Author Topic: Best reason for being a renter  (Read 2386 times)

pmac

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Best reason for being a renter
« on: April 10, 2019, 11:05:32 AM »
Just saw this today: https://www.cnbc.com/2019/04/10/1-in-5-homeowners-makes-this-mistake-and-it-could-ruin-their-finances.html


The best feeling as a renter knowing that a $3,000-$7,000 repair/replacement is NOT my responsibility.

srad

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Re: Best reason for being a renter
« Reply #1 on: April 10, 2019, 12:54:08 PM »
Yep, owing homes ain't cheap.  I got hit with a surprise 7k bill a few months ago, I was doing some touchup painting on the exterior on one of my rentals when i noticed the front porch was sagging quite a bit.  Turned out both support posts were rotted out. It's a 1920's craftsman house so the columns supporting the upper floor had to be rebuilt, that bill stung.  As for the expenses like roof and furnaces, you usually know when they are coming due and that gives you time to save for them.  And yes, over the course of several years, there are many sub $1000 bills that come up.  But, if you buy right, you'll make enough $$$ to cover those bills and hopefully, put early retirement within reach.

I will say this though, the most money i ever saved was when i rented.  It was nice picking up the phone and having someone else fix and pay for the repairs.

Tris Prior

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Re: Best reason for being a renter
« Reply #2 on: April 11, 2019, 11:20:53 AM »
For me it's not just the expense, either - we owned a condo for a few years and if I hadn't worked literally 2 blocks away so I could rush home quickly to let repair people in, I have no idea how we would have made it work. I have never been able to get my head around how homeowners can take off time from work on short notice when a plumbing emergency or roof emergency or god knows what else happens; most of my jobs have been very pissy about unscheduled personal days regardless of reason.

Duke03

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Re: Best reason for being a renter
« Reply #3 on: April 11, 2019, 01:29:49 PM »
Home ownership isn't for broke people!!!! 

ilsy

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Re: Best reason for being a renter
« Reply #4 on: April 11, 2019, 01:34:40 PM »
Some people are renters

Fishindude

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Re: Best reason for being a renter
« Reply #5 on: April 11, 2019, 01:45:06 PM »
Just had to have our well pump replaced, $3600.
Fun stuff !

Michael in ABQ

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Re: Best reason for being a renter
« Reply #6 on: April 24, 2019, 03:18:35 AM »
Still renting while we save for a down payment. Our last house the landlord had to deal with multiple water leaks from bad pipes under the garage. The third one they just replaced the whole line. They were worried they'd have to replumb the whole house but luckily that was all copper. Still I'm sure it cost thousands.

Freedomin5

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Re: Best reason for being a renter
« Reply #7 on: April 24, 2019, 03:33:23 AM »
This is why Iím a bit leery of owning a house. We own a condo (purchased new), and so far the only thing we have had to deal with is a washer that stopped working ó knock on wood. The condo association deals with everything else.

My parents own a house. They pay condo fees of around $400/month, and there is a maintenance crew on site in the gated community that deals with most things. The fee works out to be around 1% of the purchase price.

afox

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Re: Best reason for being a renter
« Reply #8 on: April 24, 2019, 10:10:27 AM »
This is why Iím a bit leery of owning a house. We own a condo (purchased new), and so far the only thing we have had to deal with is a washer that stopped working ó knock on wood. The condo association deals with everything else.

My parents own a house. They pay condo fees of around $400/month, and there is a maintenance crew on site in the gated community that deals with most things. The fee works out to be around 1% of the purchase price.

The condo association deals with everything except broken washers?

Freedomin5

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Re: Best reason for being a renter
« Reply #9 on: April 24, 2019, 04:16:09 PM »
This is why Iím a bit leery of owning a house. We own a condo (purchased new), and so far the only thing we have had to deal with is a washer that stopped working ó knock on wood. The condo association deals with everything else.

