Jump to content

Recommended Posts

This is a topic you see everywhere, but I'm curious to hear your thoughts. I myself could easily afford a house, but every time I've looked into it I can't justify it financially. It just makes more sense to me to rent.

 

I found a house a few years ago that I loved. Big two story thing on three acres. I could've done it, but when I factored in the down payment, hidden expenses, and constant lawn maintenance I backed out. It just didn't make any financial sense. All it would've taken was a roof of AC problem to put me into debt.

 

The argument for home ownership, however, is that you build wealth by investing in a home. I've rarely seen that work out for people, even prior to the 08 crisis. For one thing that 10 to 20K you spend on a down payment is money that you'll never see again, because when you by another home you'll have to put down another 10 to 20K. If you stay in the same house for the rest of your life I can see the logic, but who can say they will with any confidence?

 

So what do you think? If I had kids I would definitely own a home, because I think apartment living is a bad thing for kids. Since it's just me, however, I don't see the point. In short I think owning a home is a luxury I don't need.

Link to post
Share on other sites

I have two kids and a big dog, and we're considering more kids. So a house is pretty necessary. We redid the kitchen entirely, including taking out a wall, thanks to a storm and insurance, we got a new roof and new siding, and we put up a fence. With the market in our area and these updates, we could sell for probably $70k profit including what we've put into it.

 

We also have one of the biggest colleges in the nation in our country, and a few other small colleges too, and a pretty large young professional population. Rent on a place the same size as our house would easily be double our mortgage.

 

Renting doesn't make sense at all for us.

 

We're also fairly certain we will be here forever. Most of our friends live within a mile of us, and my best friend lives across the street. Our church is three blocks away, which is where our kids will go to school through middle school.

Link to post
Share on other sites

I bought a house in LA which is insane, but I did cause now I'm in the game, and when I'm ready to retire the money I'll get off a house here then applied to some country not LA place will get me a nice compound.

Link to post
Share on other sites

I need the space of a house but I hate taking care of a yard. I would ideally live in a sweet ass condo somewhere. Buying makes total sense for us, but if it's going to leave you on the edge of financial disaster, it's not a good choice. I think a lot of it has to do with 30-year mortgages just not being a good deal. We took a free refinance to drop down to a 12-year loan, and while it means we're not saving much outside of our 401k while the kids are in daycare, I'm going to feel rich when the kids aren't in daycare, and the house will be paid off before the oldest graduates high school. Any savings account isn't making jack squat right now, so saving for college is kind of moot unless we feel like risking it in the stock market, and our 401k is already pretty aggressive since we're young.

Link to post
Share on other sites

Love love love my condo. Only regret is that it gets so little sun. But that works out in the hot south Texas summers. No maintenance and I get a pool I don't have to maintain. I'm lucky as the one condo on the left side is empty most of the time and the one above me has the bedroom on the third floor so I'm rarely disturbed nor do I disturb other people. Then when it's paid off in a few years (I pay extra to get ahead of my mortgage) I can sell it for profit or rent it out and become a landlord. Landlord thing is a big if. And my mortgage is only 400$ a month!

Link to post
Share on other sites

I bought a house a few years back even though its just me and my dog. I quickly outgrew my one bedroom apartment and would have needed to move into a bigger place anyway. My apartment complex was quite nice and it was nice not having to worry about maintenance issues, but I grew tired of the lack of privacy and the knowledge that the atmosphere of the complex changed considerably every time we got new management. I also didn't like the fact that, since I plan on staying in this area for the long haul, my rent money each month was just going out the door entirely.

 

I'm lucky to be living in an area with cheap houses, so my mortgage combined with insurance and property taxes are only a little more than I would be paying had I moved into the largest apartment in my old complex. I'm also fortunate enough to work in a role with great job security so I conceivably could stay in this house for the considerable future regardless of whether of whether I have a family someday. It has room to grow into, but would also greatly help with a down payment should I need to move into a bigger house.

 

Also, the yards in my region are fairly small, so the lawn upkeep usually isn't that difficult. This year, it has been worse because my lawn mower isn't starting, but I should hopefully have time to get that taken care of soon. Mowing the lawn certainly isn't my favorite thing in the world to do, but it gets me some good exercise while doing something that feels productive.

 

As a side note: Columbus has seemed quite nice on my short visits there.

