The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Beric01 on August 01, 2014, 12:01:00 PM
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I personally have no intention to ever buy a home in my lifetime. I'm not saying this is the only path or that everyone else should do this, but IMO buying a home is more of a lifestyle decision than a financial one.
Here's an article (http://www.getrichslowly.org/blog/2007/07/16/renting-vs-buying-the-realities-of-home-buying/) on why renting isn't totally irrational. Yes, it was written back in 2007, but the points still ring true.
A few of the reasons why I never plan to buy:
- The ROI on investments is, on average, much better than that of a home. The ROI on a home generally matches inflation, or barely exceeds it. Putting your money in a home rather than investments is an opportunity cost.
- Buying is generally more expensive than renting, at least for the up-front period. I can reach FI earlier by not buying.
- Rent is a fixed payment each month. Home ownership can have many unexpected expenses, such as maintenance and repairs, or even natural disasters.
- Home ownership takes time out of your life to do maintenance and repairs, which then require learning additional skills. I'd prefer to spend my time doing/learning other things.
- Home ownership is not a diversified investment. It's putting huge stock in a single type of investment.
- Home ownership offers almost no flexibility. If you need to change jobs, you may be forced to give up biking to work if the place is too far away. You can't sell your house due to commissions. Imagine paying 6% fees on the act of both buying and selling stock!
I know there's a lot of homeowners and prospective homeowners on these boards. I'm not saying you made a bad decision, though it is (IMO) a lifestyle decision. I just wanted to open up the idea that you really can reach FI as a lifelong renter (haven't seen this type of discussion on these boards).
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Good topic. I ponder it frequently. Although I take great pleasure in maintaining and upgrading my house, I know that it's not for everyone. I'm coming up on ten years in my house and I was planning on crunching the numbers to do a comparison.
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Absolutely. We live in a city where buying is insanity and renting is extremely favourable financially. We also greatly value our freedom and flexibility and would not want to be tied down to any one location. We fully intend to randomly drop everything and take off to go live in cool countries short term after ER.
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Life long renter here. There's a few of us around here, although we're vastly outnumbered. Like you Beric01, renting is a faster path to FIRE for me so I'll definitely be a renter until I FIRE and leave the SF Bay Area. After that, I'm not opposed to buying, but I have no idea where that would be at the moment. I also know it can be more challenging to get a mortgage without a full time job, so it's possible that I'll never own a place. At least not a full size place. I'm slowly becoming a fan of the tiny house "movement", so that may be an option to own.
I do sometimes feel left out on all of the posts that talk about mortgage payments vs. investing. :(
Also, here's the obligatory Jim Collins post to make all of us renters feel great about our decision:
http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
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Great points. It would be nice to be able to get up and move without needing to sell, and also not have to take a big financial hit on upkeep - we recently had to get a new a/c unit for about $5K. Some of our friends love renting and I admire the flexibility in their living situation.
Though as a homeowner there is comfort in knowing that the mortgage will be paid off in a few years which will take that expense out of the equation. And it's nice to know that we could always sell and pocket the equity somewhere down the road.
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If we stay in the Seattle MSA, yeah, it will be lifelong renting unless the market seriously crashes. As it is, renting is cheaper than buying. I would probably pay $1500-$1600 a month easy on the house I rent for $1100. People here think everything RE is dipped in gold. I've seen some of the crappiest construction thrown up in a month commanding $500k TO START. Pfft, forget that.
More likely to happen is that we stay here 4-5 more years making good money and enjoying the PNW, then move back to the Great Lakes and buy something 50%+ down.
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Life long renter here. There's a few of us around here, although we're vastly outnumbered. Like you Beric01, renting is a faster path to FIRE for me so I'll definitely be a renter until I FIRE and leave the SF Bay Area. After that, I'm not opposed to buying, but I have no idea where that would be at the moment. I also know it can be more challenging to get a mortgage without a full time job, so it's possible that I'll never own a place. At least not a full size place. I'm slowly becoming a fan of the tiny house "movement", so that may be an option to own.
I do sometimes feel left out on all of the posts that talk about mortgage payments vs. investing. :(
Also, here's the obligatory Jim Collins post to make all of us renters feel great about our decision:
http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
That's a pretty awesome post! Definitely feels like a pat on the back.
I agree, after reaching FI and leaving this incredibly expensive area, it could make sense financially for me to buy (assuming I settle down in one spot in particular). But for now, I'm calculating my FI "number" based on renting. And the nice thing is that even though I'm living in a small studio, rent will still be cheaper elsewhere, even if I can't find a place this small.
And that brings me to another point - living with less. I don't need thousands of square feet of living space. I have ~250 now, and it's plenty. More space means more cleaning, and more room for "stuff". So I also like the idea of the "tiny house" movement. I'm, if anything, anti-claustrophobic - I like small spaces!
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Owning property makes sense if you plan to stay in an area for a long time and use the property to make money, either through increased value over time for a primary residence and then sale, or through renting the place out. Renting wasn't the solution for me, because I wanted to keep more of my money. I live in a high COL area, but I was able to take advantage of the housing bubble collapse to pick up a house for cheap. Several people I know buy distressed properties or foreclosed places and fix them up to flip them or turn into apartments for rent. Another option is to get a house and turn the basement into an apartment to live in while renting out of the rest of the house to tenants. There are different options for different people, but renting often is not the best choice to make (depending on your circumstances).
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I own 6 properties and rent 7 Unit's so I like that responsible people still want to Rent. My mother's father owned for a couple years and rented after that until he died. He was quite happy. At the end he rented from my parents so he had a fairly reasonable rate as my parents didn't raise his rent. The one downside to renting is the cost will continue to rise but the reality is so will home ownership. The taxes scare the crap out of me regarding my rentals as a retirement plan. I essentially have enough income when the loans are satisfied to live on for the rest of my life save the damn taxes. I figure I will be able to raise the rents enough to cover the taxes if they don't get to crazy with them.
All that to say it's not dumb, when I am working on a holiday to fix up one of my properties I often think I would be better to rent. In the short term very true but for me in the long term not the case. As it is now I pay no mortgage. The rents we receive more then cover all our mortgages even our own home. It's a personal decision on many levels.
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A few of the reasons why I never plan to buy:
These are all really good points.
I rented for many years. For me, the biggest drawback was that someone else ultimately had control of my life. I rented one place (had a great deal) for 10 years. The elderly landlord died, and his widow sold a bunch of properties. I had to move at the end of my lease. The market was at its peak, and rents had skyrocketed, so our costs really went up. We rented another place, intending to stay a long time. The landlord died--yep, again--and we had to move again. We found another place with YOUNG landlords. However, they got into trouble during the recession and decided to sell the house. So we had to move 3 times in four years. We were great tenants--never paid late, took care of the place, fixed things--but none of that mattered.
I much prefer owning and knowing that no one can make me move until *I* want to move. I also like being able to do what I want. Since we bought in 2004, I've put in a huge vegetable garden and planted a bunch of fruit trees that now provide delicious fruit. I don't ever want to go back to renting.
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I live in a high COL area and my hometown, where I plan to return one day, is in an even higher COL area. So I'm pretty sure I'll be renting forever. I'm fine with that. If I fell into dumpster truck full of cash, I'd consider buying. But my income is finite and I have to make choices--I'd prefer to rent, save and invest rather than buy, own and maintain a home.
And I knew I didn't want to buy when I was home-shopping last summer and the only places I could afford--I wouldn't even rent. I stopped the home buying process when I asked myself why I was looking to buy homes in neighborhoods I wouldn't even rent. The answer, "because that's what I can afford" wasn't a good enough reason to buy.
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I have no interest in ever owning a house.
My parents rented a house for a long time. Mom told me a long time ago that they might have bought a house but never had the 20% downpayment (back when you *had* to have that). When my dad died my mom wanted to move closer to town so she just gave 30 days notice and moved. Easy. She now lives in subsidized senior housing (my dad was a vet and town employee) and she is happy. But I digress.
Most all of the places I've rented have been fine to great and landlords have been sad to see me leave. The place my bf and I are in now is probably bigger and more expensive than we need but its a great location (walk/bike everywhere) and the landlord is a very nice guy.
If my life situation changed and I was on my own I'd move to a much smaller place, maybe even just rent a room from someone.
Oh, and I hate doing house maintenance and yardwork and don't want to be tied down.
A friend of mine got a good Federal job in a small mountain town. She thought she was set so she bought a house. A year later the job was discontinued and she had to scramble to find another Fed job somewhere. She ended up moving out of state for a new position and is renting the house out now. She bought an RV to live in which seems to have worked out well for her. She just moved to another Fed job in another state and the RV saved her butt as far as housing went. I'm not sure how she is doing financially now but she used to admire my lack of debt.
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I live in SF, and have no plans on buying (at least while I'm here). My apartment is rent controlled, a couple blocks from the water, with a beautiful view of the bay. The rent isn't "cheap" by any normal definition (except to other SF residents), but it's also not going up.
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I own a home, but I feel like it's a millstone around my neck. I can't afford anything else. And because I can't sell it, I can't move anywhere else to take any other job.
Here's blogger I love: http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/
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My spouse and I have been renting our current house for over 7 years. We hope to stay here until our kids are finished with high school -- another 7 years. Once they move out, we want to move to another state. We also want to travel a lot once we retire.
We both had financially disastrous first marriages and divorces, and we both lost the money we had invested in the houses we bought and lost to divorce. I don't care if I ever own another home.
We are happy to avoid the expenses and responsibilities of home ownership. Our landlord is happy to have stable, responsible tenants.
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A few of the reasons why I never plan to buy:
These are all really good points.
I rented for many years. For me, the biggest drawback was that someone else ultimately had control of my life. I rented one place (had a great deal) for 10 years. The elderly landlord died, and his widow sold a bunch of properties. I had to move at the end of my lease. The market was at its peak, and rents had skyrocketed, so our costs really went up. We rented another place, intending to stay a long time. The landlord died--yep, again--and we had to move again. We found another place with YOUNG landlords. However, they got into trouble during the recession and decided to sell the house. So we had to move 3 times in four years. We were great tenants--never paid late, took care of the place, fixed things--but none of that mattered.