My parents own a house. They pay condo fees of around $400/month, and there is a maintenance crew on site in the gated community that deals with most things. The fee works out to be around 1% of the purchase price.

The condo association deals with everything except broken washers?

Sorry, not clearly written. Everything else that has broken so far has fallen under the condo associationís purview. Stuff like fixing the roof and air conditioning systems and water lines, etc. The only thing we have had to pay out of pocket so far is a washer that stopped working.

Telecaster

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Re: Best reason for being a renter
« Reply #10 on: April 24, 2019, 04:32:06 PM »
Home ownership isn't for broke people!!!!

I really did laugh out loud at this.  So true!

FIREstache

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Re: Best reason for being a renter
« Reply #11 on: April 24, 2019, 05:16:33 PM »
I've been in my house 17 years.  It's paid for.  Repairs over that time, including a few new appliances, and tree removal, have been pretty low.  If I factor in some upcoming expenses for roofing repair, roofing, new carpeting, deck repairs, it's getting around $80/mo. in today's dollars and could go higher.  My homeowner's insurance and property tax over the last year was about $400/mo.  So, my monthly cost is about $480/mo. now when including all previous repairs and larger ones that I expect to have within the next year or two.

I checked out the market for house rentals in my area, and it looks like mine could rent for about $1200/mo.

In that respect, it looks a lot better to own, but that's not factoring in the mortgage or opportunity cost, nor for optional home improvements, just the difference that I'm paying monthly now for my paid off home vs. what it would likely cost to rent it.

SwordGuy

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Re: Best reason for being a renter
« Reply #12 on: April 24, 2019, 08:15:25 PM »
You can purchase insurance to cover the major repairs from companies like American Home Shield.    (I think their service sucks, but then how many huge repair bills do you expect to get?)  I'm sure there are others to choose from, that's just the one I know.


On a different note, 2 of the 3 houses I bought to live in before our current one went up in value rather nicely.    The first house was a wash, the 2nd went up enough to cover 1/2 the purchase price of the 3rd.   The 3rd went up enough to cover the PITI and all repairs.   Our 4th, the current one, we picked up at $96k below the after-repair market value.  Subtract out 30k for repairs and we're on target to make money on this one, too, if we ever choose to move again.

None of the rental units I lived in ever did that for me.   

FIREstache

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Re: Best reason for being a renter
« Reply #13 on: April 25, 2019, 03:58:57 PM »
Sadly, home appreciation over the last 17 years where I live has been dismal.  Based on looking what area homes are selling for (and those sitting not selling), I would estimate that my home has gone up in value about 20% tops in that amount of time, and that's only after completing some needed maintenance that needs done.  Also frustrating is that my property taxes and homeowners insurance have gone up 75% and 80% respectively despite a much smaller home value increase.

SwordGuy

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Re: Best reason for being a renter
« Reply #14 on: April 25, 2019, 05:08:50 PM »
Sadly, home appreciation over the last 17 years where I live has been dismal.  Based on looking what area homes are selling for (and those sitting not selling), I would estimate that my home has gone up in value about 20% tops in that amount of time, and that's only after completing some needed maintenance that needs done.  Also frustrating is that my property taxes and homeowners insurance have gone up 75% and 80% respectively despite a much smaller home value increase.

I understand.  In a way, personal home appreciation is a bit like buying a lottery ticket.  The odds aren't awesome you'll make a huge amount, but you can't win if you don't buy one.

For example, house #3 brought us about $55k over purchase price after subtracting out commissions and pre-sale prettying up costs.   Counting principal and interest costs, we came out $21k ahead over the total we had spent on principal and interest to pay off the house.  If you include taxes, insurance and repairs, it ended up costing us about $50k to live there for 14 years, or about $300 a month.   Rent on that house might easily have averaged $1,200 to $1,500 a month for the same time.    House #3 was definitely cheaper to live in as a buyer.   

