Rent house?

[Chalten08]

I live in Seattle and a 'cheap' house is $350,000 and rising.  Is it ok to rent a house permanently?  We are a one income family with no debt and a networth of $225,000.  I'm 35 years old.

[arebelspy]

It certainly could make sense to rent for a long time (or even forever).  I wouldn't buy in Manhattan or SF.

Have you checked out the various rent vs. buy calculators such as the one at: http://www.nytimes.com/interactive/business/buy-rent-calculator.html

There was another good one recommended on the forums I'm sure you can find with a search.

What is the rent on that typical 350k house?

[$_gone_amok]

House price is cheap right now and raising and interest rate is at a all time low. If you consider your house as an investment and have the down payment then I suggest run all the numbers and see if you could come ahead buying vs renting in 20 to 30 years.  A 30 year mortgage payment is fixed whereas residential rent may increase year to year depending on your location/landlord.

[AJ]

It can certainly be ok to rent forever. Financial implications are only one facet to the buying decision. Owning your home give you freedom from a landlord, you can customize it or have pets, and you don't have to worry about being evicted if your landlord gets foreclosed on. OTOH, renting gives you flexibility to move if your rent increases, or you need to downsize/upsize quickly, or you get a better job in another part of the country (or even within the same city, if you want to stay walking distance, for example). It is a lifestyle decision as much as a financial one.

[tooqk4u22]

The affordability index for an area can be telling.  Also many people lose sight of the fact that you are paying for it either way - the difference is who is putting up the capital. 

As renter you pay rent and don't worry about anything but rent going up and the landlord does everything and pays for everything including putting up the equity.  As an owner you pay the mortgage, maintenance, down payment, insurance, taxes, major repairs, etc. It really is about flexibility vs. so called planting roots.

[arebelspy]

As renter you pay rent and don't worry about anything but rent going up and the landlord does everything and pays for everything including putting up the equity.  As an owner you pay the mortgage, maintenance, down payment, insurance, taxes, major repairs, etc.

Well... sort of.  But in an efficient market (where rents = all costs of owning), the renter is really paying the mortgage, insurance, taxes, repairs, etc. via their rent.

In an inefficient market, the owner is putting extra money out (good time to rent, bad time to buy), or the renter is putting out extra money which goes as profit to the landlord (good time to buy, bad time to rent). 

It really is about flexibility vs. so called planting roots.

In an efficient market where rents = all costs of owning, yes, that's what it's about.  Otherwise it's about quite a bit more than that, including math.

[KittyWrestler]

If you are that young and have a family and plan on staying put at one spot, I would buy and take out only a 15 year loan to buy it..
I don't like the idea of renting forever when you are only 35 since rent could go up faster than inflation... And if your kids love the school and you are forced to be out of the house because your landlord has something going on... That would add a lot of stress..
I wouldn't mind selling the house and rent after the kids are out of the house though..

[billc]

In an efficient market where rents = all costs of owning, yes, that's what it's about.  Otherwise it's about quite a bit more than that, including math.

I suppose you'd have to consider what kind of yield you're getting on the capital elsewhere. If you could buy a multifamily in an area you don't live that is covering your rent and is likely to track with rental increases on your home (hypothetically) then I think you could make an argument for renting (given some of the benefits of the flexibility, etc)

[arebelspy]

In an efficient market where rents = all costs of owning, yes, that's what it's about.  Otherwise it's about quite a bit more than that, including math.

I suppose you'd have to consider what kind of yield you're getting on the capital elsewhere. If you could buy a multifamily in an area you don't live that is covering your rent and is likely to track with rental increases on your home (hypothetically) then I think you could make an argument for renting (given some of the benefits of the flexibility, etc)

Yes, that is one of the factors in the "math."  That factor you mention (yield on capital elsewhere, specifically as it relates to down payment/equity) leads to dangerous thinking like putting no money down.  ;)   Which is one of the reasons I'm okay with a small down payment in some circumstances (assuming you're accounting for PMI), while others aren't.  Because to me, it's all about the math.

[WageSlave]

I would consider, to the extent possible, the intangibles as well; specifically, the landlord-tenant relationship.  We currently rent a house, but I would rather own (even if overall costs were a little higher).  Main reason is our landlord situation.  They are far from being "landlords from hell" (I can imagine a lot worse), but there are lot of little things that annoy us.

Lesson learned, for me anyway, is: if you are planning on renting, you should scrutinize the landlord the same way they would scrutinize you as a tenant.  In particular, how much experience do they have?  Do they manage other properties?  Where do they draw the line on what they fix and what you are responsible for?  How timely will they be with various fixes and repairs?  What is their long-term plan for the property?  Why are they renting the house?

In our case, there are issues with timeliness of repairs.  For example, a broken window took over a week to get fixed.  A broken furnace took nearly a day just to get a response from the landlords.  Also, because of circumstances, the owners of the house are effectively "accidental" landlords, and we're never certain what their long-term plans for the house are.  They wanted a four month showing period prior to the end of our lease.

We're not planning on staying in the house for the long-haul, so these things are more frustrating annoyances than anything.  But if we planned on living here for a long time, we'd insist on some harder and better-defined requirements for the kind of service we get.

Sidenote: a general tip for moving into any new place: look for any evidence that a previous occupant had pets that were sick or not house-broken.  In our case, when we viewed the house, the owners had the furnace fan running non-stop.  We moved in in winter, and it wasn't until the weather got warm that I realized the furnace fan was always on.  When I turned it off, I could smell cat urine.  Fortunately, it was confined to one area, so we paid to have that professionally cleaned (after numerous self-cleaning attempts failed to remove the odor).  In the future, I don't care how crazy I look, before I buy or rent another place, I'm going through it with a blacklight, and even getting down on my hands an knees and literally sniffing for problems.