Author Topic: Rent vs buy - if you have to ask... it still feels terrible to rent?  (Read 2134 times)

iva

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Edit to add: I think I tormented myself getting lost in the math a bit here. I had read this article a long time ago out of curiosity, but had no practical need to return to it until now. I think this is helping reconcile the value of renting again for me. https://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/

Hello MMM forums. I've lived for the past 3 years in a HCOL area (DC) where studio and 1-bedroom apartments probably average around $2.5K-$3K, even more for luxury developments. Buying? You might be able to score a 500 sf condo in a high rise for $300K... not really my idea of homeownership.

I calculated that in the last 34-ish months, I've spent over $45K on rent in various average-to-falling-apart housing situations. I know all the literature says houses are such a mediocre investment, but when I see that number on paper, I can't help but feel that I haven't gotten my value's worth. I guess everyone who rents goes through similar feelings, but I'd say in my social circle the feeling that renting is a scam runs particularly strong. I have friends in LCOL areas with similar salaries to me that have owned their places for years already - granted they might not have had student debt, or maybe had help from parents on down payments, etc... I think the peer pressure is weighing on me. I know this isn't constructive.

I think all the time about trying to move my job to a satellite office or remote so that I can live in real house that I'm free to modify as I will, especially lately now that living in the city has temporarily lost most of its perks and the crowding feels like a hazard.

So I guess what I'm wondering is... if you've ever had to rent, how did you cope with feeling like you were throwing $$ away? If you're a landlord, what do you feel is the value you provide to your tenants? (edit: I don't think I phrased this right... see comments below). When did you decide to buy your own place? Is the freedom to move when I want to worth $1300/mo? Love to hear your thoughts.

Another edit: Thanks everyone for sharing their perspectives and sorry to those I inadvertently insulted with this. I typed this up in a frenzy of online shopping for houses in south central VA that are much closer to where I dream of ending up, and at the same time much less expensive all around, and I was just feeling sore about my crowded, costly city life amidst this pandemic. I'm lucky to be where I am right now, I know that extremely well.
« Last Edit: May 25, 2020, 05:55:41 PM by iva »

fell-like-rain

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Well, I pay $1,900 a month for a 1br and condos in my area start in the low $400k range, so PITI would probably be more than my rent, plus Iíd have to pay for maintenance and appliances and heat. Thereís also the flexibility- my partner and I are moving in together in September, and rather than have to go through the huge hassle of selling one or two places, we just didnít renew our leases. Plus, I donít have to have most of my net worth tied up in a single asset thatís highly illiquid and vulnerable to local price swings.

I definitely think a lot about moving to a cheaper area and owning a single family, but I donít think Iíd ever want to own an apartment in an overheated locale. If I was planning to live here forever, I might think differently, though.
« Last Edit: May 21, 2020, 01:34:44 PM by fell-like-rain »

Kem

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A 30 year fixed mortgage is a hedge against inflation and rising area rents.

A properly done purchase includes: principal, interest, taxes, short term maintenance, long term maintenance, and insurance.
Sadly, few folks actually remember to factor in the 2 maintenance buckets when looking at dollars and then bemoan the horrors that are (fully expected) house maintenance.  Nah, you're paying for maintenance if you rent and paying a premium for it. 

In 2009, we bought our home (3 bedroom, 2 garage) for 3.5% down and the total cost of all buckets was slightly less than the dilapidated apartment (1 bedroom, 1 closet listed as a bedroom, no garage). 
Since then I've refinanced back out to 30 years fixed multiple times, each time lowering the cost of living here.  So long as the refi rate is under 5%, the cost of break even is under 12-18 months, and the monthly payments drop I'll pull the trigger until the day I FI & invest the differene.  Our total monthly bucket costs are now  many hundreds less than that crappy apartment we vacated.  Each refi decrease in payment gives me more investable cashflow.


Properly bucketed maintenance accounts gives you a net worth boost via the accumulating cash accounts.   

The house value, over the long run, generally goes up with inflation, again bumping your networth.  Cash accounts cannot do this.

Owning your own place gives you the option of renting additional space to reduce these costs significantly - now know as the hack.

You can move out at anytime and rent the entire unit - no need to give up 8-10% of the home's value in selling fees - no need to pay a landlord to break a lease.  Plenty of property management companies exist that can take the 5-10 hours worth of work/year required for renting your unit for you if you want to move out of the area.

If you rent a room, or the entire unit, you can claim deprecation. Essentially each year you can deduct from taxes   % of Home rented*Homes Structure Value/27.5.  So long as you never sell it - you and your heirs will never have to recognize the deprecation either.

Long term, you really only need to lock 20% of the homes value away - the rest is accessible (new mortgage, heloc, collateral, etc).  This unlocked liquidity can be a zero tax funding source for additional investments.

edit: 
This is mostly determined by the Own vs Rent cost in the area you choose to dwell. 
If the cost of total ownership is equal or less of the cost to rent today, and the area is stable or likely to grow over next 10+ years, then the ownership equation can tip strongly in your favour.   
If the total cost of rental is lower, the area unstable, or likely to decline over next 10+ years, then rental can tip in your favour.