Enigma

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Re: Best reason for being a renter
« Reply #15 on: April 30, 2019, 07:34:03 AM »
I think that individuals living within their means tends to be a major problem.  They do not plan or set aside money for basic repairs and upkeep.  Then issues become emergencies and they take the first contractor they can find to fix the issue.  If they are renters living within their means when (not IF) prices go up for rent they start struggling more.

That aside the best reason for being a homeowner is you are in control of your housing costs.  Renters are at the mercy of rising costs of renting.   As a past renter I found myself picking basic amount of living space than I needed to live in while in questionable areas.  As a current owner I find myself in a nice sized house in a great area of town.


misshathaway

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Re: Best reason for being a renter
« Reply #16 on: May 02, 2019, 10:31:20 AM »
That aside the best reason for being a homeowner is you are in control of your housing costs.  Renters are at the mercy of rising costs of renting.   As a past renter I found myself picking basic amount of living space than I needed to live in while in questionable areas.  As a current owner I find myself in a nice sized house in a great area of town.

Depends on the area. I live in eastern MA and property taxes go up every year. This year they went up 30%. Next year it will be more to cover school construction. After next year, if I stayed, my taxes would be the same as rent for a studio apt in Florida.

Enigma

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Re: Best reason for being a renter
« Reply #17 on: May 03, 2019, 01:28:56 PM »
Depends on the area. I live in eastern MA and property taxes go up every year. This year they went up 30%. Next year it will be more to cover school construction. After next year, if I stayed, my taxes would be the same as rent for a studio apt in Florida.

I just checked the county & city taxes website.  Thankfully the taxes for 2018 was less than prior years (2013, 2014, 2015, 2016, and 2017) with 2013 being the worst year for my taxes.

conwy

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Re: Best reason for being a renter
« Reply #18 on: May 12, 2019, 03:40:15 PM »
I rent while having a tonne of growth investments and plenty of cash and couldn't be happier.

I sacrifice owning a physical piece of land and a house on it for having mental clarity and peace of mind, being able to move almost anywhere in the world in a heartbeat, having practically zero obligations, commitments or debts to anyone and being able to quit work anytime I want.
« Last Edit: May 12, 2019, 04:00:56 PM by conwy »

theoverlook

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Re: Best reason for being a renter
« Reply #19 on: May 13, 2019, 06:51:51 AM »

Depends on the area. I live in eastern MA and property taxes go up every year. This year they went up 30%. Next year it will be more to cover school construction. After next year, if I stayed, my taxes would be the same as rent for a studio apt in Florida.
Don't rents go up accordingly, though? Surely landlords don't keep rents flat if their costs rise every year.

Dicey

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Re: Best reason for being a renter
« Reply #20 on: May 14, 2019, 04:52:19 AM »
Just saw this today: https://www.cnbc.com/2019/04/10/1-in-5-homeowners-makes-this-mistake-and-it-could-ruin-their-finances.html

The best feeling as a renter knowing that a $3,000-$7,000 repair/replacement is NOT my responsibility.
Would you buy a car, never change the oil, then whine about the cost of replacing a blown engine?

A lot of seemingly exorbitant home repair costs are caused by insufficient maintenance. An ounce of prevention is...pretty damn mustachian. Systems wear out in predictable ways. Learn, conduct routine maintenance, save for repairs and replacements, carry adequate insurance and cash reserves and you'll be fine. If you're unwilling or unable to do these things, then by all means, continue renting.

Another cause of unexpected bills is insufficient research prior to buying a property. It's the biggest investment you're likely to ever make. It should also be the most well researched purchase you ever make.

Believe me, as a renter, you are paying for these repairs and maintenance, you just don't think you are because it's included in your rent. And your rental isn't going to allow you to leverage your money or provide equity. The power of leverage and the resulting equity were the keys to FIRE for me.