Link to post
Share on other sites

I live in London so the concept of owning a house is anathema to many, and alien to most of my generation. No one can afford a house anymore. Also being that london is as it is, it's super rare to find a "house" in that most houses are terraced or semi detached at the most. Fully detached houses or bungalows are near non-existent. So you're pretty much always going to share a wall here whether you rent or own. In either situation it's very expensive.

That said my partner and I have a pretty nice one bedroom apartment we rent one street back from the river in the docklands. If we move to the country we will look at owning a house, but we will have to think a little differently than just buying a pre existing home. Whether we do a barn conversion, or build a small Eco-home or small Eco/modular home that has efficient use of space..using the ideas/techniques they use in Sweden and Denmark. If we bought property, I'd rather have more garden and lawn space than put a larger home on the same plot of land.

Link to post
Share on other sites

I'm all for apartment living! It's just me so I don't care. I guess I'm lucky in that my neighbors are all pretty quiet and the rent isn't bad. I don't know if I would want to own a house unless I had a family and I'm not planning on that anytime soon. It makes moving easy, too, which I've been thinking of doing. Getting tired of the desert!

Link to post
Share on other sites

We bought our house almost ten years ago now. It was honestly a little risky at the time, but it was one of the best decisions I ever made.

We're paying hundreds less than we ever would have in an equitable apartment, have almost an acre lot that's big enough for all kinds of crazy stuff, and we're able to do whatever we want with all of it because we own it. There are some downsides. Taking care of the lawn and such is a hassle sometimes. Stuff breaks and needs repairs or replacing. But it's all worth it in the end.

Link to post
Share on other sites

There is no right/wrong answer to this question, nor is there a "rule of thumb." Anyone claiming to offer one is full of sh-t. The fact is, renting vs. buying is a question that has to be evaluated on a case-by-case basis, and everyone has a slightly different living/income/family situation. On top of that, real estate is a market that is highly sensitive to local trends and considerations (such as property taxes, etc.), and so it's not the same as advising someone on whether to buy XYZ mutual fund, stock, etc., where one's location is not particularly important.

 

That being said, there are some pointers that often hold true (but not always). IF you can afford mortgage payments (or pay the entirety in cash), and, better yet, especially if mortgage payments would be cheaper than rent in the neighborhood, and if you can be reasonably sure you won't be underwater on the mortgage (to the degree that you can know this), and if you are unlikely to be moving anytime soon, then assuming you can eat the closing costs, it probably makes sense to buy over renting.

 

That is probably the case, even if the property isn't expected to appreciate that much, since home ownership allows you to access the two best tax deductions that exist- the mortgage interest deduction and sale of principal residence deduction.

 

I hesitate to say anything more specific on the topic, since beyond the above pointers, any further analysis requires knowing factors specific to the person (such as income, family size, plans for the future, etc.), and also requires knowing about factors specific to the neighborhood one is looking at. For example, one's income and job situation (and how stable it's expected to be) can be incredibly critical to the analysis, especially if you're going to have an adjustable rate, like a 7 year ARM or something. When it comes to local neighborhood trends, a lot of buyers are not very good at researching this, and are susceptible to brokers hoodwinking them, or are delusional about how nice their neighborhood is (people always want to believe they're richer than they are). If that wasn't the case then we wouldn't have had a housing crisis after all. Some places are more stable than others, and then you have entire states that I'd avoid, such as much of the Sunbelt, especially a place like Florida, which has had rampant over-construction and the growth is mainly driven by retirees and, at best, middle class folks, but mostly poor white trash from other areas that got priced out of nicer coastal locales. This may sound harsh, but researching the demographics of the type of people moving in, what class they come from and their incomes, etc., matter a hell of a lot when it comes to predicting property values in the future. For FL in particular, you add in the fact that most of the construction in that state is recent, very tacky in design (basically the house version of an H3 vehicle), and shoddy.. very poor construction with cheap materials compared to early 20th century brick homes in the Northeast which are about 200x more solid, and well, you can see why I tend to avoid such states when investing in real estate.