« Last Edit: May 21, 2020, 03:28:58 PM by Kem »

cchrissyy

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i've never felt like rent is throwing money away. 
the money is well-spent on my living space for that month.
rent money also buys me the freedom to move to a better situation if my needs change, or if i find a better price or change my mind about where i want to be.

iva

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In 2009, we bought our home (3 bedroom, 2 garage) for 3.5% down and the total cost of all buckets was slightly less than the dilapidated apartment (1 bedroom, 1 closet listed as a bedroom, no garage). 
Since then I've refinanced back out to 30 years fixed multiple times, each time lowering the cost of living here.  So long as the refi rate is under 5%, the cost of break even is under 12-18 months, and the monthly payments drop I'll pull the trigger until the day I FI & invest the differene.  Our total monthly bucket costs are now  many hundreds less than that crappy apartment we vacated.  Each refi decrease in payment gives me more investable cashflow.

...

You can move out at anytime and rent the entire unit - no need to give up 8-10% of the home's value in selling fees - no need to pay a landlord to break a lease.  Plenty of property management companies exist that can take the 5-10 hours worth of work/year required for renting your unit for you if you want to move out of the area.

Long term, you really only need to lock 20% of the homes value away - the rest is accessible (new mortgage, heloc, collateral, etc).  This unlocked liquidity can be a zero tax funding source for additional investments.

I hear you on the maintenance. I've heard at least 5% of the home's value is a good rule of thumb to save annually for repairs and replacements. The home improvement beast is actually one of the draws to ownership for me - I'm tired of living in ill-maintained places that I have no incentive to fix up.

Interesting about your first purchase - I was wondering about the low down payment piece. I've been window shopping online for a long time now for both houses and mortgages and I was thinking of talking to a real life lender soon. Did you pay mortgage insurance for the first loan until you reached 20% equity? I would love to not have to wait and save up $60K cash, but I haven't sat down and done the math on how a low DP affects costs in the long run.

Edit to add: Big fan of the renting out if you move idea. I'm looking into neighborhoods outside of "up and coming" cities in the south, where homes are cheaper but getting pricier. Hopefully progress would continue to fuel new jobs + the rental market in the long term, but it seems like a bit of a stretch to assume that I could definitely rent it out if I were to move away.
« Last Edit: May 21, 2020, 03:36:16 PM by iva »

Kem

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My long term + short term maintenance buckets are less than 5% in total --- because I share 1 wall as a townhome, it was new construction (purchased from a builder attempting to sidestep bankruptcy during RE bust), and the finish is really low maintenance.  But 5% is a good rule of thumb starting point.

3.5% down, even on a conventional loan (or FHA loan) effectively means you pay an extra 1% 'interest'  In a conventional loan you drop this off at the later of 2 years loan seasoning or 80% LTV.  FHA currently needs to be refinanced at that time period into a conventional. 
(Yes, I paid that extra 1% until 80% was hit, but total cashflow was still lower vs rent)

 

SwordGuy

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If you're a landlord, what do you feel is the value you provide to your tenants?

Seriously, you don't know what value landlords provide to their tenants?

I ask that because I have some liberal friends who have accepted the claptrap that landlords are nothing but parasites on society.

Put your thinking cap on and list some of the value that landlords provide.    We'll chip in if you miss some.  :)

iva

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If you're a landlord, what do you feel is the value you provide to your tenants?

Seriously, you don't know what value landlords provide to their tenants?

I ask that because I have some liberal friends who have accepted the claptrap that landlords are nothing but parasites on society.

Put your thinking cap on and list some of the value that landlords provide.    We'll chip in if you miss some.  :)

This feels a little mean spirited. But alright, my thinking cap is officially *on*... I'm asking for landlords' perspectives for the same reason you're asking for mine. Angry liberal friend circles that make for some heated arguments. And also experiences with bad landlords. I do think imbalanced forgiveness policies for late mortgages vs. late rent and evictions has really soured the conversation lately. My loved ones and I aren't landlords, but my loved ones and I have been taken advantage of as renters at times. I want to hear other perspectives.

I obviously understand the reasons someone would end up renting, given how much I've spent doing it. Landlords are (sometimes, hopefully) carrying out all of the burdensome and costly duties of home ownership, while not actually benefiting from the "home." But then shouldn't rent be the average cost of repairs and maintenance plus the cost of the landlord's time, however they value it? I just don't think renting is priced that way around here, unless repairs are far more costly than I can imagine. Maybe that is the case - my house isn't very well maintained and I've never owned a home so I can't guess. If so, there's the value I've gotten for my $45K. Broken even over the alternative of owning my own place.

Or else the housing owners are asking big $$$$ per hour on top of the value they get to build just from being in a position to own. Not to mention those who push out tenants as an area becomes more in-demand and expensive, in the name of bigger profits. The latter business-folk might be what I think your friends call parasitic. Value of the home goes up, cost to landlord stays the same save for property taxes, but the opportunity cost of passing up higher rent from wealthier tenants is just too horrible to face... previous tenants get to find a worse house or a new community to start over in.

