When Renting is Better
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  1. #1
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    Default When Renting is Better

    I'm prepared for the tomatoes to come flying at me, but I HAD to ask...

    So, I bought into the whole "home ownership American Dream" philosophy at an early age. I owned my first condo at 22 years old, then I upgraded to a 3 BR / 2 Bath home a few years later which I lived in for 12 years. Granted, on the second home, I did not read the fine print and fell prey to the ARM fiasco and being upside down in value for a few years, but I survived it and eventually sold the home for less than I owed on it, so that COULD be clouding my judgment here.

    BUT... chew on this for a bit:

    1) I bought the second home with hopes of growing into it. 12 years later, I am still single with no children, so it was too much house.
    2) The house was GREAT when it was shiny and new, but as it started to age, it became EXPENSIVE (roof leaks, A/C replacement, lawn maintenance, extermination, etc.)
    3) With taxes and insurance, my mortgage ended up being $200 more than I currently pay to rent a 2BR townhome in a decent neighborhood. It's by no means a palace, but it's a nice place.

    So, even though I don't get the tax break from home ownership, in my experience, that became the only advantage of owning a home. For me...

    1) If I need to move, it's a lot easier to break a lease than get out of a mortgage
    2) If something breaks, I just call the super to fix it and it's part of my rent
    3) Lawn care, extermination, etc. are no longer my concern
    4) I have plenty of room for me and my 10 pound dog, and it's CHEAPER

    So are there instances where renting is just better? For me, owning was not worth the extra hassle... tax break or not. What say you?

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    Quote Originally Posted by ZenZeta View Post
    I'm prepared for the tomatoes to come flying at me, but I HAD to ask...

    So, I bought into the whole "home ownership American Dream" philosophy at an early age. I owned my first condo at 22 years old, then I upgraded to a 3 BR / 2 Bath home a few years later which I lived in for 12 years. Granted, on the second home, I did not read the fine print and fell prey to the ARM fiasco and being upside down in value for a few years, but I survived it and eventually sold the home for less than I owed on it, so that COULD be clouding my judgment here.

    BUT... chew on this for a bit:

    1) I bought the second home with hopes of growing into it. 12 years later, I am still single with no children, so it was too much house.
    2) The house was GREAT when it was shiny and new, but as it started to age, it became EXPENSIVE (roof leaks, A/C replacement, lawn maintenance, extermination, etc.)
    3) With taxes and insurance, my mortgage ended up being $200 more than I currently pay to rent a 2BR townhome in a decent neighborhood. It's by no means a palace, but it's a nice place.

    So, even though I don't get the tax break from home ownership, in my experience, that became the only advantage of owning a home. For me...

    1) If I need to move, it's a lot easier to break a lease than get out of a mortgage
    2) If something breaks, I just call the super to fix it and it's part of my rent
    3) Lawn care, extermination, etc. are no longer my concern
    4) I have plenty of room for me and my 10 pound dog, and it's CHEAPER

    So are there instances where renting is just better? For me, owning was not worth the extra hassle... tax break or not. What say you?
    This is a hard one - all depends on what the housing market does I guess. We bought a home 26 years ago for $125,000 and sold it 22 years later for $324,000. Then bought a new home for $468,000 (taxes incl and we had cash for the extra cost) and now it is worth another 60K above what we paid for. But the housing market is crazy right now. For us it was totally worth owning while for others maybe not so much...just depends on the circumstances.

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    For us owing has been very beneficial as far as more than doubling our Money after 15 years when we sold the first one. However housing markets are different everywhere. My mom owned a very nice home and decided she wanted to be a renter when she was widowed. Owning a home can be a lot of work. Not everyone likes that work! Its not always about the numbers but quality of life and what feels right for an individual.

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    Two things - (1) don't own a house for the tax break, that's small. (2) and be sure to compare apples to apples, eg, if you compare owning a 3bd2ba house with a one bdrm apt you'll get a poor comparison.

    But the main factor is longterm, say 30 or 35 yrs. If you buy a condo w/ a fixed rate loan, your 'rent' doesn't go up. And at the end of 30 yrs, the condo is paid for. And it will be worth about 4X or 5X what you paid for it 30 yrs earlier. If you rented that same condo, your rent goes up every few yrs, on average the rent after 30 yrs will be about triple what it was at the start. And then, unlike a paid off 30 yr loan, the rent just keeps climbing - at 40 yrs it is higher than it was at 30, and so on - and if you live to be 80, the rent will become huge - and you own nothing. As for renters not having to pay taxes, repairs, AC replacement, roof replacement - sorry, I was a landlord for 40 yrs and I can tell you, all of those costs are included in your rent - plus my PFOFIT, lol.

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    To add on to what old guy said, even if your value doesn't go up at all, you're still likely to come out on top when buying over renting. This of course assumes you aren't regularly moving. As he said, your payments stay the same over the course of the loan. Outside of areas that have rent control in place, rent costs can go up at the end of your lease, which is usually 1-2 years at a time. The apartment I used to live in 10 years ago now costs $600 more than it did when I was there. If I hadn't paid off my mortgage, I would still be paying the same price I started with when I bought it.

    The big pros that renting has is flexibility towards moving, and SOMETIMES less maintenance. Renting a house will still probably have you taking care of the landscaping. If something needs fixed, you'll have to wait for the owner to do the repairs. A good landlord will do it quickly, others will take their time. If my washing machine goes out, I can replace it in an hour, for example.

    Also, as old guy says, you are paying behind the scenes for all of the repairs and upgrades. The only time you're going to get away with not paying for that stuff is when the seller market is terrible, and people are renting at a loss just to have some sort of income.

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    Quote Originally Posted by mndtrp View Post
    To add on to what old guy said, even if your value doesn't go up at all, you're still likely to come out on top when buying over renting. This of course assumes you aren't regularly moving. As he said, your payments stay the same over the course of the loan. Outside of areas that have rent control in place, rent costs can go up at the end of your lease, which is usually 1-2 years at a time. The apartment I used to live in 10 years ago now costs $600 more than it did when I was there. If I hadn't paid off my mortgage, I would still be paying the same price I started with when I bought it.

    The big pros that renting has is flexibility towards moving, and SOMETIMES less maintenance. Renting a house will still probably have you taking care of the landscaping. If something needs fixed, you'll have to wait for the owner to do the repairs. A good landlord will do it quickly, others will take their time. If my washing machine goes out, I can replace it in an hour, for example.

    Also, as old guy says, you are paying behind the scenes for all of the repairs and upgrades. The only time you're going to get away with not paying for that stuff is when the seller market is terrible, and people are renting at a loss just to have some sort of income.
    One of our boys lives in a small town where housing prices have remained fairly steady while other areas have skyrocketed. He owned his own home but sold it and now rents a home. He only pays $400/month utilities included (one other guy in the house - owner). He says he is just going to hang tight and will jump into the market only when he is good and ready - maybe pay cash for a home then. He is planning on living there long term so it is a matter of timing for him but, with the rent he pays, he actually saves money.

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