Linea_Norway

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Re: Best reason for being a renter
« Reply #21 on: May 14, 2019, 06:33:03 AM »
I think that if you are a DIY person, home ownership can be a good thing. If you can fix 75% of the maintenance and problems yourself, you only need to hire a professional every now and then. You save a lot of money compared to people who need to hire someone for every little thing.

My mother hires an electrician to change a fuse... She also hires a gartner and a painter. Everything is expensive.

Our house has pretty low cost, because we do most things ourselves, even the annoying jobs like digging.

Being a renter would be a bit more frustrating for DIY-ers, because you are not allowed to do anything yourself.

SwordGuy

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Re: Best reason for being a renter
« Reply #22 on: May 14, 2019, 07:19:00 AM »
Just saw this today: https://www.cnbc.com/2019/04/10/1-in-5-homeowners-makes-this-mistake-and-it-could-ruin-their-finances.html

The best feeling as a renter knowing that a $3,000-$7,000 repair/replacement is NOT my responsibility.
Would you buy a car, never change the oil, then whine about the cost of replacing a blown engine?

A lot of seemingly exorbitant home repair costs are caused by insufficient maintenance. An ounce of prevention is...pretty damn mustachian. Systems wear out in predictable ways. Learn, conduct routine maintenance, save for repairs and replacements, carry adequate insurance and cash reserves and you'll be fine. If you're unwilling or unable to do these things, then by all means, continue renting.

Another cause of unexpected bills is insufficient research prior to buying a property. It's the biggest investment you're likely to ever make. It should also be the most well researched purchase you ever make.

Believe me, as a renter, you are paying for these repairs and maintenance, you just don't think you are because it's included in your rent. And your rental isn't going to allow you to leverage your money or provide equity. The power of leverage and the resulting equity were the keys to FIRE for me.

Well said!

A friend recently tried to explain to me that renters didn't pay property taxes.  I told them that was possibly the dumbest thing I had ever heard them say.    I may write the check to the county, but I can assure you my renters are paying that tax.

misshathaway

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Re: Best reason for being a renter
« Reply #23 on: May 14, 2019, 08:09:14 AM »

Depends on the area. I live in eastern MA and property taxes go up every year. This year they went up 30%. Next year it will be more to cover school construction. After next year, if I stayed, my taxes would be the same as rent for a studio apt in Florida.
Don't rents go up accordingly, though? Surely landlords don't keep rents flat if their costs rise every year.

They do. I was just responding to the assertion that being a homeowner means that you control your housing cost.

theoverlook

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Re: Best reason for being a renter
« Reply #24 on: May 14, 2019, 11:25:30 AM »
@misshathaway : Oh, sorry - that makes sense.

Enigma

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Re: Best reason for being a renter
« Reply #25 on: May 14, 2019, 12:31:23 PM »
A friend recently tried to explain to me that renters didn't pay property taxes.  I told them that was possibly the dumbest thing I had ever heard them say.    I may write the check to the county, but I can assure you my renters are paying that tax.
Best reason for being a landlord - renters pay for everything.  Renters pay for taxes, insurance, repairs, upgrades, mortgages (P&I), and even put money in the pockets of the landlord.    Over time rent goes up but most of the costs stay the same for the landlord.  As some costs go up a little (3% increase to taxes) the rent goes up more (10% increase) (RENT++).  Landlords are in the business to make money.

Most of my rentals cost 30k-60k a door (27 units) almost 10 years ago.  Most long term rentals have paid more in rent than I have paid in the mortgage and they paid them off for me.  My Capitalization rate varies between 8-12% per unit.

I just sold as a realtor a 3bd/1.5ba 1100 sqft house for $75k in Clarksville TN.  Brick, double-pane windows, CENT heat/air, new carpet, new paint, etc.  The buyers are using both the FHA & THDA ($15k down payment incentive program for TN) with a 30yr loan.  The seller will be covering all the costs to close.  So the owner will be paying about $300/month to own a house (60k loan/ 30yrs / 4.5%).

Comparable rentals in the area are around $1000/m since everyone wants a 3bedroom.