I much prefer owning and knowing that no one can make me move until *I* want to move. I also like being able to do what I want. Since we bought in 2004, I've put in a huge vegetable garden and planted a bunch of fruit trees that now provide delicious fruit. I don't ever want to go back to renting.
If I wasn't planning on having kids, I would probably decide between renting long term vs. owning and renting rooms to roommates. To me, having kids changes the game given that its been shown that kids do better if they have a stable home. I wouldn't want them to have to go through 3 moves in 4 years disrupting their lives.
I just want to say that moving isn't the worst thing for kids! I'm 1 data point, but my family moved a lot (4 regions, 2 states, which necessitated 5 different schools for varying lengths of time), until my parents bought a house when I was 11, and I think it was actually really good for me. It helped me develop a letter-writing habit that really shaped me as a person and kept me connected to friends.
The secure foundation built in our home, not just our house, is what mattered. Just wanted to throw in that 2 cents so people don't feel like they're going to ruin their kids by moving a bunch!
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I just want to say that moving isn't the worst thing for kids! I'm 1 data point, but my family moved a lot (4 regions, 2 states, which necessitated 5 different schools for varying lengths of time), until my parents bought a house when I was 11, and I think it was actually really good for me. It helped me develop a letter-writing habit that really shaped me as a person and kept me connected to friends.
The secure foundation built in our home, not just our house, is what mattered. Just wanted to throw in that 2 cents so people don't feel like they're going to ruin their kids by moving a bunch!
Thank you. I too was a child of expats and never understand why people talk about moving their kids (often within the same first world country where people eat the same food and speak the same language) like it's the harshest thing in the world. 5 countries and 3 foreign languages later, I think my siblings and I turned out quite okay.
Count me in the renter for life camp. There may be a time in my life where I can seriously say "alright, I am ready to drop the anchor here and commit to 10 years", but I have a hard time seeing it.
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That article has some different numbers that really diverge with what I've seen. The highest I've paid for insurance on a home has been ~$80+/month on one valued at ~$600k, and the maintenance figure is very high. I doubt I've ever paid more than $50/month. The mortgage calculation is also a little high for a ~$400k home. I'm getting ~$1930 with current interest rates.
Still, it is ~$600-$700 more per month to rent. Complaining about mortgage interest is valid too, but the solution to that is to get a 15-year mortgage with lower interest rates and a higher monthly.
There's also some missing tax savings. It's not a lot over a few years, but it adds up over time. My grandmother pays ~$800/year on her $600k home. Anyhoo... Ignoring that, I'm still getting hugely different results. Over 15 years (15 year loan), I'm seeing a home cost ~$100k less than renting, even with 8% ROI, and ignoring any increases in rent due to inflation, which I think is very unlikely.
Still, if someone doesn't shop around for insurance, pays a gardener and repairmen $350/month, and gets a 30-year loan with a highish interest rate, then I can see how renting/investing could be better. And naturally, if you move a lot, purchase/sales fees can eat up any advantages.
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If we ever buy it definetly will not be where we live now. Provided that we want to live central enough to allow for a car free lifestyle where I can continue to make 150.000 EUR a year (significant other makes 60.000 EUR and commutes, COL at his place of work would be much lower, but my working hours are incompatible with commuting - or at least incompatible with commuting and sanity), the math plays out as follows:
Apartments suitable for a couple (2-3 rooms) cost around 800-1500 EUR per month in rent and around 450.000-700.000 to buy.
Apartments which are big enough to raise 2+ kids in cost around 1800-2200 EUR per month in rent, whereas to buy such a place would cost around 750.000-1.000.000 EUR.
If we absolutely wanted to own prior to FIRE that would delay things several years. For us it makes a lot more sense to throw 11.000 - 26.000 at rent per year than burdening us with a 500.000 EUR mortgage on top of a 300.000 EUR down-payment. Plus there would be the risk that those crazy prices eventually do not only fall but really collapse and several years of savings would be completely lost.
Renting is fine for now and the next 7 years. We'll re-evaluate then.
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I personally have no intention to ever buy a home in my lifetime. I'm not saying this is the only path or that everyone else should do this, but IMO buying a home is more of a lifestyle decision than a financial one.
Here's an article (http://www.getrichslowly.org/blog/2007/07/16/renting-vs-buying-the-realities-of-home-buying/) on why renting isn't totally irrational. Yes, it was written back in 2007, but the points still ring true.
A few of the reasons why I never plan to buy:
- The ROI on investments is, on average, much better than that of a home. The ROI on a home generally matches inflation, or barely exceeds it. Putting your money in a home rather than investments is an opportunity cost.
- Buying is generally more expensive than renting, at least for the up-front period. I can reach FI earlier by not buying.
- Rent is a fixed payment each month. Home ownership can have many unexpected expenses, such as maintenance and repairs, or even natural disasters.
- Home ownership takes time out of your life to do maintenance and repairs, which then require learning additional skills. I'd prefer to spend my time doing/learning other things.
- Home ownership is not a diversified investment. It's putting huge stock in a single type of investment.
- Home ownership offers almost no flexibility. If you need to change jobs, you may be forced to give up biking to work if the place is too far away. You can't sell your house due to commissions. Imagine paying 6% fees on the act of both buying and selling stock!
I know there's a lot of homeowners and prospective homeowners on these boards. I'm not saying you made a bad decision, though it is (IMO) a lifestyle decision. I just wanted to open up the idea that you really can reach FI as a lifelong renter (haven't seen this type of discussion on these boards).
This is a great topic. But I think each one of the points needs investigation, especially if the goal is early retirement.
1. ROI of investments is NOT always on average higher, if you are looking at risk adjusted return--the stdev of housing is less than half that of the stock market--this matters a lot.
2. Buying is more expensive then renting (initially)--but can you sustain FI when renting? Is your rent somehow controlled so you can predict the inflation? Referencing point 1, you eliminate you risk to the housing market by owning, and since a large portion of your income will go to housing in ER, reducing this risk has huge option value.
3. You pay your landlord to do this work--you could pay other individuals to take care of your house as well. Trust me, you do pay for this while renting
4. You are incorrect that your house is not a diversified investment. As you utilize your home, and you need to utilize real estate to live, owning what you consume is not an investment. If you know there is a 100% chance that you will live in the home you bought for a long time, and you own that home, you are taking on 0 market risk (because the market is 100% correlated to your consumption). If on the other hand you own a diversified index fund, and you are relying on its income to pay your rent, the housing market and the stock market are not 100% correlated, and you have now increased the risk that you may not meet your payments.
5. Good point--and if you are not in ER, then you are absolutely correct. Housing markets are not nearly as liquid as others, but if you pick the right neighborhood, it may not take you as long to sell your house as you think.
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Most of you are not talking about owning a home, but rather purchasing on margin. Owning is an entirely different calculation.
For the people talking about six percent transaction costs, I'd propose that anyone using a realtor isn't being very mustacian. They do have their place, such as when you're selling out of town, but if listing on zillow and CL can save you 5%, isn't it worth a try?
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Most of you are not talking about owning a home, but rather purchasing on margin. Owning is an entirely different calculation.
True. That's what I meant by re-evaluating in 7+ years. If we have more than 1 million net worth, are FIRE and can buy a nice home for 350k in a low COL area that is certainly worth thinking about.
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What I'm actually thinking of doing is renting a place for myself to live in, and buying properties in a lower COL area to rent out.
Partly because I think Melbourne's too damn expensive, and partly because my own situation's likely to change in the next five or ten years. I'm single, so a one bedroom apartment is fine now, but if I meet someone and we decide to start a family in a few years it won't be fine anymore.
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It depends on whether renting or buying is cheaper.
It definitely doesn't make sense to take out a jumbo mortgage you can barely afford but it you find a property you like and can easily afford it then it definitely makes more sense to buy.
It is complete fallacy to say that you will make more money investing in the stock market than property. This only holds true if you do not employ leverage, which almost everybody does when they mortgage their property.
I currently do not own property at the moment having recently sold but over the time period of 10 years have made 220,000 capital gains profit tax free and at most had 50,000 of my own money in the pot at any point. Also, over that period, due to having extremely low interest rate mortgages I was paying less than half what monthly rent would have cost to live in similar properties.
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I personally have no intention to ever buy a home in my lifetime. I'm not saying this is the only path or that everyone else should do this, but IMO buying a home is more of a lifestyle decision than a financial one.
Here's an article (http://www.getrichslowly.org/blog/2007/07/16/renting-vs-buying-the-realities-of-home-buying/) on why renting isn't totally irrational. Yes, it was written back in 2007, but the points still ring true.
A few of the reasons why I never plan to buy:
- The ROI on investments is, on average, much better than that of a home. The ROI on a home generally matches inflation, or barely exceeds it. Putting your money in a home rather than investments is an opportunity cost.
- Buying is generally more expensive than renting, at least for the up-front period. I can reach FI earlier by not buying.
- Rent is a fixed payment each month. Home ownership can have many unexpected expenses, such as maintenance and repairs, or even natural disasters.
- Home ownership takes time out of your life to do maintenance and repairs, which then require learning additional skills. I'd prefer to spend my time doing/learning other things.
- Home ownership is not a diversified investment. It's putting huge stock in a single type of investment.
- Home ownership offers almost no flexibility. If you need to change jobs, you may be forced to give up biking to work if the place is too far away. You can't sell your house due to commissions. Imagine paying 6% fees on the act of both buying and selling stock!
I know there's a lot of homeowners and prospective homeowners on these boards. I'm not saying you made a bad decision, though it is (IMO) a lifestyle decision. I just wanted to open up the idea that you really can reach FI as a lifelong renter (haven't seen this type of discussion on these boards).