Money that a tenant saves from not having a mortgage isn't going to higher-performing investments, it's going to rent, which provides no monetary return, so I don't know how much of an argument there is to be made about avoiding housing as an investment. Except for those repairs we talked about. And a house isn't like a truck you rent out when you need it. You're always going to need a house and it's not going to depreciate over time the way most other things you'd rent would.

I get that owning anything carries more risk than renting it, and I know that bearing the burden of that risk is the value landlords truly provide. And like I called out earlier, I also shell out my $$$ in exchange for the freedom of 12-month mobility and not having to hire a realtor and a bank every time I move. I'm just beginning to question whether it's been a worthwhile trade.

Maybe I'm frustrated about the wrong thing. People should always have a safe place to call home, even in a time like this when they're forced out of work. It's just the getting there that seems impossible for some. It's late, and I digress... but anyways, hoping to learn here, just like everyone else. Please do chip in...
« Last Edit: May 22, 2020, 09:06:50 AM by iva »

brunetteUK

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Hi Iva!

I feel I have been in the same situation as you describe. In my case, I've been living in London UK for many years and it's the same story: rent is expensive and properties are usually in a bad shape. If you want anything that is well built and well kept, then you're probably looking at 50% of your salary. Many people share a flat for that reason, but flatsharing is all fun and games until you're sick of it.

Interestingly enough, what has swayed me towards home ownership (I intend to start looking for and buying a place in the next few months) was that two of my close friends bought their place not too far from each other.

I have always wanted to stay in London but knew that buying meant going a bit further out. But that gave me such feelings of isolation. So I kept renting (25%-30% of my income sharing with one person) in a central location, in a very well kept apartment. The gains were obvious: close to work, close to the river and parks, close to all the fun restaurants and bars. Downside: my close friends are now 1h30 away from me, I'm still flatsharing.

I have thought of living by myself but OMG the state of the one bed/studio flats! Horrendous! Another thing that swayed me towards ownership is that I can buy a shabby flat but then I CAN RENOVATE IT because it's MINE!

Once my friends bought their place, which fit into my criteria: not tooooo far from London, easy commute into Central London, nice enough surroundings, then it was easy to think "actually I won't be far away from everyone in this area and I can also enjoy the benefits of being close to the London action, and I can feel like a grown up who doesn't have to argue over the dirty dishes".

As many have mentioned, rent gives you flexibility while ownership gives stability. Flexibility is great, for the past few years I was considering moving countries, changing jobs etc... owning my house just didn't fit with that time in my life.

Owning is great in the sense that you lock down the price you pay for living (while rent can keep increasing every year). There is also the part where you have a mortgage debt but you take a long time to pay it so there is inflation so hopefully you try to refinance and keep your interest below inflation, meaning you are better off in real money terms. Better explanation need but bottom line is that owning is not a nightmare of maintenance fees and headaches, whatever you are paying as rent already includes all the landlord's expenses.

I'm looking at property prices and the respective monthly mortgage payments. For a quick sense check, I'm looking for properties where the monthly payment would be £100, £200 lower than my rent so I don't overstretch my budget.

Of course, many detailed calculations are need. But I understand your frustation.

Good luck!


Kem

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Iím going to spin on this

But then shouldn't rent be the average cost of repairs and maintenance plus the cost of the landlord's time, however they value it?  Not to mention those who push out tenants as an area becomes more in-demand and expensive, in the name of bigger profits?

A lot of folks view landlords as evil parasites because they believe them as as greedy scrooges out to make a buck at any expense --- when if most folks understood the value proposition in being a landlord theyíd likely have very different opinions.  Most landlords are just like you and me Ė they are not out to spread poverty and make others lives difficult Ė they are not out for excessive greed.  When tenants up an move, or destroy property (many just call it living), or are in need of eviction Ė they are stealing from the landlord and strangely the laws often allow the tenants to legally steal. 

Lets say Iím not going the route of putting 3.5% down, room rent hacking, and picking up a new principal residence to convert into a rentalÖ but rather buying rentals as rentals.

Many rentals do not initially cashflow.  I can put 30% down on a 150K house around here (45K) and another 20K into repairs. 

Iím out 70K.  70K in something like VTI would double every 7-10 years with zero effort and (essentially) no risk.  Also, how long did it take me to earn 70K net?  On top of my living expenses? On top of my emergency fund?  OhÖ and I need to set aside 6 months of expenses on the property too so I need not only $70K but an additional $8,610 buffer.  At.  A.  Minimum.  What is that 79K in life energy worth?

A house worth 170K will net me $1,400/month in rents.

The monthly cost of owning the property is $520 P&I, $85 for my insurance, $80 for landlord insurance, $140 in taxes, $160 into a sinking fund to cover vacancy, $175 into a sinking fund for long term repairs, $25 into legal fees, $100 for mowing/snow removal, and $140 (typically 10%) management fees . 

That totals $1,425.  I initially loose $300/year in cashflow on most good deals around here.

But that snags me a net worth accelerator Ė per month I average (on paper): $320 in deprecation, $260 in principal paydown, and an average of $20 in appreciation).