Le Poisson

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Re: Best reason for being a renter
« Reply #26 on: May 14, 2019, 01:08:45 PM »
Folks, that's not a news article. Its an advertisement for a home repair insurance plan.

Don't be fooled by marketing masked as information.

1. Save up an Emergency Fund. Regardless of whether you own a house or not. 3 mos living expenses should cover any emergency housing related or not.
2. Invest in learning - help friends fix their shitholes so when your shithole goes boom, you can DIY the repair and save thousands.
3. Know what to ask when you need a contractor, and beware of things like scope creep and contract conditions. A good contractor may be cheaper than a bad DIY experience.

I've saved thousands in real estate by buying houses with bad roofs. Roofs are an easy fix, but the tools are expensive. Same with plumbing - everything from slow drains to hooking up municipal services is pretty easy if you know 3 rules (1. Hot left, cold right. 2. Vent the line. 3. Shit won't flow uphill.) and even electrical isn't that complicated if you can follow the code.

This year I had to seal the foundation on my rental. It meant hiring an excavator and crew, but I'm still ahead on the property, and the tenants are fantastic. Maintenance is just part of ownership, factor it into your costs and you'll be fine.

conwy

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Re: Best reason for being a renter
« Reply #27 on: May 16, 2019, 07:31:41 PM »
How far do you want to stretch the idea of someone else paying for something because they rent off you? As a full-time worker, my employer pays for my rent. How about that?

If I was knowledgeable about real-estate, found myself in a real-estate buyer's market, had lots of capital to invest, was interested in putting a good deal of time and energy into maintaining a property and wasn't interested in extended periods of travel, yeah, I'd probably buy some real-estate.

As it happens, my situation is the reverse. I know little or nothing about real-estate (and really aren't that interested). All the houses around me are expensive as heck, yet the rentals are so cheap that the room I live in costs less than 5% of my post-tax income. Focussing on my career is paying off much more (in both money and satisfaction) than having to learn how to fix some broken plumbing or something. I can afford to travel anywhere anytime, and still have my net worth grow, sitting in cheap index funds.

I'll pick renting over buying any day.

SwordGuy

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Re: Best reason for being a renter
« Reply #28 on: May 16, 2019, 07:57:42 PM »
How far do you want to stretch the idea of someone else paying for something because they rent off you? As a full-time worker, my employer pays for my rent. How about that?

I would say that is an absurd position to take, which I think you well know.

If I was knowledgeable about real-estate, found myself in a real-estate buyer's market, had lots of capital to invest, was interested in putting a good deal of time and energy into maintaining a property and wasn't interested in extended periods of travel, yeah, I'd probably buy some real-estate.

I'll agree you don't know much about real estate investing.   It's possible to buy real estate without lots of capital to invest and it's certainly possible to make money off real estate with virtually no money to invest.   It doesn't require much time or effort to keep property maintained, that's what you can hire a property manager and tradesmen to do on your behalf.  I don't know where you get the idea you can't travel if you invest in real estate, but that's not true either.   It's certainly possible to invest in real estate where one chooses a plan that requires some or all of those things, but it's not a requirement.  Nor is there any requirement that the real estate one invests in is nearby to where one lives.

As it happens, my situation is the reverse. I know little or nothing about real-estate (and really aren't that interested). All the houses around me are expensive as heck, yet the rentals are so cheap that the room I live in costs less than 5% of my post-tax income. Focussing on my career is paying off much more (in both money and satisfaction) than having to learn how to fix some broken plumbing or something. I can afford to travel anywhere anytime, and still have my net worth grow, sitting in cheap index funds.

I'll pick renting over buying any day.

The only thing you've said above that's I find relevant from a good financial advice point of view is that your rental cost is less than 5% of your post tax income.    That's so cheap that even if buying a house was cheaper, it really isn't likely to matter much that much.  Congrats on finding cheap lodging!