I don't think anyone has ever said you can't reach FI as a lifelong renter. In fact when people come posting on the boards asking whether to rent or buy they're usually handed a calculator and told to figure it out. Since it's a roof over the head discussion and not an investment discussion it is advised to throw out all concepts of investment when making the decision and make it a financial decision. As in put a roof over your head in a cost effective manner.
That being said as long as I'm in my location I'll probably be a renter unless the numbers change. And that is key, unless you've got an emotional anchor to home-ownership or renting then it is just a numbers game.
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I don't think anyone has ever said you can't reach FI as a lifelong renter. In fact when people come posting on the boards asking whether to rent or buy they're usually handed a calculator and told to figure it out. Since it's a roof over the head discussion and not an investment discussion it is advised to throw out all concepts of investment when making the decision and make it a financial decision. As in put a roof over your head in a cost effective manner.
This.
When I first got MMM I got all excited about selling my house and renting. Ran the figures where I am, and it didn't stack up, even with a substantial downsize to a cheaper location. So do your own figures.
If you are a nomad type, then better to rent than buy unless you wish to rent your property when you next move. Buying/selling/moving costs, at least in Australia are substantial.
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I disagree with several of your points:
The numbers that pop out of your calculator when you discuss ROI are important, but keep in mind that a home pays you in TWO WAYS: (1) You get the practical use of living in it, and (2) your house is increasing in value. Though exceptions exist, it's reasonable to think that you can live in a house for years . . . then sell it and get back what you've spent. In contrast, at the end of a rental contract, you just get a nice goodbye from the landlord.
The stock market may go up and down, and the value of your house may do the same . . . but it always remains a useful investment. That is, if you chose poorly, your 150K house may decrease and now only be worth 100K, but you can still live in it. In contrast, if your mutual fund dips, you're poorer than you were.
The cost of buying vs. renting fluctuates wildly, but in my area buying a same-size house is usually slightly less expensive than renting an apartment.
Renting is NOT a fixed expense; rather, once your lease expires, your landlord may decide to increase your rent. In contrast, if you have a fixed-mortgage, you're still going to be paying the same amount 10, 20 years from now (unless you pay it off earlier).
Yes, owners do have to be prepared to replace a roof or a furnace, but the reality is that renters are paying these expenses too: It's just less transparent. If you were a landlord, wouldn't you include the cost of future repairs in your rent? You'd put X amount of each month's rent away into an account so that when the water heater quits working, you'd be ready to replace it!
I agree that everyone should diversify his or her investments, and a house should not be the lion's share of anyone's portfolio; however, the better argument here is that you should buy a small, inexpensive house -- not that you should avoid real estate altogether! Incidentally, my house makes up less than 5% of my total assets.
6% realtor fees is outrageous (though that may vary from place to place). The standard is 3%, and although I've owned two houses, I've never paid these fees. It's not hard to buy a house without professional help. However, you will need to go through a lawyer's office to make the transaction official (to protect yourself), and some other fees are unavoidable.
I have to agree with you on a couple things:
Home maintenance and repairs does take time and does require learning additional skills.
Home ownership does reduce flexibility. An apartment dweller who suddenly learns he's having triplets IS in a better position to move quickly than is a home owner.
And I'll bring up a couple other points:
The big one first: You're arguing the difference between renting and paying a mortgage. You're ignoring the biggest benefit of all. Eventually the home owner gets to quit paying his mortgage, whereas the renter must pay every month . . . forever. Take me for example: When we married, we bought a small starter house and paid it off in eleven years. Then we sold it and moved into a larger house in a more convenient neighborhood -- and because we'd lived frugally all those years, we were able to pay cash. So we haven't paid rent or mortgage in more than a decade. With that large line item removed from the budget, we were able to travel much more while all our kids were still at home, we are currently able to pay for their college educations without trouble, and we did those things without skimping on saving! Yes, we do still pay maintenance and we do put in time on the house; however, we tend to spend about 3K a year on maintenance and a little over 1K a year on taxes and insurance.
The best deal isn't renting or owning a mortgage: It's owning a house outright! That allows you to live on less so that your dollars stretch farther each month, which is a different way of looking at reaching FI.
With a house of your own, you tend to have more space and more control of that space. I never lived in a rental that had more than one living area, yet when both our children were still at home we definitely enjoyed having a living room and a den. I never lived in a rental that had adequate storage. And in your own home you can paint your walls any color you want or have a trampoline and a dog.
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I am genetically resistant to buying SF, Seattle, Vancouver, NYC level real estate. And because I have craploads of pets, must have gardens, and paint my walls pink, I have to buy my own real estate in order to have the control I want. Ergo, this means I must live in fly-over land where real estate is cheap.
You guys who rent--that's is a perfectly valid choice, and it's even a perfectly valid choice in flyover land, given the right set of circumstances. It's financially sensible and in flyover land it is thinking outside of the box. But I admire the philosophy because I really think that renters can make the numbers work for FIRE.
I will miss out on all of the lovely things that SF and Vancouver and etc have to offer, and that makes me sad. I'd love to live in those places.
Guess that I will just have to visit.
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I have been paying approximately the same amount of money for my house as I would for a small 1-2 bedroom apartment in my area. For about the same price I get way more space, a yard, more privacy, more freedom to customize and do what I want, and thousands of dollars in equity built up. I think it's a no brainer to own in my area.
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Re children and renting: I suspect any negative effects are more from a financially insecure home environment than strictly from renting. I remember growing up we always rented and over hearing my mom talk about moving and finding a good place we could afford every few years. Would seem to be about the same for kids whose parents cant really afford the mortgage (for what ever reason).
Renting vs Buying: Yep, do your own math, figure out what you want. YMMV.
Will just say getting sick of moving and thinking about what the landlord would do at the end of the lease was a BIG driver in me buying. But I live in a medium COL area.
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The best deal isn't renting or owning a mortgage: It's owning a house outright! That allows you to live on less so that your dollars stretch farther each month, which is a different way of looking at reaching FI.
This could be true, but it's not a universal truth. You still have to run the numbers. In very inflated real estate markets, it can be more advantageous to rent forever than to pay off a home after 30 years.
For example, take an initial down payment of $160K and invest it at 7% for 30 years, and you'll (almost) end up with an amount that will cover the equivalent of a $2000/mo rent today, increasing rent by 3% per year. Forever. And that doesn't even account for the difference between your PITI and cheaper rent payment that can be invested along the way.
Essentially, having a huge down payment invested in the stock market versus investing it in a house can end up paying your rent forever. So while it seems like a no brainer that not having a payment would be advantageous, it's not always the case. But of course you have to run the numbers for your specific situation.
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The best deal isn't renting or owning a mortgage: It's owning a house outright! That allows you to live on less so that your dollars stretch farther each month, which is a different way of looking at reaching FI.
This could be true, but it's not a universal truth. You still have to run the numbers. In very inflated real estate markets, it can be more advantageous to rent forever than to pay off a home after 30 years.
For example, take an initial down payment of $160K and invest it at 7% for 30 years, and you'll (almost) end up with an amount that will cover the equivalent of a $2000/mo rent today, increasing rent by 3% per year. Forever. And that doesn't even account for the difference between your PITI and cheaper rent payment that can be invested along the way.
Essentially, having a huge down payment invested in the stock market versus investing it in a house can end up paying your rent forever. So while it seems like a no brainer that not having a payment would be advantageous, it's not always the case. But of course you have to run the numbers for your specific situation.
Yes, I can see that in specific pockets of highly inflated real estate, you'd be in danger of being a housing-bubble victim -- Detroit homeowners would agree -- but those areas aren't representative of the majority of the country.
A "downpayment" of 160K in my area would buy a house . . . plus all the furniture. Gotta love the South. My 2400 sf, all-brick house in a quiet, established neighborhood on a 1+ fenced lot is worth about 150K.
In contrast, if invested, that 160K could be lost, and a 7% return isn't always guaranteed.
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This is a great topic. But I think each one of the points needs investigation, especially if the goal is early retirement.
1. ROI of investments is NOT always on average higher, if you are looking at risk adjusted return--the stdev of housing is less than half that of the stock market--this matters a lot.
2. Buying is more expensive then renting (initially)--but can you sustain FI when renting? Is your rent somehow controlled so you can predict the inflation? Referencing point 1, you eliminate you risk to the housing market by owning, and since a large portion of your income will go to housing in ER, reducing this risk has huge option value.
3. You pay your landlord to do this work--you could pay other individuals to take care of your house as well. Trust me, you do pay for this while renting
4. You are incorrect that your house is not a diversified investment. As you utilize your home, and you need to utilize real estate to live, owning what you consume is not an investment. If you know there is a 100% chance that you will live in the home you bought for a long time, and you own that home, you are taking on 0 market risk (because the market is 100% correlated to your consumption). If on the other hand you own a diversified index fund, and you are relying on its income to pay your rent, the housing market and the stock market are not 100% correlated, and you have now increased the risk that you may not meet your payments.
5. Good point--and if you are not in ER, then you are absolutely correct. Housing markets are not nearly as liquid as others, but if you pick the right neighborhood, it may not take you as long to sell your house as you think.
- I'm not going to argue with you that investing in housing is less risky than with an index fund. You're likely correct. However, housing does carry other risks.
- Renting IS controlled over your lease. You sign a 1-year lease, your rent is stable over that 1 year. If at the end of the year, your landlord wants to raise your rent by 50%, you can just leave and find a cheaper place. That's the thing about renting. It's a market that's is fairly easy to change your situation, unlike housing, where you're stuck.
- Landlords can use their volume and negotiating power to get cheaper repairs than a homeowner. Surely my landlord pays less than I would on their 150 units in my building. Also, it's insurance by spreading the cost over everyone. If the roof above my unit alone needs to be repaired, I pay no more. If rent will go up at the end of my lease due to expensive repairs, I can move.
- Recognize here it's just different kinds of risk we're talking about. You could go bankrupt and need to sell, or get your home foreclosed on. Property taxes could rise. An earthquake/tornado/hurricane could take out your home (depending on where you live). And can I forget eminent domain? Everything has its own set of risks. The problem is, a homeowner can't always just move.