Eventually I NEED the property to cashflow otherwise every property I hold would bankrupt me.  A net worth accelerator is good in the long run, but expensive to establish.  This occurs primarily via inflation.  Around here, the volatility is low, so rents tend to raise at 2%/year.  It will be 3-4 years before I break even on my cashflow & it will be 21 years before the cashflow breaks even on the 70K invested.  In VTI I would have netted 140-210K in liquid assets on those funds.  As an aside, I (and many of the bigger pocket folks) try to target $150/month in cashflow within 4 years.   

In 21 years I will have averaged 7,200/year in paper gains that can be unlocked for tax free funding of additional real estate investments (via cash-out refinance, helocs, or as collateral).  If these are used to pick up additional rentals, after doing this for 10-15 years or so Iíll have enough net worth built up and enough cashflow that --- if I live very frugally --- have set myself up for financial independence. 

Thanks to appreciation (ok, really inflation) taxes and maintenance also raise every year - but for simplicity Iím ignoring that here.

But then shouldn't rent be the average cost of repairs and maintenance 
Many of the properties forced under a socialistic rent control have required full demolition after a certain time period.  The landlord looses more and more money, goes bankrupt, and is unable to sell the turd.

iva

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #10 on: May 22, 2020, 09:42:17 AM »
@Kem
Thank you for such an in depth response. I totally follow you. And I'm sure the landlords on this forum are good landlords that give their renters fair deals. I think maybe I've been biased to assume negative intent by a couple of bad eggs.

The moral rightness of the whole thing comes up a lot with some friends in less stable areas because I don't think they can see themselves any time in the near future in a position to buy, even if it would be a better deal given enough time in one place. And so the fear of getting priced out of their homes grows each year.

I have one question that might be stupid. In theory, if housing in an area is bought up and used as rentals, do you think that makes homeownership harder to access for people who might otherwise have been able to afford it? Or is the market ultimately unaffected? Asking because I genuinely don't know, not to be incendiary.

@brunetteUK
Thanks for writing! Yeah, DC has a similar ultimatum of: pay out the nose for a luxury place, or pay out of just one nostril for a place that's kinda grimy. Or else live far from useful public transit.  I would feel much better living in a grimy place if it was truly mine  and I could fix it up 😅

SunnyDays

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #11 on: May 22, 2020, 10:22:22 AM »
Only you can decide what's right for you, apart from the numbers.  (45K in 3.5 years is not all that bad considering all the expenses that go into a house.)

I lived in 2 apartments over 7 years and HATED it. I felt trapped, literally.  A small balcony only; if I wanted to go outside, I had to go out and DO something.  Couldn't just putter around in a yard.  That was by far the deciding factor for me in buying a house.  And being able to change the physical aspects to suit myself.  I would have paid almost any amount for these things, they were that important to me.  I've never calculated which option would have been better financially.  I live in a lower cost area both for renting and home ownership, so either choice could have been justified, but I have never been sorry I made the choice I did.  It all comes down to what is most important to you in terms of lifestyle.


Dicey

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #12 on: May 22, 2020, 12:34:25 PM »
At the risk of sounding even more "mean spirited", I'm going to say that a lot of your original post just sounds like privileged underinformed whining. Don't ask experienced people for help on this site if you don't want honest, from-the-front-lines answers. Hard stop.

I had a great boss who used to say, "People gotta eat." and, "Everybody has to live somewhere." Rent is the price you pay for the freedom from maintenance hassles; from the freedom of saving up a 25% down payment (that's what most lenders require on investment properties - surprise!); the risks of bad tenants, or good tenants who encounter bad situations, like pandemics; the freedom to pull up stakes and move anywhere you want, etc. Renting gives you freedom, and THAT'S what you're paying for, in addition to basic shelter.

But you asked, so here's my answer. Though I have lived all my adult life in HCOLAS (LA, SF), I never lived by myself in expensive housing. I lived with roommates in shared apartments or in other people's houses as their roommate. Even when I eventually owned a big enough place, I still had roommates. It worked great. I saved a ton of money and made a lot of lifelong friends.

Back to my twenties...once I had a year's salary in  the bank, I bought my first house. No, I couldn't afford anything in my HCOLA, so I bought a SFH in the lower COLA place where I grew up. I rehabbed it on a shoestring budget on weekends, then rented it out. I kept it for eight years, and made very little on it when I sold. I would have done better by putting the money into the market bit by bit, but I wanted to own my own home. I learned a lot, and made more money on the next property, and the next one, etc. I am FIRE today because of my real estate adventures. However, it's entirely possible I would have hit my FIRE goal even sooner if I had continued to rent (reasonably), save, and invest.

Never once did I complain that it wasn't fair, nor did I have the advantage of any money other than what I earned and saved on my own. I never earned much more (and sometimes much less) than an average income.

If you want it badly enough, it can be done. There are plenty of people on this forum who have done the same or similar. You can follow the advice that we willingly share, so your journey to FIRE may be smoother, or you can call us "mean-spirited". We're still out here, living our best lives, whatever you decide to do. Best of luck to you in your path to freedom.

Kem

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #13 on: May 22, 2020, 12:37:45 PM »
Yes, bad seeds exist - both in tenants and landlords.  Having lived in a Ďghettoí I understand that Ďslum lordsí can be less than stellar Ė but even many of these folks are not bad.  The folks make money, but have little/no incentive to keep the property in any shape beyond what the local market dictates. (*** I mean no offense above, the area was high violent crime, low income, high homeless - but also extremely inexpensive to live in).

