on
    616610-1.png
  • DruhimDruhim Registered User, ClubPA regular
    edited June 2010
    Tef wrote: »
    MichaelLC wrote: »
    I frown so hard when Oprah and Orman talk about how fucking awesome home ownership was because it's an "asset." It's not, it's a liability for reasons already explained here.

    weeeell.... it is an asset. That's exactly what it is. People have come unstuck recently because they couldn't afford their repayments and/or the the land value decreases.

    As long as you can:

    a) meet your repayments
    b)buy in an area that at least won't decrease in value

    then you'll be on a winner. I get that it's easier said then done but with sound advice and an understanding of how the systems works, it can and does happen.

    his point is valid in that it's not an asset until it's payed off
    if you have a $350,000 home that you've only payed down $100,000 on, that absolutely is a liability
    don't let anyone tell you differently

    Druhim on
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  • TefTef Registered User regular
    edited June 2010
    useless4 wrote: »
    Disrupter wrote: »
    Tax write offs for interest and taxes will likely put owning a home as a financially better situation then renting, if you can afford the down payment.

    That interest thing is a dodgy subject to entice people to buy houses they have to finance (read: can't afford to buy with cash)

    Look at it this way:
    You are able to deduct interest you paid from your total tax bill.

    If you buy your house cash, or simply don't own a house and rent etc., then you never pay this interest in the first place.

    Using the house I bought last year (Full disclosure, cash only for the reason I am now outlining) as an example... My original "traditional" purchase option of a mortgage would have incurred $11,413 in interest this year alone.

    That's $11,413 this year alone I didn't have to spend! Granted I didn't have a tax deduction of this amount - but I am firmly in the middle of the tax bracket so it wouldn't push me either way unless my wife decided to work.

    that $11k you spent you DID have to spend to have your own house that can provide equity in future financial deals you make. Debt is the way to get ahead in the western world; otherwise you'd be saving for decades to buy a house outright. Yes you save a lot of money in interest payments, but it's a facile argument to say that it outweighs the benefits of buying (over renting.)

    Renting is paying money for no gain other than having a roof over your head. To be fair, that's a pretty good gain but my point is, if you're in the situation that you can afford to buy, you'd be silly not to educate yourself on the marketplace and buy rather than rent.

    Buying loses out to renting if:
    a) you make a bad investment (ie the property drops in value greatly and you had the intention of selling it)
    b) you wish to do a lot of travelling/plan on not having a steady source of income to make repayments

    Tef on
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  • DruhimDruhim Registered User, ClubPA regular
    edited June 2010
    or you know, your income suddenly drops and you can't keep up on the payments and go into foreclosure and lose everything you paid into the house

    Druhim on
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  • SkyCaptainSkyCaptain Registered User regular
    edited June 2010
    I am paying less per month than I was renting: $376 vs $435. Add in water/sewage/trash and I'm at $425, still a little less than renting, but my property tax liability? $0. Yes, $0. I have no property taxes because of my homestead exemption, my mortgage exemption, and a state homestead supplemental exemption. Sure, I have to do maintenance, but I have the freedom to do whatever I want to do and since the house was completely renovated with a new roof, new drywall, new carpet, and all the wiring updated to modern code...

    The only real costs are cosmetic right now. The neighborhood is great. The housing crash made this a perfect time for me to buy and I got the house at a steal. If my girlfriend and I move in together and get married, her income will allow us to pay off the house much more quickly and avoid a lot of the interest.

    Buying the house was great for me because of my situation, the housing market, and my long term plans in this area. You really need to look at your life to see if that's right for you.

    SkyCaptain on
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  • TefTef Registered User regular
    edited June 2010
    Druhim wrote: »
    or you know, your income suddenly drops and you can't keep up on the payments and go into foreclosure and lose everything you paid into the house

    You're totally right there, but I mean what about if you you lost your job and couldn't make rent? You'd lose the house you were living in that way, too. It's a good argument, but it works both ways, shall we declare the point moot?

    Also on the 'home ownership is a liabilty', we have to remember that the total amount of the capital repayment can be used as equity on another loan, whereas all rent money paid obviously can't help you out like that. You're right, Druhim, after reading what I'd posted previously it wasn't correct. A mortgage is a liabilty. That said, the financial benefits of home ownership far outweighs the inherent risks.

    I feel like this is heading towards a D&D thread :?

    Tef on
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  • MichaelLCMichaelLC In what furnace was thy brain? ChicagoRegistered User regular
    edited June 2010
    Tef wrote: »
    I feel like this is heading towards a D&D thread :?

    Well, unlike some relationship threads this doesn't have a clear answer, not one we can give anyway.

    Ownership really depends on a few general points, most are universal but some may only apply to US/CAN:

    1) How much can you afford?
    2) How much can you put down to avoid PMI (if applicable)
    3) Take into account property taxes, HoA, repairs/improvements and other misc. expenses
    4) How long do you plan to live there?
    5) Research the block, the area, the city for housing, education, and population trends to get a feel for the neighborhood's growth (or lack of)
    6) Do your neighbors like playing bags at 10:30pm?