- And you'll also pay more for that neighborhood. It's also a risk. Your home could not sell, or you need to sell it for tens or hundred of thousands of dollars less than you thought it was worth. It's also a risk.
The best deal isn't renting or owning a mortgage: It's owning a house outright! That allows you to live on less so that your dollars stretch farther each month, which is a different way of looking at reaching FI.
This could be true, but it's not a universal truth. You still have to run the numbers. In very inflated real estate markets, it can be more advantageous to rent forever than to pay off a home after 30 years.
For example, take an initial down payment of $160K and invest it at 7% for 30 years, and you'll (almost) end up with an amount that will cover the equivalent of a $2000/mo rent today, increasing rent by 3% per year. Forever. And that doesn't even account for the difference between your PITI and cheaper rent payment that can be invested along the way.
Essentially, having a huge down payment invested in the stock market versus investing it in a house can end up paying your rent forever. So while it seems like a no brainer that not having a payment would be advantageous, it's not always the case. But of course you have to run the numbers for your specific situation.
This is the calculation I ran.
Take the value of your home. Would you prefer to have that money, earning a return on its investment year after year, or a house, roughly increasing with inflation, while you pay rent. The answer will vary widely depending on where you live. I live in the Bay Area and ran the math and it came out for renting, but this is an expensive market. I'm sure in the middle of nowhere, renting is more expensive, and the only people who rent are those who can't save for a down payment.
For me, I determined the fastest way to FI was to rent as cheap of an apartment as possible in a high COL city, for the salary increase. Then, when I hit FI I'll move somewhere else and reevaluate the situation. If I like the area and plan to stick around, maybe I might even buy if the math makes sense.
The other factor here is that I don't need much space. You can't generally buy ~250 square-foot houses the size of my apartment. Condos have more space than I need, and I'd end up paying for that.
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- Renting IS controlled over your lease. You sign a 1-year lease, your rent is stable over that 1 year. If at the end of the year, your landlord wants to raise your rent by 50%, you can just leave and find a cheaper place.
You can't say that renting is stable and also that you can "just leave." You do not have stability if you face the real possibility of having to move at the end of each lease term. The flip side to the freedom and flexibility of renting is that you may have to move when you don't want to, more often than you want to, and not necessarily to a better situation. And you face that uncertainty every year (or more often, depending on your lease term), which in itself can be quite disruptive. The flip side to being "stuck" as a homeowner is that you don't arbitrarily have to move. Both options have the risks associated with their advantages.
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- Renting IS controlled over your lease. You sign a 1-year lease, your rent is stable over that 1 year. If at the end of the year, your landlord wants to raise your rent by 50%, you can just leave and find a cheaper place.
You can't say that renting is stable and also that you can "just leave." You do not have stability if you face the real possibility of having to move at the end of each lease term. The flip side to the freedom and flexibility of renting is that you may have to move when you don't want to, more often than you want to, and not necessarily to a better situation. And you face that uncertainty every year (or more often, depending on your lease term), which in itself can be quite disruptive. The flip side to being "stuck" as a homeowner is that you don't arbitrarily have to move. Both options have the risks associated with their advantages.
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I'm a renter. I'm single, no kids, don't need much space, and dislike home maintenance tasks. Where I live (Irvine, CA) homes are going for about 250 times rent, so prices are a bit out of control. Makes some sense to rent in a market like that. I reached FI a few years ago without ever owning a house. It can be done.
Nothing against owning a house. I think it can be a decent investment if bought on the cheap. Unfortunately people's reasons for buying and selling personal residences are only occasionally tied to local market cycles, and are more tied to job gain/loss or to the misunderstanding that housing is always a good investment.
Mike
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I'm sure a lot of it depends on where you're renting/buying. personally, I'm really looking forward to the time when we're confident enough that we'll be somewhere for several years and are willing to buy. there are two major reasons:
- we have two dogs, which really limits rental options. I thought it was bad enough looking for a rental when we had one 45-lb dog... I am nervous for when we have to look again now that we have two. at least the new one isn't any bigger!
- so goddamn sick of landlords/property managers that never fix or maintain anything. I will gladly spend the time and money to fix my own shit but I'm not putting money into someone else's property!
these two items, to me, are... not priceless, I guess, but pretty important. man I can't wait to own a house. Tulsa is pretty cheap for both buying and renting, so if we wanted to stay here long term we would definitely buy.
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You can't say that renting is stable and also that you can "just leave." You do not have stability if you face the real possibility of having to move at the end of each lease term. The flip side to the freedom and flexibility of renting is that you may have to move when you don't want to, more often than you want to, and not necessarily to a better situation. And you face that uncertainty every year (or more often, depending on your lease term), which in itself can be quite disruptive. The flip side to being "stuck" as a homeowner is that you don't arbitrarily have to move. Both options have the risks associated with their advantages.
I didn't say that the feeling was stable, I said that the price was stable. If you look at my original post, I said that owning a home was a lifestyle decision. It may be that the feeling of stability is the number one priority to you, and thus you'd like to own a home. That's fine.
As a renter, I can control the price after every lease ends. If the price raises and I don't like it, I can pack my bags in less than a day and move somewhere else that has a better price (even if it's not in the same city, or even country). Homeowners can't do that. If your government suddenly doubles your property taxes on your home, what can you do about it?
That's the point I'm trying to make about renting. I sign a lease, and the pricing is rock solid for that lease period. If they try to increase the price, they have to wait until the end of the lease period, or I can sue them. And if the rent increases and I don't like it, I'm out of there. No commission fees or spending months on the market, depending on the housing market conditions. There's countless other landlords out there vying for my business.
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I'm in my early 40's and have rented all my life (mom is lifelong renter too so this goes back to childhood) and I've never had to move due to not being renewed by a landlord or some other non-voluntary reason. All my moves have been self-initiated. Of course it happens but just because the chance is there doesn't mean it's something that happens all that often. There are always outliers, but generally I think if you're a good tenant, landlords are happy to keep you around.
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You can't say that renting is stable and also that you can "just leave." You do not have stability if you face the real possibility of having to move at the end of each lease term. The flip side to the freedom and flexibility of renting is that you may have to move when you don't want to, more often than you want to, and not necessarily to a better situation. And you face that uncertainty every year (or more often, depending on your lease term), which in itself can be quite disruptive. The flip side to being "stuck" as a homeowner is that you don't arbitrarily have to move. Both options have the risks associated with their advantages.
I didn't say that the feeling was stable, I said that the price was stable. If you look at my original post, I said that owning a home was a lifestyle decision. It may be that the feeling of stability is the number one priority to you, and thus you'd like to own a home. That's fine.
As a renter, I can control the price after every lease ends. If the price raises and I don't like it, I can pack my bags in less than a day and move somewhere else that has a better price (even if it's not in the same city, or even country). Homeowners can't do that. If your government suddenly doubles your property taxes on your home, what can you do about it?
That's the point I'm trying to make about renting. I sign a lease, and the pricing is rock solid for that lease period. If they try to increase the price, they have to wait until the end of the lease period, or I can sue them. And if the rent increases and I don't like it, I'm out of there. No commission fees or spending months on the market, depending on the housing market conditions. There's countless other landlords out there vying for my business.
No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.
I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.
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No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.
I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.
I don't see how those are not both true. What I am saying is that I get stability in pricing by choosing between different options in housing. If the pricing is stable, I can stay there. If it's not, I can move. It's the free market.
I'm not saying that you have stability in your lifestyle. Of course you can always live in your house if you own it, precluding natural disasters or eminent domain (which I won't go into). But as a renter, the entire world is open to me. I can choose to move to any apartment in the world I want, and, if I don't sign a lease (which helps me due to locking in the price), move the next month.
So basically, I really can get both flexibility AND the best pricing.
Moving is only a pain if you have too many possessions. Finding a suitable apartment is only a pain if you don't know how to look (they are hundreds of websites at your disposal), or if you're too picky.
I'm not saying renting is better than buying. I'm just saying that renting really does have stability in pricing and flexibility. I fully agree that there are pros and cons and one is not absolutely the superior choice.
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I totally understand where you are coming from. Live in NYC, and no way in hell would I ever consider buying. The maintenance fees would be about 50% of what I pay in rent.
I love feeling like I always have choices-- can up and go anywhere I want. I was able to move to NYC for my dream job in 2008 during the crash because I didn't have a house to sell in a down market.
Plus I hate maintenance chores.
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No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.
I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.
I don't see how those are not both true. What I am saying is that I get stability in pricing by choosing between different options in housing. If the pricing is stable, I can stay there. If it's not, I can move. It's the free market.
I'm not saying that you have stability in your lifestyle. Of course you can always live in your house if you own it, precluding natural disasters or eminent domain (which I won't go into). But as a renter, the entire world is open to me. I can choose to move to any apartment in the world I want, and, if I don't sign a lease (which helps me due to locking in the price), move the next month.
So basically, I really can get both flexibility AND the best pricing.
Moving is only a pain if you have too many possessions. Finding a suitable apartment is only a pain if you don't know how to look (they are hundreds of websites at your disposal), or if you're too picky.
I'm not saying renting is better than buying. I'm just saying that renting really does have stability in pricing and flexibility. I fully agree that there are pros and cons and one is not absolutely the superior choice.
Moving is a huge pain in the ass. Even if you have only a few possessions you have to actually move them all to a new location, change your voting registry, change the address on all your accounts, potentially change school districts, find new stores to shop at, re optimize all your routes, etc. You can dismiss it if you like but it's a huge pain in the ass. Multiple people have already posted saying how much of a pain in the ass it was, and I tend to agree. All of my moves were voluntary and it was still a huge pain in the ass, I can't imagine having that thrust on me on a regular basis through out my life for various circumstances outside of my control.
Also there is no way in hell you are getting comparable pricing in rents now vs 25 years from now, where as a mortgage payment can be locked in for 30 years.