Generally Iíve seen a growing trend in my area that Ďstarter homesí are being converted into rentals by the original owners or purchased by small ma & pop landlords.  The big investors come in and buy a block worth of these homes, tear them down, and build semi-luxury 4 story high density 'condos.'   When an area grows, these type of homes become less desirable to build (or even denied by the city permits) so their supply ultimately dwindles.  If you own in this kind of area you may hit significant appreciation/gentrification.   I believe the transfer of ownership to landlords and/or deep pocket investors in these kind of homes in these kind of areas is a by-product of an appreciating location (not a result of).

Wintergreen78

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #14 on: May 22, 2020, 02:06:45 PM »
I live near the coast in California. My rent is a little over $1600/month for a nice studio In a neighborhood I love. Houses in my neighborhood go for $750,000+ and one bedroom condos go for $500,000+ with $400+/month in association fees. Every time I thought about buying a place I ran the numbers and it made much more sense to keep renting and invest the money I saved on a down payment+mortgage+property taxes+maintenance.

Iíd always assumed I would eventually buy a place, but the only way I could see that making sense financially would be if I bought a place, lived in a smaller unit on the property and rented out the main house. Iíve never been interested in being a landlord, so Iím pretty happy with the arrangement I have now.

As far as I can tell, landlords in my area who buy houses at current prices canít make a profit based on current rents. So, they must be counting on price appreciation of the house and land, or theyíve bought the properties a long time ago and they are basing their numbers on their purchase price, not the current price of the property.

Kem

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #15 on: May 22, 2020, 02:30:06 PM »
1 - hope for, but never bet on appreciation
2 - always base returns on original purchase price.

@Wintergreen78 - buying a 500K property that you can rent for $1,600 is insanity.


Linea_Norway

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #16 on: May 23, 2020, 07:46:31 AM »
We have been home owners for the last 20 years, but will start renting from next month. This is to create less stress between selling our home and finding a new home. We'll take a 1-2 year break to look around for houses and spend a lot of time doing outdoorsy stuff.

We are renting a smallish villa, for (roughly converted) 1400 euro per month. Included utilities, not not electricity, water and broadband. The owners live next door. He is a carpenter and built the house himself. His mother lived in it before us. We are going to test what it is like to live in a hoyse that is 60% the size of the houses we owned. The house has a mountain/ground warmth pump and therefore heating costs should be low. The rental owner wants to move the loan himself, he has a machine for that. Perfectly fine for us, as we don't like mowing. In the contract, the sentence about rent increased was crossed through, as the home owner believed that was only necessary for long term rent. We could in theory stay there for many years for the same rent. She also didn't think it was necessary with a deposit, as she trusts people. We noticed we got an illegal contract, as it is for unlimited time, but with a year minimum rental. In Norway that combination is not legal. But we didn't say snything and just signed it. If we would find a next house and wanted to move within a year, we could always fight the contract.

The downside that I already experience even before moving in, is that we cannot change the garden. I would like to start growing vegetables, but will have to do in a pot on the terrace, where also DH's grapes should survive in pots until we find another house. We cannot change the lawn into a vegetable garden. Also, after we signed the contract, we visited the house again and noticed that the warmth pump is very loud, much louder than it should be. DH is an expert on this kind of regulstions. We will take it up with the home owner when we take over the key and hope he can and will do something about it. DH can make some suggestions. Otherwise, DH can try to do a few things himself. And with all the doors closed, it is not too loud to sleep in.

In general, I think it is a good deal for us to rent a newish house (< 20 years old) for the flexible time that we want it. The garden will provide apples that are on our side of the lawn, which according to rental law is for us to use.

There was also another house where we could imagine living in. That was owned by someone who wanted to live somewhere else for a few years. This was definitely not a typical rental. That house was a few hundred euro more expensive per month, had a high heating bill and required some more hassle. Had a great view though, but ad we have been living with a similar view for years, we were not so impressed as the owner expected. We chose the newer, cheaper and more hassle-free rental.

MrThatsDifferent

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #17 on: May 23, 2020, 09:13:47 AM »
Thank you OP for starting this thread. I donít think youíre whining at all. I understand your dilemma and Iím right there with you. I live in a very HCOL city where the rent is extremely high and so are the housing prices. Reading the JL Collins piece and the Go Curry Cracker piece had me convinced that I would just be an always renter, invest my money and FIRE that way. That was also tied to my plans to leave the very HCOL city that Iím in the second I FIRE and travel the world using geographic arbitrage. Until COVID 19 hit and everything in the world changed. Now, I see me living here a couple more years and I need to think more carefully about where to live next or what geographic arbitrage looks like once the world recovers in 5-10 years.

The current global crisis has made me consider saving more money outside of investments and having a stable base of operations where I am currently since my current city and country have a bunch of advantages that I shouldnít take for granted. Then when I look at buying, it seems that if I have the 20% deposit, my mortgage and associated fees for an apartment will be virtually equal to or less than what I am renting my place for.  And then I think that worst case, if I buy, I can do as the others have suggested and rent it out when I do my global adventures and return to it live years later or sell for something else.

