Author Topic: I can't understand why "renting = throwing money away" is wrong  (Read 15566 times)

Dicey

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Re: I can't understand why "renting = throwing money away" is wrong
« Reply #50 on: December 08, 2015, 03:11:50 PM »

A few years ago, I rented a unit that was on Pacfic Coast Highway. The air conditioner broke. The owner had to not only buy a new air conditioning unit, they also had to pay a crane to come out and put the new a/c on the roof.
Wait, you lived on PCH and had air conditioning? Seriously? What's wrong with ocean breezes? I lived a couple of miles inland, in West L.A. for eleven years w/o A/C. I didn't even own a fan and only wished I had one a handful of times. There must be more to this story...
*shrugs* The condo's in that complex had an a/c unit. It was definitely rare for the area.
I'm kind of surprised that the landlord replaced it, especially since a crane was needed. That could not have been cheap. Unless it was a giant old box of a building with few windows, it doesn't really make sense to replace it in that climate. If it was my property, I might have bought each tenant a great fan or two or three and promised to freeze the rent for a year in lieu of replacing the A/C, especially when a crane is called for. Better for the environment, lower electricity bills for all, and lower costs all adds up to a win in my (theoretical) book. Mostly thinking in writing here, so if I'm ever in that landlord's position, I'll have at least one other plan to consider.

davef

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Re: I can't understand why "renting = throwing money away" is wrong
« Reply #51 on: December 08, 2015, 03:23:39 PM »
I rented for years and never accumulated wealth until I bought. It forces you to be more disciplined and automatically socks away equity for you. I got lucky in appreciation, or chose a good area.  My first house I bought at 160k and sold at 189k 5 years later. My second I bought for 300k and am in the process of selling for 400k 5 years later. so I had a good rate of return on both of them, plus the write offs.

The simple truth however is I just want a place that feels like home. And Renting does not to me anymore.

Eric

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Re: I can't understand why "renting = throwing money away" is wrong
« Reply #52 on: December 08, 2015, 03:41:35 PM »
I rented for years and never accumulated wealth until I bought. It forces you to be more disciplined and automatically socks away equity for you.

This sounds like a personal issue and not one that applies to a mustachian.

NoraLenderbee

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Re: I can't understand why "renting = throwing money away" is wrong
« Reply #53 on: December 08, 2015, 03:47:39 PM »

I LOVE owning my own house. I can put down any kind of flooring, paint any room any color, replace or upgrade any appliance I want to. I can put holes in the walls, hell, move the walls for that matter. I can re-landscape, I can move the furniture any time of day (or night), ditto for laundry. I can convert my electric stove and dryer to gas or vice versa. I can install solar panels, a tankless water heater, or even a water collection system on a whim. I can throw parties, play music, stomp around the house, invite as many friends over as I please. I can have overnight guests, I can park extra cars in my driveway. I can have as many cats or dogs or chickens as local ordinance and my patience allows. This list is by no means comprehensive. Sure I have to pay when things break, but I also have full control over the replacement process. No one ever seems to consider any of this when claiming that renting is the better option. Just my two cents.

I love owning for many of the same reasons. I love it that no one can make me move, too. However, that love is sorely tested when the roof has to be replaced, or the water heater fails and floods the basement, or our big tree drops a limb on the neighbor's garage, or you discover that the previous homeowner left live wiring hanging all over the garage. All these things cost time and money to fix, and often worry too. When you rent, you're paying *not* to have to do this.

We had to replace the pipe to the sewer last year--$1000 to buy a tube for carrying shit and bury it in the ground. Yay, homeowning.

mskyle

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Re: I can't understand why "renting = throwing money away" is wrong
« Reply #54 on: December 09, 2015, 11:06:44 AM »
As everyone's saying it totally depends on the market.

Here's an example from my real life: I love my neighborhood and would love to stay long-term, and I don't love being in a month-to-month lease. But our rent is $1500 a month (for half a duplex), while condos in other houses on my street (which are admittedly on average nicer than my place, at least the ones I've seen) have recently sold for $500-700K. Their property taxes + condo fees add up to half or more of our rent, so they're "throwing away" at least half as much as we are, before we even start looking at transaction costs and mortgage interest and ROI on a down payment.

End result for us is that we'll stay where we are until the landlords kick us out! Buying a house in my (lovely) neighborhood would feel like a huge waste of money to me.

When we buy, it will probably not be anywhere near where we are now, which is too bad.

zephyr911

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Re: I can't understand why "renting = throwing money away" is wrong
« Reply #55 on: December 09, 2015, 02:13:25 PM »
I have been trying to wrap my head around it for a while but still can't explain it when someone asks.

Why is the following argument wrong when trying to argue for buying and against renting:

"if you're renting, you're throwing your money away by paying someone's mortgage while not getting anything in return. If you buy, you pay a mortgage but then have a house to sell"

What is wrong with that argument? Isn't it true? If you're renting, all you're getting for your money is not being evicted. If you're buying, you pay your mortgage monthly in return for not being evicted + eventually owning the place which you can sell and make (some/more) money back.

If you're renting, whatever you do, you're never going to make any money back.

Please enlighten me!
It's not wrong, it's just oversimplified.
Renting can make more sense in a lot of situations. Real estate can be overvalued, which means it could fall and owners would lose money. You might be in a place where you don't plan to stay very long, and transactional costs associated with buying and selling could cause your total cost of living during that time to be higher than if you just rented.
There are many other possibilities too. The key is to evaluate the big picture and not oversimplify the decision.

Goldielocks

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Re: I can't understand why "renting = throwing money away" is wrong
« Reply #56 on: December 09, 2015, 04:33:16 PM »
One way to look at it ...
The biggest part of the monthly mortgage payment is interest.  That money is being thrown away.  You'll never see it again.  This is eased by the tax deduction.   The part that goes to principle I consider the investment. 
Now, if you rent and have a lower monthly payment, the difference you can invest. Hopefully you'd get a better return than the RE market..

You can play the numbers game but, in the end it most likely becomes an emotional decision.
I enjoy home ownership, never having to interact with a landlord.

Since you like equations, here is the above as a MMM equation:

Rent = interest on mortgage+ property tax + repairs => money " thrown away"

Principal payment=> money saved to become an owner.

There are other factors, like costs to buy and sell to think of, but this is the basic formula.