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If you're in a HCOL area, renting usually makes sense. I got lucky and bought my first house (with 3% down) in Eugene, Oregon, in 2001 and sold it in 2007 for a nice profit. Then I bought my next primary residence in PDX during the real estate bubble, lost a bit at the beginning, but have since more than made up for it. The great thing about selling a house with appreciation is the tax-free capital gains (250k single, 500k married).
Anyway, renting makes sense for HCOL or short-term stays. My plan now is to stay in my house in PDX for 10 years and rent the final 4-5 years in a good high school district before leaving town. PDX is (and will be) too expensive in the long term.
Good luck.
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No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.
I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.
I don't see how those are not both true. What I am saying is that I get stability in pricing by choosing between different options in housing. If the pricing is stable, I can stay there. If it's not, I can move. It's the free market.
I'm not saying that you have stability in your lifestyle. Of course you can always live in your house if you own it, precluding natural disasters or eminent domain (which I won't go into). But as a renter, the entire world is open to me. I can choose to move to any apartment in the world I want, and, if I don't sign a lease (which helps me due to locking in the price), move the next month.
So basically, I really can get both flexibility AND the best pricing.
Moving is only a pain if you have too many possessions. Finding a suitable apartment is only a pain if you don't know how to look (they are hundreds of websites at your disposal), or if you're too picky.
I'm not saying renting is better than buying. I'm just saying that renting really does have stability in pricing and flexibility. I fully agree that there are pros and cons and one is not absolutely the superior choice.
Moving is a huge pain in the ass. Even if you have only a few possessions you have to actually move them all to a new location, change your voting registry, change the address on all your accounts, potentially change school districts, find new stores to shop at, re optimize all your routes, etc. You can dismiss it if you like but it's a huge pain in the ass. Multiple people have already posted saying how much of a pain in the ass it was, and I tend to agree. All of my moves were voluntary and it was still a huge pain in the ass, I can't imagine having that thrust on me on a regular basis through out my life for various circumstances outside of my control.
Also there is no way in hell you are getting comparable pricing in rents now vs 25 years from now, where as a mortgage payment can be locked in for 30 years.
You can't grantee property taxes (or renting from the government) won't go up. If fact, I'll bet you they will.
I intend to FIRE outside the US in a cheaper COL country (renting, of course). So yes, I will be able to keep my costs constant.
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No, it is not just a feeling. There are actual costs in time and money every time you have to look for a new place, move your stuff, and re-optimize your commute, errands, etc. Those are the tradeoffs for the advantages of renting.
I agree that renting has many good points and it can make more sense than owning for a lot of people. I never said owning was better. This discussion is great because it presents the benefits of both options. However, your posts are trying to win the discussion by having it both ways--renting is flexible, you can pick up and leave, *and* it's rock-solid stable with totally predictable expenses. It can't be both.
I don't see how those are not both true. What I am saying is that I get stability in pricing by choosing between different options in housing. If the pricing is stable, I can stay there. If it's not, I can move. It's the free market.
I'm not saying that you have stability in your lifestyle. Of course you can always live in your house if you own it, precluding natural disasters or eminent domain (which I won't go into). But as a renter, the entire world is open to me. I can choose to move to any apartment in the world I want, and, if I don't sign a lease (which helps me due to locking in the price), move the next month.
So basically, I really can get both flexibility AND the best pricing.
Moving is only a pain if you have too many possessions. Finding a suitable apartment is only a pain if you don't know how to look (they are hundreds of websites at your disposal), or if you're too picky.
I'm not saying renting is better than buying. I'm just saying that renting really does have stability in pricing and flexibility. I fully agree that there are pros and cons and one is not absolutely the superior choice.
Moving is a huge pain in the ass. Even if you have only a few possessions you have to actually move them all to a new location, change your voting registry, change the address on all your accounts, potentially change school districts, find new stores to shop at, re optimize all your routes, etc. You can dismiss it if you like but it's a huge pain in the ass. Multiple people have already posted saying how much of a pain in the ass it was, and I tend to agree. All of my moves were voluntary and it was still a huge pain in the ass, I can't imagine having that thrust on me on a regular basis through out my life for various circumstances outside of my control.
Also there is no way in hell you are getting comparable pricing in rents now vs 25 years from now, where as a mortgage payment can be locked in for 30 years.
You can't grantee property taxes (or renting from the government) won't go up. If fact, I'll bet you they will.
I intend to FIRE outside the US in a cheaper COL country (renting, of course). So yes, I will be able to keep my costs constant.
How does your landlord guarantee the property taxes won't increase? You think you aren't going to get charged for things like that? Property taxes increase, and somehow you find properties for the next 40 years that don't include that increase into their rents?
I can always sell my house. Selling your house and moving is only a pain if you have too many possessions. Finding a suitable house is only a pain if you don't know how to look (there are hundreds of websites at your disposal), or if you're too picky.
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I'm a renter. I'm single, no kids, don't need much space, and dislike home maintenance tasks. Where I live (Irvine, CA) homes are going for about 250 times rent, so prices are a bit out of control.
You recognize, of course, that this crazy, outrageous price isn't representative of the country as a whole -- and it's going to end at some point, then those homeowners will lose money like crazy. But that has little to do with the rest of us. It's a unique situation.
I didn't say that the feeling was stable, I said that the price was stable. If you look at my original post, I said that owning a home was a lifestyle decision. It may be that the feeling of stability is the number one priority to you, and thus you'd like to own a home. That's fine.
As a renter, I can control the price after every lease ends. If the price raises and I don't like it, I can pack my bags in less than a day and move somewhere else that has a better price (even if it's not in the same city, or even country). Homeowners can't do that. If your government suddenly doubles your property taxes on your home, what can you do about it?
That's the point I'm trying to make about renting. I sign a lease, and the pricing is rock solid for that lease period. If they try to increase the price, they have to wait until the end of the lease period, or I can sue them. And if the rent increases and I don't like it, I'm out of there. No commission fees or spending months on the market, depending on the housing market conditions. There's countless other landlords out there vying for my business.
But that's not true -- not long term. Yes, you're locked into your rent for one year (the likely lease period), but after that the rent can (and probably will) increase. Year after year after year. Example: My daughter is about to move into a college apartment. She and her roommate will EACH be paying roughly what my college roommates and I paid TOTAL 25 years ago. And we're in the same area. Prices definitely will go up.
Are you sure you can find a new rental any time you please? A place in a good location with reasonable rent? If you want just a one-bedroom, it might be easier than if you need something to house a family. And if you have special requests like a good-sized pantry, proximity to public transportation, or a specific school district, you're limited to a very small number of rentals. Once you find a place, will it be available when you want it? To give an example, in January my above-mentioned daughter committed to a two-bedroom apartment starting in August -- people who wait 'til school's out typically can't get a place. Almost before the ink was dry on her lease, her roommate learned that a high school friend is transferring to their school next year, and the two girls agreed that they'd love to switch their two-bedroom for a three-bedroom /include the third girl. NOPE. They were open to taking a four-bedroom and searching for a fourth person. NOPE. Though the complex had just "opened the dates" for the fall semester a week before, they were already sold out -- no three bedrooms were available. The moral: Rentals aren't all that easy to find just anywhere.
In contrast, I own the house I'm sitting in right now. Its value may fluctuate, but it's still MINE. This year, next year, and the year after that -- until I decide to sell it.
Moving is a huge pain in the ass. Even if you have only a few possessions you have to actually move them all to a new location, change your voting registry, change the address on all your accounts, potentially change school districts, find new stores to shop at, re optimize all your routes, etc. You can dismiss it if you like but it's a huge pain in the ass. Multiple people have already posted saying how much of a pain in the ass it was, and I tend to agree. All of my moves were voluntary and it was still a huge pain in the ass, I can't imagine having that thrust on me on a regular basis through out my life for various circumstances outside of my control
I hate moving. Hate, hate, hate, hate, hate it. If you're young and single, it's awful finding a truck and moving the furniture . . . but if you have kids, it's beyond awful. All their stuff, all your stuff -- and oh, the pantry -- then arranging things in the new place. Finding that your favorite chair doesn't fit into the bedroom, and somehow your shower curtain was left behind at the old place. And then there's the transferring of utilities, changing your address, and the little things you forget -- voting registration type stuff, which slips your mind because it's not an everyday thing. No thanks. You can't grantee property taxes (or renting from the government) won't go up. If fact, I'll bet you they will.
Yes, taxes will go up -- insurance too -- but you'll pay it one way or the other. If you're a homeowner, you'll pay it directly. If you're a renter, you'll pay it a bit at a time each month in your rent. Your landlord isn't going to pick up those charges for you!
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Also there is no way in hell you are getting comparable pricing in rents now vs 25 years from now, where as a mortgage payment can be locked in for 30 years.
You can't grantee property taxes (or renting from the government) won't go up. If fact, I'll bet you they will.
I intend to FIRE outside the US in a cheaper COL country (renting, of course). So yes, I will be able to keep my costs constant.
How does your landlord guarantee the property taxes won't increase? You think you aren't going to get charged for things like that? Property taxes increase, and somehow you find properties for the next 40 years that don't include that increase into their rents?
We're already aware that rents will rise. Your claim was that your mortgage payment is "locked in", but Beric is pointing out that's not true because your property taxes will increase. So your payment will also rise. There's no free lunch here.
And as I pointed out above, when you invest the large difference between a mortgage payment and a rent payment, your investments should easily be able to cover these rent increases. (note - may not apply to the area where you live, but definitely applies to the high COL areas where a 2br condo starts at $400K+)
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I will forever Rent from myself and one day from my Children. When I actually was in a property I didn't own I rented from my father. I hope to eventually add his properties to my portfolio.
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Are you sure you can find a new rental any time you please? A place in a good location with reasonable rent? If you want just a one-bedroom, it might be easier than if you need something to house a family. And if you have special requests like a good-sized pantry, proximity to public transportation, or a specific school district, you're limited to a very small number of rentals. Once you find a place, will it be available when you want it? To give an example, in January my above-mentioned daughter committed to a two-bedroom apartment starting in August -- people who wait 'til school's out typically can't get a place. Almost before the ink was dry on her lease, her roommate learned that a high school friend is transferring to their school next year, and the two girls agreed that they'd love to switch their two-bedroom for a three-bedroom /include the third girl. NOPE. They were open to taking a four-bedroom and searching for a fourth person. NOPE. Though the complex had just "opened the dates" for the fall semester a week before, they were already sold out -- no three bedrooms were available. The moral: Rentals aren't all that easy to find just anywhere.