    MichaelLC on
  • DhalphirDhalphir don't you open that trapdoor you're a fool if you dareRegistered User regular
    edited June 2010
    Being able to do what you like with your own house is all the reason anyone should need to buy rather than rent, assuming you can afford either.

    No asinine rules about owning pets, no inspections to verify such, no rules about what you can and can't modify about the house.

    Dhalphir on
  • TefTef Registered User regular
    edited June 2010
    MichaelLC wrote: »
    Tef wrote: »
    I feel like this is heading towards a D&D thread :?

    Well, unlike some relationship threads this doesn't have a clear answer, not one we can give anyway.

    Ownership really depends on a few general points, most are universal but some may only apply to US/CAN:

    1) How much can you afford?
    2) How much can you put down to avoid PMI (if applicable)
    3) Take into account property taxes, HoA, repairs/improvements and other misc. expenses
    4) How long do you plan to live there?
    5) Research the block, the area, the city for housing, education, and population trends to get a feel for the neighborhood's growth (or lack of)
    6) Do your neighbors like playing bags at 10:30pm?

    Pretty clear and concise list. The only thing I'd add is whether you plan to live there or not. My first property I bought I lived in it for the minimum 6 months to qualify for an aussie taxbreak then I rented it out. That house costs me, out of my wage, about $80 a week. This is figure is worked out after I get my tax back as it's a rental property now.

    I don't know how it works in the US (that's why I recommend you talk to a professional) but for me; in about 12-15 years, the mortgage will be paid off and I'll be making $450 per week in rent. Basically I see property investment as a long term strategy for creating wealth.

    Now I've just gotta give up smoking and drinking so I can live long enough to enjoy it!

    Tef on
    help a fellow forumer meet their mental health care needs because USA healthcare sucks!

    Ever tried. Ever failed. No matter. Try again. Fail again. Fail better

    bit.ly/2XQM1ke
  • SkyCaptainSkyCaptain Registered User regular
    edited June 2010
    Bags... that's a silly name. We call it "cornhole" 'round 'ere. :mrgreen:

    SkyCaptain on
    The RPG Bestiary - Dangerous foes and legendary monsters for D&D 4th Edition
  • japanjapan Registered User regular
    edited June 2010
    This is a calculation that needs to be performed for individual circumstances.

    For example, I bought my house, however in my specific circumstances and location:

    -My mortgage payment is about half to two thirds what it would cost to rent somewhere similar (note that here utility bills and council tax are not typically rolled into rent, so it is a reasonable comparison, all those costs stay approximately the same whether I bought or rented)

    -I bought right when property values were in the toilet. They may not fully recover by the time I come to sell, but I can be reasonably certain that the house will not be worth any less than I paid for it

    So for me it made more sense to buy, given I'm going to be here a few years at least.

    japan on
  • Blake TBlake T Registered User regular
    edited June 2010
    GungHo wrote: »
    The "throwing your money away with rent" thing is kind of BS. I like home ownership, but don't kid yourself... you end up in about the same place either way. It's all very mental.
    Lets think about this logically.

    Why would the people who are renting the place rent it out at such a low place that it would end up even? They still need to pay their debts.

    If you can save the difference between rent and what you would be paying in a mortgage you will end up slightly in front. But lets be honest here, most people don't do this.

    Blake T on
  • TefTef Registered User regular
    edited June 2010
    Blaket wrote: »
    GungHo wrote: »
    The "throwing your money away with rent" thing is kind of BS. I like home ownership, but don't kid yourself... you end up in about the same place either way. It's all very mental.
    Lets think about this logically.

    Why would the people who are renting the place rent it out at such a low place that it would end up even? They still need to pay their debts.

    If you can save the difference between rent and what you would be paying in a mortgage you will end up slightly in front. But lets be honest here, most people don't do this.

    People DO rent out their properties at a price so low that often it's actually not breaking even. It's what's called negative gearing. The idea is that while the rent doesn't cover the total repayment amount, you'll get the money you pay on interest back in tax (NOT the the capital repayments- that money isn't tax decuctible to the best of my knowledge) and that rent money helps towards the repayments.

    I hope this is making sense, but basically the rent just helps you make the payments, it won't cover the entire cost of the property. The goal is basically that you keep chipping away at the capital (the actual amount you borrowed that interest is calculated off of) until you reach such a time that the rent you receive exceeds the interest and capital repayments.

    Tef on
    help a fellow forumer meet their mental health care needs because USA healthcare sucks!

    Ever tried. Ever failed. No matter. Try again. Fail again. Fail better

    bit.ly/2XQM1ke
  • SkyCaptainSkyCaptain Registered User regular
    edited June 2010
    If you're renting your house out for less than the mortgage payment, you're doing it wrong.

    SkyCaptain on
    The RPG Bestiary - Dangerous foes and legendary monsters for D&D 4th Edition
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