Whatís always stopped me before was the saving the 20% deposit and missing out on the gains in the market, which were incredible until this bloody thing hit. Now that 20% deposit doesnít seem like a bad idea because, again, worst case if I donít buy Iíve got a nice EF that gives me a measure of security during these times.

So my plan is rather simple: for the next 18 months Iím focused on saving all my money in a HISA and then seeing what the property market is like and if I find a good property that fits my criteria of a base and something that could be rented out later, I might pull the plug and buy. If not, and the economy has stabilized and gets back on track then I might invest some of all that I had saved. The only thing Iím losing is the opportunity to buy cheaper stocks but I think 18 months is fine.

These arenít easy decisions. I wasnít expecting a global pandemic to alter my plans but Iíd be an idiot to not recognize that post-COVID world will be different for everyone. For my plans specifically things have changed but they donít need to be abandoned, just more thought and planning. And there is value in security.

All the best to you as you sort your way through.

spartana

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #18 on: May 23, 2020, 01:17:24 PM »
I've been a homeowner of a couple of different SFHs for approx 20 years and have hated it. I would have been better emotionally renting (although financially I probably would have broke even or been ahead as an owner). I hate the cost and time required for maintenance and repairs - which can seem endless and are a huge time suck for a working person (and a FIREd person too). I hated worrying about it when I wanted to go off travelling for a few months or longer, or take advantage of any temporary opportunities far from home. I just always felt tied down and somewhat enslaved by owning a place. Not as easy to just...go!

But  homeownership does allow for far greater security in many ways, especially once paid off,  and as a divorced childless FIREee with no family that's important to me if shtf for some reason. I found I liked having a home base to return to. I liked knowing my pets would have a place they could roam and that I couldn't be kicked out of. Plus I found it was actually hard to rent a long term place once FIREd and living on passive income at a fairly young age. So I have owned for the most part, and probably always will,  but still hate it.

I sold my first house after I FIREd and tried renting for awhile. While I really loved it I eventually bought again to be able to have a place for my dogs and cats and to be closer to elderly parents.   
« Last Edit: May 23, 2020, 01:26:43 PM by spartana »

2Birds1Stone

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #19 on: May 23, 2020, 02:01:17 PM »
Lifelong renters here too, no regrets. We paid $1,100/month for our place for the past 6.5 years and had utilities and WiFi included in that prices. Median SFH price in our area was $400k, we rented a 1 bdrm apartment instead.

People BUY more house than they typically need, while renting they tend to be more reasonable.

swashbucklinstache

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #20 on: May 23, 2020, 03:54:23 PM »
Speaking explicitly, the value landlord's add is taking on risk so that you can live somewhere you can't afford or don't want to purchase right now. Literally, if they weren't letting you'd have to leave DC right now or buy right now.

Renters, in turn, should acknowledge that they are choosing to take on the risk of being later priced out of buying in a specific neighborhood by not buying now. Especially in times of 0% down mortgages.

Landlord's risk + labor is compensated in cashflow dollars + expected value of appreciation + other (e.g. sentimental value, avoiding the risk renters are taking if e.g. they want to live here 10 years from now, taxes, hassle of selling). If it weren't they wouldn't bother, just like you wouldn't when you buy stocks. The market determines the reward for that risk, for the first two anyway, just like it does when you choose to put your money into securities {or, anything at all}. You've noticed that in some HCOL places it never makes sense to buy except when looking at large appreciation and that third bucket - consider that your friends might even be complaining about people knowingly acting against their own expected value financial best interest to give them a great deal over the next 10 years. That's a deal they'll never see in e.g. the stock market =).

Importantly, real estate is hyper-local, so unlike stocks (where you'd need to work to impact national or global wealth inequality against highly organized groups) your friends can directly impact this market determination! "Landlords" aren't the people your friends should be thinking about, but rather the local laws. These can absolutely be written in a way to deter landlording or buying-to-let, especially by those specifically out to make an outsized profit through less than morally upstanding means or in ways with too many other associated negative consequences. Individual landlords and even buy-to-let companies really, really aren't the people driving outcomes here^. Your friends can directly impact this because it's mostly local or state law.

If they want to do more than complain to they sky* they either get involved politically, come to terms with the fact that the tie goes to the people with money on this planet, or mentally re-frame** the landlord value-add scenario. What if, instead, they thought of it this way: buying prices are what they are, and if there were no buy-to-let landlords your choices would be buy the condo, don't live in an area at all, or, if we're limiting letting not banning it, pay 5x the current rent due to much lower supply (or you're staying in a hotel for 9 months). Maybe without landlords buying to let the buy price is $350,000 instead of $500,000 - would they take that trade, since it would've meant you'd have lived in the boonies that last however many years it took to save up that down payment? And that maybe they'd have lived with their parents until they had any down payment saved up at all? Would that limit high paying city jobs to people gifted the $100,000 down payment at 22? What would that do to society? A fun read can be about the creation of mortgages, which weren't always around (so you'd save up the purchase price not the down payment), and their impact on housing. Basically no societies work this way and it's not for no reason, so we're on to just arguing the implementation details, which are again determined locally.