 

Compare those sunbelt areas to more prestigious old-money neighborhoods in Westchester Cty near NY, Montgomery Cty Maryland, near DC, etc., such places are unlikely (if ever) to outright depreciate in value, though the degree to which they appreciate will depend on the market. On the other hand, you have another whole category of places, the 'hot growth' type places with upwardly mobile millennials, the Denvers and Austins of the world (though truth be told, it's a little too late to get into either of those and get the best bang for the buck). And yet another category are the locations where prices are sky-high due to market distortions- the best example of this being San Francisco, where prices are at NY levels (or higher), but less so due to demand (although demand is high), and more due to there being an artificial shortage since local government makes it damn near impossible to tear down structures and develop new property, as well as there being a huge influx of foreign investment from all-cash Chinese buyers who are looking for places to park their money- they have effectively priced out a lot of otherwise middle class buyers and really distorted the market. This is why you see a bunch of these s-tty little ranch homes in the Bay Area that were built in the 70s for blue collar workers going for $1 mil, $2 mil, etc. This is another area I tend to avoid since a lot of the pricing is due to these distortions, as well as growth in the IT industry- SF is a bit of a one-note town in that respect, and so all it'll take for a big flight in capital is a correction in IT stock prices, which I tend to think will happen sooner than later, given that a lot of these companies are a complete house of cards that don't actually make anything, the Snapchats of the world and what not. Getting on a bit of a tangent here... you get my point.

 

Children are another complicating factor, since depending on your income, private school may not be an option, which is a huge restricting factor since neighborhood will dictate what quality school you can access, and some of these areas, depending on where you are in the country, may have very little (if no) rental stock and entirely single family homes. Of course, you'll end up paying for it another way (property taxes, usually), but that is often more affordable for people than private school, again, depending on the area of the country.

 

So, there is not a whole lot that can be said on this topic Tex, other than.. buying can often make financial sense, except when it doesn't. Not too helpful, right? ;)

 

As for myself, I am currently renting in northern VA, near DC. I don't know how much longer I'll be in the area, and even though I suspect for a while, I wasn't going to buy before I fully assessed the market and researched neighborhoods. I own a few other properties in NY, one in Manhattan proper and houses in Long Island. I rent them out.

Link to post
Share on other sites

I think a lot of it has to do with 30-year mortgages just not being a good deal.

That is absolutely not true. Depends on what rates were at the time, one's income, anticipated living situation over the next several years, and so on. A 30 year fixed is often a better idea than a shorter ARM, but the opposite can be true as well. Really depends on the individual circumstances.

Link to post
Share on other sites

 

I think a lot of it has to do with 30-year mortgages just not being a good deal.

That is absolutely not true. Depends on what rates were at the time, one's income, anticipated living situation over the next several years, and so on. A 30 year fixed is often a better idea than a shorter ARM, but the opposite can be true as well. Really depends on the individual circumstances.
I think she might be talking about a 30 year fixed versus a 15 year fixed. Or in her case a 12. If you can afford the extra few hundred a month then you end up owing the home quicker without paying a ton of interest.
Link to post
Share on other sites

Even comparing fixed rates, my point stands.

 

First off, it could potentially be quite a bit more than a "few extra hundred," completely depends on the property. Second, it's not necessarily the case you'll pay less interest, even though that's generally true. If you locked in a great 30 year rate about 6 years back when they were low as sh-t, it's not necessarily the case you'll get something equally as good on a refi, though you might, it just depends. Even so, individual circumstances could still outweigh the greater interest payments- say, for example, your job security is in question, or you are planning a career change, or you have some situation that you know could end up costing a sh-t ton of money at any given time (kids with severe disabilities, etc.). In other words, having more cash "locked up" in the house is not always a good idea if you need it liquid.

 

Third, the goal is not necessarily always to "own the home quicker." If you're planning on using the sale of primary residence deduction (again, possibly the best tax deduction you can get), and especially if you plan on using the deduction multiple times, it's in your interest to pay as little as possible a month. This is especially the case when you buy in new 'hot' areas, particularly the hipster areas, especially if you're buying a re-development into new construction. In such cases, you're going to see the most equity appreciation in the first few years and after that point, it's typically in your interest to sell so you can buy new construction and use the deduction again.

 

Fourth, if you don't plan on moving anytime soon and using the deduction (say, you're settling in an area and raising kids), it could very well be the case that you could invest the extra money and come out ahead. Depending on return on investment and how savvy you are at this stuff, of course. You also get a double benefit of sorts doing it this way, since a) you can invest that money into an account with favorable tax treatment, like an IRA, and b) to the extent you pay extra interest over the life of the loan, that's not necessarily a bad thing since you just write it off with the mortgage interest deduction. Obviously it's going to depend on the property, market conditions, and what rate you originally got on the loan, but it is most certainly not the case that it's always in your interest to pay off a loan quicker. This is especially the case if you're not maxing out your IRA.