I think that's a college town specific problem. I remember doing that too back in the day (signing in the winter for next fall), but in my experience, that just doesn't happen in a major city. I can't imagine signing a lease even a month before moving, and I'd think two weeks or less is closer to the norm.
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renting is great for ppl who are not sure what the future holds
if one is planning on staying in a specific place for an extended period of time (7 yrs or more) buying almost always comes out ahead - and unlike buy and hold stock investing with the downpayment, there is much less market risk in terms of when you actually get in
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We're already aware that rents will rise. Your claim was that your mortgage payment is "locked in", but Beric is pointing out that's not true because your property taxes will increase. So your payment will also rise. There's no free lunch here.
And as I pointed out above, when you invest the large difference between a mortgage payment and a rent payment, your investments should easily be able to cover these rent increases. (note - may not apply to the area where you live, but definitely applies to the high COL areas where a 2br condo starts at $400K+)
Property tax bills are separate from the mortgage payment. Renters and home owners both end up paying when property taxes increase, but home owners mortgage payments (which are a substantial fraction of the overall housing payment) won't increase. The lunch isn't free, it's just locked in at a certain price for 30 years, so it will not be inflation adjusted in the future. You start out comparing dollars to dollars, but each year into the mortgage you are still using the value of the dollar at the start of the mortgage while your rent contract is going to be pegged at the new value whenever a new lease agreement is signed. Of course if you can get rent cheap enough and invest the difference and make enough return to cover the difference then you are good, but that is not the case where I live...
I find the inverse to be true in my area. I would be paying about the same amount in rent for a substantially smaller place. To get a place of the same size would cost me several hundred dollars a month more than owning, even when factoring in home repairs and upgrades. Not only have I saved thousands over the years by owning instead of renting, but I have thousands of dollars of equity in my house (That will be paying me in free rent one day).
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For your specific situation, sure, the property taxes are separate. My mortgage company requires me to make escrow payments towards my annual property tax bill, so my taxes are included in my mortgage payment. However, the apples to apples comparison is to include a monthly payment towards property taxes in the rent vs. buy decision, whether or not that payment is rolled into your mortgage payment.
W/r/t to the 30-year fixed payment, again, that is specific to the financing tool in your specific situation. Not everyone chooses a 30 year mortgage. And again, since we are looking at PITI, you have to account for insurance and tax increases.
In your particular area, it may make more sense to buy. I guess the more interesting question is, all else equal (ie the rent vs buy financial decision is pretty much a tie), would you prefer to rent or buy in FI? Some of us may still prefer to rent for lifestyle/personal reasons.
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For your specific situation, sure, the property taxes are separate. My mortgage company requires me to make escrow payments towards my annual property tax bill, so my taxes are included in my mortgage payment. However, the apples to apples comparison is to include a monthly payment towards property taxes in the rent vs. buy decision, whether or not that payment is rolled into your mortgage payment.
W/r/t to the 30-year fixed payment, again, that is specific to the financing tool in your specific situation. Not everyone chooses a 30 year mortgage. And again, since we are looking at PITI, you have to account for insurance and tax increases.
In your particular area, it may make more sense to buy. I guess the more interesting question is, all else equal (ie the rent vs buy financial decision is pretty much a tie), would you prefer to rent or buy in FI? Some of us may still prefer to rent for lifestyle/personal reasons.
Mine actually are rolled into one monthly payment to my mortgage company, but they are listed as separate items. I'm pretty sure I could drop my escrow account and pay the taxes and insurance on my own (as I have known others to do), but I see no incentive to go through the trouble. But my point was that any increase in property taxes will affect only the property tax I have to pay and not the portion of my mortgage that goes towards principal and interest. The PI are fixed (unlike rent), while the TI will adjust every year (same as rent). My total PITI will not rise as fast as a rent because of this.
I realize not everyone will get a 30 year mortgage, but you have to include your entire lifetime expense into the calculation. If someone gets a 1 year mortgage, their 1st year PITI will no doubt by substantially more than rent for something comparable, but they will only have TI payments for the rest of their life after that.
All things being financially equal I would still prefer home ownership.
I dislike that I am responsible if anything breaks. It would be nice to just call a land lord and tell him to fix my hot water heater with no additional expenses to me. I also dislike that I will have to do regular maintenance and upgrades like getting my carpet redone instead of simply moving into a new place that is already done up fresh.
However I love that I can do anything I want and don't have to answer to anyone. It's mine and I can drill holes where I want, and do any modifications I want with no permission, I can put in a garden, I can put in a fire pit. I also love that I have a back yard. I have to cut the grass and take care of weeds, but I like doing that stuff on a small scale - totally worth it to have a backyard imo (although I suppose I could still get this if I rented a house). I also like the stability that it provides. I know that I won't be forced to move out at the end of of a lease. I can probably live in this house my entire life if I want with no fear of ever having to move unless I choose to.
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We're already aware that rents will rise. Your claim was that your mortgage payment is "locked in", but Beric is pointing out that's not true because your property taxes will increase. So your payment will also rise. There's no free lunch here.
No, no points for property tax arguments.
1. My property taxes this year are $970. Even if they go up, there's no comparison between property taxes and paying rent.
2. Renters are also paying property tax -- and will pay more when those taxes increase. Anyone who says otherwise isn't stopping to realize that these costs are included in the monthly rent.
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It sounds like people are arguing rather fiercely and maybe emotionally for their preferred choice, and not really answering the OP's question anymore. I thought the Bogleheads Wiki sums it up quite nicely:
There is no definitive answer for owning vs. renting a home. There can be a financial answer as to whether it is cheaper to buy or rent. However, other considerations such as emotional, environmental, and flexibility can sometimes outweigh decisions that may not be financially justified.
http://www.bogleheads.org/wiki/Owning_vs_renting
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To add a wrinkle to the argument - size. They average house size continues to balloon and with more house you have more square feet of air to heat/cool. My 350 square foot studio in Orlando, Florida has me MAXING out my electric bill at $66...in the summer. I couldn't keep the bills that low in a larger house.
Also, the houses in my area that meet the criteria for buy/rent calculator to make purchasing the better financial option (under $100k) are far from work (no biking) and in very sketchy areas of town.
As a life long renter up until now (and probably far into the future) I maintain three important directives: 1. I don't own it so I don't fix it, call maintenance 2. the lease is a business contract, do your research and be a damn bulldog when it comes to potential rent increases 3. do your research, read the neighborhood reviews, and seriously consider all options in your target location
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I think that's a college town specific problem. I remember doing that too back in the day (signing in the winter for next fall), but in my experience, that just doesn't happen in a major city. I can't imagine signing a lease even a month before moving, and I'd think two weeks or less is closer to the norm.
I've heard similar things from my co-workers who rent though. Example: One of my fellow teachers was in a panic near the end of last school year because her roommate was getting married and moving. She wanted to find a cheaper place anyway, but the place she wanted didn't have an opening until June -- leaving her homeless for two months. She ended up moving in illegally with a friend in another apartment for that short time. She worried the whole time about whether the landlord would figure out she was crashing, and she had some trouble with parking.
No, moving from rental to rental does require some effort, planning and luck.
Live in a major city? No thank you.
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I too have my bank automatically send one check per month to cover principle/interest & escrow taxes. The taxes currently are about 12% of the total minimum payment (dont quote me but is something of that magnitude). So if my taxes jumped 5% my total monthly payment would only go up a bit.
BS numbers
800$ payment for principle/interest
120$ local taxes
say taxes go up 5%
120$ * 1.05 = 126$
old monthly total payment 920$, new monthly payment 926$. In my expert engineering opinion I am willing to casually refer to that as unchanged, or "fixed" with an asterisk.
Also taxes are determined by assessed home value times a multiplier the city sets. Generally the home value will change about with inflation and the city multiplier will only change a bit.
In high COL areas it may be best to rent, I would not argue that, but when home owners say there costs are fixed you can see here what they mean. This does half assume the owner (borrower) does not own in a property bubble area where tax might compound on it self with each re-assessment at ever higher values.
Edit: Also may over pay/pre pay so any tax increase is not visible, ie I might put 1200$/mon when mortgage+tax totals 920$ so adding 6$ in tax is invisible to me. I am still paying it but I dont see it without looking at it.
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1. My property taxes this year are $970. Even if they go up, there's no comparison between property taxes and paying rent.
But you're in a cheap area where it's already advantageous to buy over rent, so the comparison is skewed. Because of that, even if your tax rates were the same, your home isn't worth much [comparatively, I'm sure it's very nice :) ], so of course your taxes will be lower. I just looked it up and $970 is about the monthly property tax payment on a $1MM property, which is what (small) houses cost where I currently live.
2. Renters are also paying property tax -- and will pay more when those taxes increase. Anyone who says otherwise isn't stopping to realize that these costs are included in the monthly rent.
No argument here. The point was only that payments for owning aren't simply fixed as mentioned previously. (Granted, more fixed than rent, but not without increases)
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To add a wrinkle to the argument - size. They average house size continues to balloon and with more house you have more square feet of air to heat/cool. My 350 square foot studio in Orlando, Florida has me MAXING out my electric bill at $66...in the summer. I couldn't keep the bills that low in a larger house.
Also, the houses in my area that meet the criteria for buy/rent calculator to make purchasing the better financial option (under $100k) are far from work (no biking) and in very sketchy areas of town.