*there's nothing wrong with doing this, of course. Lamenting the downsides to choices a society has made is completely above board. For instance, many areas where lots of landlords enter see housing quality lower over time (accept this as written for now^). It's okay to acknowledge this as a downside of a society's land-letting laws and lament it without calling landlords evil for taking advantage of those laws. Just the same, landlords, you shouldn't take personal offense at someone saying "you operating here lowers the quality of housing" in cases where it is objectively true.

**This is the third option for a reason: it's a lot more complicated than that, so more to help them be less unhappy than make the world a righter place =). It also doesn't cover the much more tragic cases, imo, of longtime owners priced out directly via property tax increases^.

^There are a ton of interesting, non-intuitive, unintended consequences to various housing policies. If you're interested, there are many, many academic papers discussing the various impacts, eventually summing up to economic policies more broadly and their global interplay. Many of the things I said here might be objectively false upon a review of the literature and I expect that to be true for most people reading this.

As an aside, just as there are obnoxious, whiny tenants playing the "woe is me landlords are evil, why do you get so much profit off my back card" there are landlords who, essentially, complain that there are downsides to RE investments. Losing money (direct risk). Getting called late at night / called out on a message board about <anything, even what's actually something the renter is responsible for, because sometimes you need to educate your customers or your customers don't and won't like you as people (think how a tow truck driver feels everyday)> (lifestyle risk). Or one time that no, I wasn't going to risk injuring myself to carry the new full-sized refrigerator up the 3 flights of walk-up steps for my little old lady landlord like they assumed I would just so they can save $50 on delivery, and now they can figure out what to do about it with it on the sidewalk before nightfall (this is a business transaction and I, as a tenant, am treating it as such). There are also tenants and landlords who do none of those things. Sounds like people to me.

All of this, too, might be more a commentary on the changing global purchasing power an individual person generates per hour in the US than renting, buying, and landlording laws.
« Last Edit: May 23, 2020, 04:56:56 PM by swashbucklinstache »

mountainfamily

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #21 on: May 23, 2020, 09:59:11 PM »
I didn't read the whole thread, so maybe this has been addressed... but perhaps you could look at it from the perspective of "what if I rented something decent that I really enjoyed living in?" and make your calculations from there?  It sounds like you're renting places you don't really like. How much would a rental that you felt happy in cost? A rental that you'd be happy to call home for 15 or 20 years? Would you feel at peace being a lifelong renter then? Or, would the higher cost of that rental be too much for you, and spur you to buy?

We always rented close to the bottom of the market, and sometimes it was miserable.  Mold, bad neighbors, no yard space, nowhere to store bikes, etc. Then, we decided to get a small rental house, which was more expensive than crappy apartments, but allowed me to grow my business more, and my income went up. So it paid off. And, we had garden space and lovely neighbors. Then, after a few years of happy renting, our rent was raised from $1400 to $2300 in a short period of time (Seattle...) so we bought a fixer in a good neighborhood knowing we'd be putting in a lot of effort and sweat to make it nice. And, my business grew even more and my husband got a better job. So, life often moves onward and upward and owning a home has been part of that journey for us. We plan to stay long enough to make it worthwhile, and it's getting decently nice to live in.

ixtap

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #22 on: May 24, 2020, 08:59:09 AM »
I had the opportunity to run rent buy calculations on two similar townhouses in the same neighborhood. They had the same floorplan, the one for sale was renovated and a mid unit, the one for rent has original, 20yo features, including that horrible fad of tiled countertops, and was an end unit on the Greenway.

It would have taken five years to get to a point where HOA + interest + taxes would be less than rent. That doesn't include maintenance, selling fees or tying up most of our taxable account on one hand nor appreciation on the other hand. In the first two years, there has been some appreciation, but HOA has also gone up. Rent went up 4% for another two year contract, which should be the end of our time here, meaning we will still save money in just HOA + interest + tax.

Renting does not preclude roommates. We have one. Around here, studios are often more than one bedroom and there is usually less than 10% difference between one and two bedrooms. So sharing what was built as family housing 20-40 years ago just makes sense.

iva

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #23 on: May 25, 2020, 03:59:52 PM »
I didn't read the whole thread, so maybe this has been addressed... but perhaps you could look at it from the perspective of "what if I rented something decent that I really enjoyed living in?" and make your calculations from there?

...

So, life often moves onward and upward and owning a home has been part of that journey for us. We plan to stay long enough to make it worthwhile, and it's getting decently nice to live in.

Thanks for the reply @mountainfamily ! I think what it's coming out to for me is that I just don't enjoy living in this city that much and can't see myself in a HCOL urban center like this in the long term. Renting here especially hurts now, because it doesn't even matter where I'm located. I definitely couldn't afford the kind of home I know I really want eventually if I stayed here - tiny house but a big yard, tall fence, big dog, a garden, maybe some chickens... I've seen people pull off amazing urban farming around here, but I just don't think I'll ever get over how crowded and expensive it is, especially since this crisis has proven that I simply don't need to be here to do my job. I really hope I'm not here in 5 years, let alone 20-30.