 

Fifth, if you really care about paying it off faster, for whatever reason (let's say you just have $ to blow), most loans are going to allow you to pay additional amounts on your principal. You could pay it off in 15 years if you wanted, or less, but you have the flexibility.

 

Now, in Destiny's case, it may have been a good deal for her (I dunno, I'd have to see the numbers). I suspect she's probably not making as much money as she could, since she herself admits that she's not really investing in the market.. which, I mean, that's fine I guess, some people have a very low risk tolerance, that's personal preference to some degree. So in many cases a shorter loan can be a great deal, but in some cases it's not. That's all I'm saying. Destiny was stating it like it was some real estate industry maxim or something, and that's just not the case.

Link to post
Share on other sites
Guest El Chalupacabra

This is a topic you see everywhere, but I'm curious to hear your thoughts. I myself could easily afford a house, but every time I've looked into it I can't justify it financially. It just makes more sense to me to rent.

 

I found a house a few years ago that I loved. Big two story thing on three acres. I could've done it, but when I factored in the down payment, hidden expenses, and constant lawn maintenance I backed out. It just didn't make any financial sense. All it would've taken was a roof of AC problem to put me into debt.

 

The argument for home ownership, however, is that you build wealth by investing in a home. I've rarely seen that work out for people, even prior to the 08 crisis. For one thing that 10 to 20K you spend on a down payment is money that you'll never see again, because when you by another home you'll have to put down another 10 to 20K. If you stay in the same house for the rest of your life I can see the logic, but who can say they will with any confidence?

 

So what do you think? If I had kids I would definitely own a home, because I think apartment living is a bad thing for kids. Since it's just me, however, I don't see the point. In short I think owning a home is a luxury I don't need.

My unqualified opinion is that people who buy a house looking to "create wealth" are wrong-headed in the first place. Unless your name is Trump, or you want to rent out 30 homes, or you can afford to be a real estate speculator, it's probably not a good motive for buying a home. What a lot of people forget about when it comes to owning a home is the hidden costs: roof repairs, air conditioning \ heating repairs (depending on what part of the country you are in), water heater and piping repairs, electrical, paying a premium on mortgage insurance if you don't put enough down to give you enough equity (on top of home owner's insurance), and whenever the a-holes at the city or county assessors office decides to artificially raise the value of your home to generate higher taxes, all come to mind. Oh, and then, depending on where you choose to buy your home, there is the unholy wickedness of soul stealing HOAs.

 

I'm single, no kids, stable job, and I personally rent an apartment (more accurately, it was formerly an apartment, which was sold off as a condo to my landlord, from whom I rent). I used to rent a house, but decided to save some money. I have no compelling need to join the ranks of landed gentry right now. What I do in lieu of a "wealth creating" home is to take the money I save each month renting, and at the end of each year some of it goes towards a ROTH IRA, rest stays in savings for the day I do decide to buy a home, which will likely be when I retire. My input (at least in my situation) would be unless there is a compelling reason to buy, like as you say, starting a family with kids or it is significantly cheaper to own than rent, it doesn't really make sense to buy a house. Condo or town home, maybe. Do NOT buy a trailer home/manufactured home, though (money loooooser all around, unless you own the lot too, which is sure to increase in value).

Link to post
Share on other sites

I bought a house because there aren't many nice places to rent where I am and I'd rather not deal with a slum Lord. Also I found my dream home in my price range and plan to stay for the long haul. Pool, yard, garage, dining room for 14 and plenty of space for entertaining. We are really enjoying it even if we have had to sink $5,000 into major projects since we moved in. And we are the rare couple who both enjoy mowing the lawn, so we argue about who gets to do it.

Link to post
Share on other sites

HOUSE-no question. You can ALWAYS make money on a house if you're staying at least 5 years-if you're smart.

 

I doubled my money on my first home in 7 years of ownership and those we sold it to made a MINT. We bought the house on a double lot for $85,000, sold it for $167 and the guy who bought it built another home on the property and now the two homes and lot are worth over $3milion. I bought my 2nd home for $111K and 18 years

later, sold if for $355K.

 

'ACourse I'm in a market where half a million dollars buys you this:

https://www.redfin.com/WA/Seattle/8737-1st-Ave-NW-98117/home/100606

 

NOW, I put out $1500 and have nothing to show for it.