As a life long renter up until now (and probably far into the future) I maintain three important directives: 1. I don't own it so I don't fix it, call maintenance 2. the lease is a business contract, do your research and be a damn bulldog when it comes to potential rent increases 3. do your research, read the neighborhood reviews, and seriously consider all options in your target location
I view the size opposite to you. My house is 1300 sq ft with a basement. My last electric bill was $53 (I live in mi so I haven't been running the AC all summer). My heating costs in the winter are well under $100 per month, even with the brutal winter we just had. The utility increase for me to go from 350 sq ft to 1300 sq ft is negligible when compared to the total cost of rent/mortgage, but the space increase is huge. Maybe i'm not as minimal as everyone, but I enjoy having 2 bathrooms, and a guest bedroom for friends and relatives, and a separate room to hang and play my guitars without disturbing everyone in the house, and space to have friends and family actually hang out while cooking dinner etc. I could never do all that in a 350 sq ft apartment.
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If anyone is interested in some specific numbers, I can provide my own for my city.
Over the last 8 years I've lived in four apartments in Vancouver. Moving is a bit annoying, but not too much work when you have limited stuff. It probably helps that I don't set my mind on moving into a specific building and resort to going homeless when they don't have a convenient opening (Seriously? Why would someone do that?), but that's besides the point. Pretty much any city has some combination of Craigslist, bulletin boards, phone books, and internet access, which is all you really need to find a place.
My rent has gone from $600 + utilities (about $50/month) + transit pass ($81/month at the time) to $755 including utilities, + 1 book bus tickets/moth ($21/month) over the last 8 years, though the last two apartments were a SIGNIFICANT quality upgrade from the first two. My only housing-related additional expense is mandatory renters insurance, which is $15/month.
The cheapest, smallest condos in the city start at around $250,000, + utilities/garbage/sewage/whateverelsethecitycharges, + MUCH more expensive insurance, + $200 at least in strata fees, + maintenance, etc etc. The second you have something serious that needs to be fixed with the building, bam, special levy, for pretty much any amount - my boyfriend mentioned a building he knows of where it came to $100,000 per unit, all at once, for major critical work.
Mathematically, I just don't see how you could possibly come out ahead by buying rather than renting here.
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It sounds like people are arguing rather fiercely and maybe emotionally for their preferred choice, and not really answering the OP's question anymore.
I was thinking the same thing. Considering that there are very few of us around here who will either rent their whole adult lives until FIRE, or possibly their whole adult lives, this seemed like a good place to build some camaraderie and/or commiserate with each other. Home owners, no need to justify your purchases to us. None of us renters are questioning your decision. We'd simply like the same courtesy extended to us. We're good at math too. If owning made sense for where we live, we'd do it.
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My rent has gone from $600 + utilities (about $50/month) + transit pass ($81/month at the time) to $755 including utilities, + 1 book bus tickets/moth ($21/month) over the last 8 years, though the last two apartments were a SIGNIFICANT quality upgrade from the first two. My only housing-related additional expense is mandatory renters insurance, which is $15/month.
Is that the total amount of rent for the apartment or just your portion? Just curious.
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My rent has gone from $600 + utilities (about $50/month) + transit pass ($81/month at the time) to $755 including utilities, + 1 book bus tickets/moth ($21/month) over the last 8 years, though the last two apartments were a SIGNIFICANT quality upgrade from the first two. My only housing-related additional expense is mandatory renters insurance, which is $15/month.
Is that the total amount of rent for the apartment or just your portion? Just curious.
Total. I guess technically it's been half that much for my share. No roommates, just boyfriends who moved in with me.
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Mathematically, I just don't see how you could possibly come out ahead by buying rather than renting here.
That always seemed crazy to me. Who is buying these places up and renting them when rent is lower than the cost of a mortgage? How those landlords make money if purchasing is so much more expensive than rent?
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If anyone is interested in some specific numbers, I can provide my own for my city.
Mathematically, I just don't see how you could possibly come out ahead by buying rather than renting here.
For what it's worth, I plugged your numbers into the NYT calculator, I had to assume 5% annual home price growth to make buying come out ahead of renting with your numbers after 15 years (assuming 2.5% rent increase, 4.0% investment growth, 2.5% inflation rate).
That always seemed crazy to me. Who is buying these places up and renting them when rent is lower than the cost of a mortgage? How those landlords make money if purchasing is so much more expensive than rent?
They are counting on appreciation, not cash-flow, or they just want a "stable" place to park funds.
Also, most people don't purchase their own personal residence evaluating the cash flow the same as they would a rental..
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If anyone is interested in some specific numbers, I can provide my own for my city.
Mathematically, I just don't see how you could possibly come out ahead by buying rather than renting here.
For what it's worth, I plugged your numbers into the NYT calculator, I had to assume 5% annual home price growth to make buying come out ahead of renting with your numbers after 15 years (assuming 2.5% rent increase, 4.0% investment growth, 2.5% inflation rate).
That always seemed crazy to me. Who is buying these places up and renting them when rent is lower than the cost of a mortgage? How those landlords make money if purchasing is so much more expensive than rent?
They are counting on appreciation, not cash-flow, or they just want a "stable" place to park funds.
Also, most people don't purchase their own personal residence evaluating the cash flow the same as they would a rental..
Won't it appreciate regardless of whether it is owned by a land lord or a home owner? And if it appreciates enough for the land lord to come out ahead, couldn't someone just have bought it themselves and come out ahead?
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If anyone is interested in some specific numbers, I can provide my own for my city.
Mathematically, I just don't see how you could possibly come out ahead by buying rather than renting here.
For what it's worth, I plugged your numbers into the NYT calculator, I had to assume 5% annual home price growth to make buying come out ahead of renting with your numbers after 15 years (assuming 2.5% rent increase, 4.0% investment growth, 2.5% inflation rate).
That always seemed crazy to me. Who is buying these places up and renting them when rent is lower than the cost of a mortgage? How those landlords make money if purchasing is so much more expensive than rent?
They are counting on appreciation, not cash-flow, or they just want a "stable" place to park funds.
Also, most people don't purchase their own personal residence evaluating the cash flow the same as they would a rental..
Did you include $200-$300/month strata fees? That seems to be the thing that really throws the numbers in favour of renting. I also put inflation lower when I run numbers - I feel like 1% is pretty generous, from my own record keeping. For example, I've been buying groceries all the way back since I used to shop for my family when I was 13 (14 years ago), and I spend substantially less now. My small rent increases have all come with drastic quality improvements, so not much real increase there over the last decade. And so on.
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Won't it appreciate regardless of whether it is owned by a land lord or a home owner? And if it appreciates enough for the land lord to come out ahead, couldn't someone just have bought it themselves and come out ahead?
I should say I was just speculating on what makes someone buy a rental in a market like that. I can't actually read people's minds (nor predict future appreciation).
You can see posts in the landlording section of this forum that some people buy strictly for cash-flow and avoid high-cost cities like the plague, others are very happy with the appreciation they have been seeing. Different strokes for different folks. I was just trying my best to answer your original question with my best guess.
Did you include $200-$300/month strata fees? That seems to be the thing that really throws the numbers in favour of renting. I also put inflation lower when I run numbers - I feel like 1% is pretty generous, from my own record keeping. For example, I've been buying groceries all the way back since I used to shop for my family when I was 13 (14 years ago), and I spend substantially less now. My small rent increases have all come with drastic quality improvements, so not much real increase there over the last decade. And so on.
Yes. I put $250 in "monthly common fees" in the calculator.
As for inflation, it seems that the NYT puts 2.3% as the default, I should have probably just left it at that but I figured 2.5% is what most central banks target. We can argue about what someones personal inflation rate is, but that is really hard to estimate. It doesn't seem to make a big difference either way, and a lower inflation rate would make buying slightly more advantageous I think (less of an opportunity cost bite for all those funds tied up in home equity). The other difference is probably that I used the default mortgage rates from the calculator, which are based on American numbers. The (not as heavily government backed) Canadian mortgage situation might be different.
I don't have a particular horse in this race. I was just curious what your numbers would give you.
Waiting 15 years and having to bank on 5% appreciation is a big burden to overcome though...
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Are you sure you can find a new rental any time you please? A place in a good location with reasonable rent? If you want just a one-bedroom, it might be easier than if you need something to house a family. And if you have special requests like a good-sized pantry, proximity to public transportation, or a specific school district, you're limited to a very small number of rentals. Once you find a place, will it be available when you want it? To give an example, in January my above-mentioned daughter committed to a two-bedroom apartment starting in August -- people who wait 'til school's out typically can't get a place. Almost before the ink was dry on her lease, her roommate learned that a high school friend is transferring to their school next year, and the two girls agreed that they'd love to switch their two-bedroom for a three-bedroom /include the third girl. NOPE. They were open to taking a four-bedroom and searching for a fourth person. NOPE. Though the complex had just "opened the dates" for the fall semester a week before, they were already sold out -- no three bedrooms were available. The moral: Rentals aren't all that easy to find just anywhere.
I think that's a college town specific problem. I remember doing that too back in the day (signing in the winter for next fall), but in my experience, that just doesn't happen in a major city. I can't imagine signing a lease even a month before moving, and I'd think two weeks or less is closer to the norm.
oh yeah. renting in a college town is pretty much hell. especially if you have to move at a time of year other than May or August... and/or you have a dog... you are probably fucked.
As a life long renter up until now (and probably far into the future) I maintain three important directives: 1. I don't own it so I don't fix it, call maintenance
would that it were that easy! I still can't believe I'm the only person in this thread to complain about this. seriously one of the biggest things I hate about renting. am I just really bad at identifying terrible landlords/property managers before I move in?
To add a wrinkle to the argument - size. They average house size continues to balloon and with more house you have more square feet of air to heat/cool. My 350 square foot studio in Orlando, Florida has me MAXING out my electric bill at $66...in the summer. I couldn't keep the bills that low in a larger house.
Also, the houses in my area that meet the criteria for buy/rent calculator to make purchasing the better financial option (under $100k) are far from work (no biking) and in very sketchy areas of town.
