Owning a home vs renting a place

[Jonesy]

Re: Owning a home vs renting a place

Houses do not increase in value relative to salaries and interest rates.

Did i say they did? I said they increase in value.

Go look up what a house cost in 1980 and what it costs today. You think the people who bought their house 30 years ago and can sell it today for a massive profit are wishing they had rented?

[mjb2124]

Re: Owning a home vs renting a place

Houses do not increase in value relative to salaries and interest rates.

Depends on the area IMO. My salary hasn't gone up 45K over the last 7-8 years, but my townhouse value did....whereas renting there is no increase in value because there is no financial value to the renter. Where else would one get 45K in appreciation on something in that time frame? I don't know of anything...my 401K, money markets, Roth IRA's and CD's are not even close.

[cardsfan2222]

Re: Owning a home vs renting a place

I would like someone to educate me on how owning a home is somehow a much wiser investment than renting, especially with the way the economy is.

I preface with the fact that if you are very wealthy and can just afford to buy a home, then thats one thing. However, majority of people will have to finance a home in order to buy it.

As there are way too many variables involved in this market, Ill just assume a loan on a $200,000 home.

Its a given that getting a ARM would be stupid, and the majority of lenders I have talked with are using around a 5% interest rate fee.

Putting down 20% of the home purchase would be $40,000.

Payments just for the home loan would be around $900 a month before taxes, insurance etc. $900 x 12 months x 30 years = $324,000

Basic insurance runs you around $1000 a year x 30 years = $30,000

Property tax on my home is around $2,500 a year with the exemption policy. $2,500 x 30 year = 75,000

Home owners association fees are around $1000 a year so thats $1,000 x 30 years = $30,000

So right now, before any maintance issues come up like roofing, heating and cooling, plumbing, electrical, general maintance etc.... we are looking at...

$40,000 down payment
$324,000 total cost of loan
$30,000 basic coverage insurance
$75,000 property tax
$30,000 HoA fees
--------
$499,000 cost to own home before ANY maintance costs. I am aware that not everywhere has a HoA fee, and Im quite sure someone can come up with some isolated instance of where there is no property tax, but those are the exceptions and certainly not the rule. It is a general rule that you should set aside 1% of your homes value for your annual maintance cost so that would be $2,000 a year x 30 years and now you can take this total and make it $560,000 for that $200,000 investment.

Thats a HALF MILLION dollar investment for a house that you thought cost $200,000. There is no way you can justify that as an investment.

Majority of homeowners now, infact...still do not own their homes and will still be paying them off until they die. Factor in the idea that there are a ton of homeowners are upside down on their payments since property value has dropped, they are paying MUCH more than the property is worth now and are locked in to it. Thats one of the reasons you are seeing foreclosures at an alarming rate is because some people are finally realizing that its not worth owning in the long run with the way propertys are valued and potentially drop drastically. Speculator bought the house next door to me for $250,000 a couple of years ago and its now on the market for $170,000 and has been sitting there for 2 years unoccupied.

There are a ton of hidden costs in owning a home and many dont see it. Just because you take out a loan on a house doesnt make you a homeowner, the bank still owns the home.



On the flip side, lets say you rent the home for $800-$1000 a month. Thats $360,000 over the course of 30 years. This is a lot of money still , no doubt about it. With that comes a sense of safety though. You can relocate in neccesary for jobs, you arent locked into a 30 year commitment. You have freedom.

The cost of owning a home is almost double the cost of renting and brings a lot more cons than positives from what I can tell.

The thing is, after 30 years the house that you paid $200,000 could be worth 2-3 times that much. If you rent, after 30 years you don't own anything. In fact, if you're 25 now like I am, you could conceivably be renting for 60 years. My home loan payment is locked in at a certain rate for all 30 years, but renting you have to deal with inflation. If you rented a home starting 30 years ago at $1,000 a month you would be paying over $2,600 today after inflation.

If your renting a house, your payments are high enough to cover the owner's mortgage on the house, plus property tax and insurance, plus enough for the owner to make a profit. You aren't getting away from those charges just by renting, their included in your monthly rent.

Now would actually be a great time to buy a house. You can get the $8,000 tax credit, plus house prices have plummeted, meaning you can get them much cheaper than normal. The economy will turn around, and house prices will go up. It's always smarter to buy when prices are low.

[Evan_OS]

Re: Owning a home vs renting a place

Owning a home, even though I'm renting right now.