Link to post
Share on other sites

HA! @ Chalupa! OMG! HOA's are the worst. I have a minimal HOA payment for my condo of 129$ a month and it covers insurance, water, sewer, garbage and maintenance. We based our fees fairly on square footage. I became the HOA vice president and since I'm the only one living in my condo on the board it's a nightmare. Wanna bitch about something wrong with the interior of your condo, knock on my door. Wanna bring complaints about a neighbor parking in your spot, call me. I just did it to make sure we don't raise our rates and make good decisions concerning how we upgrade parts of the complex like new fences, getting recycling bin service and such. But because our HOA fee is so low we also get really bad tenants who don't give a shit. Which is why HOA's are so high in most neighborhoods to keep the riff raff out. We are not as nazi-ish though about things. But I'm bailing on the position next vote. I'm working on this new young couple who I think I can trick into being on the board. HAHAHAHAHA!

 

Mobile homes are not so bad any more but they're not as valuable an asset if you look at it from an investing point of view. They are literally the best way for poor people and limited income retirees to have some freedom and a house with amenities. The county actually taxes them like cars in many states so property taxes are whatever you pay yearly for your car tag. As former trailer trash I lived in Atlanta for 10 years in a single wide with two bedrooms and two bathrooms and my lot rent and house payment combined were 312$ a month. An apartment of the same dimensions in Atlanta at the time was running about 750$ a month and most of those in that price range were built in the 70s. Every year I'd pay my 42$ tax tag and stick a sticker on one of the windows instead of property tax (lot rent included what the owners of the park paid in it for their property tax). I don't poopoo on people who buy trailers. And newer construction modular homes as they call them now are quite nice with taped and floated walls and upgrades.

 

As for mortgages in this topic it all depends on what you want and will work for you. As a former military brat my parents never invested in a big house because my Dad might be PCS'd as you'll never see your investment back. If you are buying and know you're going to move in a few years it's better to buy something with 3 beds and a bathroom (demand for this is higher than say a 2 bed 1 bath or overly huge home) because you can sell right away at the price you want as downsizers and starter family homes sell. You won't have to give or take when it comes to negotiation on the price as much or getting stuck with closing costs to unload it. But it is nice at the end of say 25 to 30 years when you have a well maintained property you've paid for that is yours. This type of investment will require maintaining unlike say a mutual fund or CD. I'm for a 30 year fixed if you know your going to stay in one place for a while because you can make an extra payment once or twice a year to the principle and your 30 year fixed is suddenly a 20 year loan. 15 year fixed is great if you can swing the larger payment as the interest rate is lower but sometimes points and your credit will screw you.

 

I have an FHA loan and my interest rate is 4.5% and I only put 3.5% down on my condo. But that's because I was living in an apartment and loved it for years and then the AC went out and they took all the month of August to fix it. I got tired of the crappy maintenance in my complex as they couldn't keep hot water going either so I chose to finally move. I didn't want to touch my ROTH IRA to buy the condo (ROTH IRAs are fantastic as you don't pay taxes when you finally draw on it f you use it for a down payment on a home but the condo was within FHA range and my credit was stellar). So now in a few years I can use the Roth to buy an upgrade house with property or wait until I'm 59.5 and start drawing on the savings in that account.

Link to post
Share on other sites

I always wondered while most of the houses I saw in London were duplexes. Was that a post-war rebuilding thing?

A lot of East London, South East London, Docklands, and Isle of Dogs are all post-war builds because all those areas got bombed to shit by the Germans in WW2. But most of what you would have seen in Central and West London would be either Victorian buildings, or Edwardian, some even older than that., as well as whatever post-war and new builds they can cram in on top of that. As a city London is super dense (as you probably noticed) and very old. I guess they just piled in the buildings and expanded out from the old Roman town since this ever was a town. You wont find any Tudor buildings in London though cause of the fire back in the 1500s. Pretty much got rid of all those timber buildings.

But anyway... yeah duplexes, or terraced as we call them. Though most houses will still have a back yard, particularly in actual suburban neighbourhoods. Anything from Zone 2 out most houses will have a back yard. From the street you see all these properties and you think they must be super small on the inside and many are, but some houses are pretty expansive when you get inside them.

Link to post
Share on other sites

My mortgage payment is less than $650 a month. We couldn't rent a one bedroom apartment for that. I could sell this place right now for almost twice what we paid for it, but if we updated the bathrooms and kitchen, I could probably tack on another $10K. Easily.

And my husband is a handyman. So extra upkeep and maintenance costs are practically moot. Plus we need the storage space for all his tools, equipment, materials and supplies.

This is a no-brainer for us.

Link to post
Share on other sites
×
×
  • Create New...