As a life long renter up until now (and probably far into the future) I maintain three important directives: 1. I don't own it so I don't fix it, call maintenance 2. the lease is a business contract, do your research and be a damn bulldog when it comes to potential rent increases 3. do your research, read the neighborhood reviews, and seriously consider all options in your target location
I view the size opposite to you. My house is 1300 sq ft with a basement. My last electric bill was $53 (I live in mi so I haven't been running the AC all summer). My heating costs in the winter are well under $100 per month, even with the brutal winter we just had. The utility increase for me to go from 350 sq ft to 1300 sq ft is negligible when compared to the total cost of rent/mortgage, but the space increase is huge. Maybe i'm not as minimal as everyone, but I enjoy having 2 bathrooms, and a guest bedroom for friends and relatives, and a separate room to hang and play my guitars without disturbing everyone in the house, and space to have friends and family actually hang out while cooking dinner etc. I could never do all that in a 350 sq ft apartment.
yeah... I tend to rent houses because I have dogs and I like entertaining outside. the big downside to renting a house is you are very limited in what energy efficiency improvements you can make. our rental house is old and our electricity bill BLOWS.
anyway, I love the convenience/cost savings of renting if you aren't planning on being somewhere for a long time, which is where I'm at now. but god damn I hate almost everything else about it. y'all sound like you have had way better experiences than me :)
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y'all sound like you have had way better experiences than me :)
I think it's being open to the idea that renting is a viable option - the root of this thread. When you consider it a business arrangement like any other and you lay the proper ground work, build the relationship from the first moment you show interest in a place, and then continue to be a decent tenant, it's not hard to find a good experience renting.
In Orlando, the properties close enough for me to bike to work are all in the same coveted neighborhood. So for me to buy, I either need to figure out all cash financing to be competitive against flippers (there are a LOT), buy a house that needs no TLC and is too big for my needs and will be expensive to heat/cool, or look to areas that I'm not willing to live in due to blight and crime. Saving an additional $150,000 nest egg earning 4% and withdrawing 700 per month will last 31 years without touching my FIRE reserves. That's also precisely the time I'll qualify for subsidized old folks communities with exactly the amenities I'll need as a jazzy senior citizen. :-)
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Mathematically, I just don't see how you could possibly come out ahead by buying rather than renting here.
That always seemed crazy to me. Who is buying these places up and renting them when rent is lower than the cost of a mortgage? How those landlords make money if purchasing is so much more expensive than rent?
The condo rental market and the lower cost rental market are completely different here, basically. If you own a nice condo, you can rent it out for a couple thousand a month and break even - though people I know who have done this seem to regret it and barely be breaking even, or even slightly losing money but hoping the place appreciates.
The low cost rental market is mostly very old heritage apartment buildings, old houses that have been converted into multiple suites, and strange things that are hard to classify but rent for cheap. I imagine this would be a very difficult market for a potential landlord to get into, as most of these units have been owned by the same people/companies forever.
If you live in one of the low cost rentals, you don't really have a housing equivalent to compare to for buying - you have to look at the condo market for comparison, since that's all there is.
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But that's not true -- not long term. Yes, you're locked into your rent for one year (the likely lease period), but after that the rent can (and probably will) increase. Year after year after year. Example: My daughter is about to move into a college apartment. She and her roommate will EACH be paying roughly what my college roommates and I paid TOTAL 25 years ago. And we're in the same area. Prices definitely will go up.
While I agree with you in theory, it doesn't actually square with my experience as a renter. I lived in one apartment for 5 years and never once did my landlord raise the rent - and we were month-to-month from the beginning. Currently, DH and I are renting a house out of state while I work here and when we asked our landlord about staying beyond our year lease, he enthusiastically said yes, with no change to the terms or rent. ("Stay as long as you like!")
Having said that, we do have friends that were "forced" out of their rental by a landlord who increased rent 50% all at once. But I suspect that's an anomaly at the other end of the scale. I suspect many, if not most, landlords are happy to have good tenants and not to raise the rent at every single opportunity, lest they lose a good tenant and have to spend time and money searching for a new one.
Having said all that, DH and I are homeowners now and will almost certainly buy again in a few years.
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y'all sound like you have had way better experiences than me :)
I think it's being open to the idea that renting is a viable option - the root of this thread. When you consider it a business arrangement like any other and you lay the proper ground work, build the relationship from the first moment you show interest in a place, and then continue to be a decent tenant, it's not hard to find a good experience renting.
I think I may be misunderstanding your statement and may be inappropriately offended by it, but I literally don't know how I could be a better tenant. I have never paid a month of rent late in my life, never damaged a property, never broken a lease... are there other things a tenant is supposed to do? if courteously requesting reasonable maintenance, like fixing a broken dishwasher or a hole in the bathtub, makes me a bad tenant, I don't wanna live in that world. LOL. I'm not sure how I would "build a relationship from the first moment I show interest," other than by being communicative and paying everything on time, which I already do.
it's obviously a totally viable option, and I've had a few great landlords and really loved some of the properties I've rented, but I've also had at least two landlords that were absolutely terrible and I have no idea how I would have known that before I signed a lease :/
But that's not true -- not long term. Yes, you're locked into your rent for one year (the likely lease period), but after that the rent can (and probably will) increase. Year after year after year. Example: My daughter is about to move into a college apartment. She and her roommate will EACH be paying roughly what my college roommates and I paid TOTAL 25 years ago. And we're in the same area. Prices definitely will go up.
While I agree with you in theory, it doesn't actually square with my experience as a renter. I lived in one apartment for 5 years and never once did my landlord raise the rent - and we were month-to-month from the beginning. Currently, DH and I are renting a house out of state while I work here and when we asked our landlord about staying beyond our year lease, he enthusiastically said yes, with no change to the terms or rent. ("Stay as long as you like!")
Having said that, we do have friends that were "forced" out of their rental by a landlord who increased rent 50% all at once. But I suspect that's an anomaly at the other end of the scale. I suspect many, if not most, landlords are happy to have good tenants and not to raise the rent at every single opportunity, lest they lose a good tenant and have to spend time and money searching for a new one.
yeah, I will say this seems to be one downside of renting that is overblown, although maybe it's different in different markets... I've never had the rent raised on me, either.
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I think I may be misunderstanding your statement and may be inappropriately offended by it, but I literally don't know how I could be a better tenant. I have never paid a month of rent late in my life, never damaged a property, never broken a lease... are there other things a tenant is supposed to do? if courteously requesting reasonable maintenance, like fixing a broken dishwasher or a hole in the bathtub, makes me a bad tenant, I don't wanna live in that world. LOL. I'm not sure how I would "build a relationship from the first moment I show interest," other than by being communicative and paying everything on time, which I already do.
it's obviously a totally viable option, and I've had a few great landlords and really loved some of the properties I've rented, but I've also had at least two landlords that were absolutely terrible and I have no idea how I would have known that before I signed a lease :/
I would say a big part of not getting screwed by a bad landlord is just doing your research before renting. I did my research on my current apartments - I read Yelp and other website reviews, I came in for a tour and asked questions, etc. You gotta do your due diligence and you'll be fine.
And I really think people are really overreacting on the rent increase issue. Landlords simply aren't allowed to do that mid-lease. If you are notified of an upcoming rent increase (I think they have to give you at least 30 days, if not more), and you think it's unreasonable, move out rather than getting screwed. Don't sign a new lease. Also, show your landlord you've always paid on time, you're a reliable client, etc. and they may let you keep your current rate. Just paying your rent on time and being a reasonable person goes a long way.
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I think I may be misunderstanding your statement and may be inappropriately offended by it, but I literally don't know how I could be a better tenant. I have never paid a month of rent late in my life, never damaged a property, never broken a lease... are there other things a tenant is supposed to do? if courteously requesting reasonable maintenance, like fixing a broken dishwasher or a hole in the bathtub, makes me a bad tenant, I don't wanna live in that world. LOL. I'm not sure how I would "build a relationship from the first moment I show interest," other than by being communicative and paying everything on time, which I already do.
it's obviously a totally viable option, and I've had a few great landlords and really loved some of the properties I've rented, but I've also had at least two landlords that were absolutely terrible and I have no idea how I would have known that before I signed a lease :/
No offence intended! I meant that doing exactly what you've been doing generally leads to good renting situations. When I say managing the relationship from the start, I mean it's a business relationship. I keep this idea front and center when dealing with landlords and leasing agents.
I keep emotions completely out of the picture whenever possible. I do all my research and bring it with me - reviews, rents I've been offered at nearby locations, floor plans, "amenities", a survey of the number of vacant properties on the rest of the street, etc. I politely explain that I've done my research and clearly state my price range and requirements. I'll negotiate a lower rental rate in that first meeting and if they wont play ball, they're clearly not smart business people so I walk. I've found that smart business owners are more attentive landlords. I also like living in just-past-their-prime apartment communities - they keep a staff of maintenance and groundskeepers which shortens response times for issues.
Each lease renewal, I follow the same procedure - get new quotes from nearby landlords, read the new reviews, get paperwork in order in advance, etc. Again, reminding them that it's a business relationship and I'm eager to continue paying them for their services but it must make financial sense.
I'm the kind of tenant I'd want to rent to if I were ever to own rentals for semi-passive income.
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yeah, I think I've found the following to be generally true:
- SFH/duplex/townhouse rentals with an individual landlord who owns fewer than 5 properties and is their own property manager: always had good experiences with this, though I guess you are taking a risk because research beforehand usually doesn't turn up much
- large apartment complex with dedicated staff: I have only had one experience with this and it was good; based on what I hear from friends, it can go either way, but this one you can probably figure out pretty easily with research beforehand
- SFH/duplex/townhouse rentals managed by property manager/company who manages several (>10) properties/tenants: this is where I've gotten fucked (and yes I know how to use Google, LOL... sometimes there just isn't anything out there)
I'm curious if others have similar experiences/guidelines/rules of thumb. these have held true for me across three different cities (big city, small city, and college town) in three different parts of the country. and yeah, I'm definitely the kind of tenant I would want if I were a landlord. hopefully one day I'll be a landlord and I'll remember what it was like to be a tenant :)