Thank you OP for starting this thread. I donít think youíre whining at all. I understand your dilemma and Iím right there with you. I live in a very HCOL city where the rent is extremely high and so are the housing prices. Reading the JL Collins piece and the Go Curry Cracker piece had me convinced that I would just be an always renter, invest my money and FIRE that way. That was also tied to my plans to leave the very HCOL city that Iím in the second I FIRE and travel the world using geographic arbitrage. Until COVID 19 hit and everything in the world changed. Now, I see me living here a couple more years and I need to think more carefully about where to live next or what geographic arbitrage looks like once the world recovers in 5-10 years.

...

So my plan is rather simple: for the next 18 months Iím focused on saving all my money in a HISA and then seeing what the property market is like and if I find a good property that fits my criteria of a base and something that could be rented out later, I might pull the plug and buy. If not, and the economy has stabilized and gets back on track then I might invest some of all that I had saved. The only thing Iím losing is the opportunity to buy cheaper stocks but I think 18 months is fine.

These arenít easy decisions. I wasnít expecting a global pandemic to alter my plans but Iíd be an idiot to not recognize that post-COVID world will be different for everyone. For my plans specifically things have changed but they donít need to be abandoned, just more thought and planning. And there is value in security.

All the best to you as you sort your way through.

@MrThatsDifferent Thanks for helping me feel like I'm not just crazy! And thanks for the well wishes, everything is so incredibly uncertain right now. Your plan sounds solid to me. I will likely end up doing something similar. once my lease ends later this year. I was already considering this last fall before I stayed in DC and signed my current lease, but now I'm pretty sold on the idea of renting next year in a much lower COL area with some friends I know there while I keep saving up and start looking for a house, if it's still looking like a long road to recovery globally.

I had hoped these next few years might hold some epic world travels and international adventures that I'd want maximum flexibility for. Just in February I had started hunting for jobs in Berlin! But any amount of jet setting is incredibly unappealing for the foreseeable future for obvious reasons.

Maybe things will recover faster than I can imagine, but all I've been craving for the last couple of months is stability and control. To me, owning the place you live embodies both of those things. I already have to deal with getting appliances fixed, rats exterminated, lawns mowed, leaks repaired - I'm not fronting (all of) the costs but I am fronting all of the time because my landlord isn't around. I'd rather just cover both, make my place nice to live, and keep the long term benefits in exchange.

At the risk of sounding even more "mean spirited", I'm going to say that a lot of your original post just sounds like privileged underinformed whining. Don't ask experienced people for help on this site if you don't want honest, from-the-front-lines answers. Hard stop.

...


If you want it badly enough, it can be done. There are plenty of people on this forum who have done the same or similar. You can follow the advice that we willingly share, so your journey to FIRE may be smoother, or you can call us "mean-spirited". We're still out here, living our best lives, whatever you decide to do. Best of luck to you in your path to freedom.

Hi again @Dicey ... thank you as always for your thoughtful response (sincerely). And for teaching me to use the bat signal! I've enjoyed reading your journal and I've lurked and learned from other threads here for a long time. I am here to learn from other friendly people and I'm sorry I frustrated you and other members, but just hearing from someone who made it on their own means a lot to me. I made the thread to try and get personal and emotional perspectives of the upsides of renting and the downsides of owning and vice versa. Maybe that one particular comment was trying to be helpful and not mean-spirited and the tone just didn't translate online, but I gotta say that for me it just came across as dismissive and discouraging rather than well-meaning. Strangers on the internet and all that... I certainly wasn't dismissing this entire community's advice-giving.

And I am indeed underinformed... and maybe a little whiny... and I'm definitely privileged. I'd say mostly I'm just scared, though. Especially now. I'm the first from my family to have this kind of a chance at this "wealth" thing and I am plain scared of getting it wrong and messing everything up. I know I'm on easy street, but I'm the only one there and it can feel like a lot of pressure. So reading MMM for the last 6 years or so has really helped me keep my head on straight when it comes to money and other life stuff too, but it's only ever been me talking to myself in my own head. I've enjoyed learning from blog posts over the years, but I'm grateful that there are people to talk to about this stuff with here because I just haven't come across it often in the real world, especially not with people my own age. I often feel like I'm moving too slowly.

I won't go too far into it because it's complicated to articulate, but most of my young peers in my field come from what I would call extreme familial wealth. And I've been humiliated and called entitled by older colleagues when I've describe feeling alone and like a fish out of water among my peers because of my background. This seemed like it might be a better place to muse on my insecurities. I'm sorry I came off entitled; I feel much less like I deserve anything and more like I lucked into it and could lose it at any moment. Maybe others here feel the same. I hope one day to have the confidence of you and the other successful people here, and knowledge of my own to share. Thank you for your well wishes.
« Last Edit: May 25, 2020, 06:00:36 PM by iva »

Paper Chaser

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #24 on: May 26, 2020, 05:32:57 AM »
For a lot of people, HCOLAs aren't all they're cracked up to be. High incomes are nice, but it really seems like higher expenses often offset income increases in HCOLAs and result in lower buying power for all but the highest earners (relative to median income for an area). In many cases, I'd bet a person could take a 20-30k annual pay cut by moving to a LCOLA and have an equal or better quality of life/spending power. If you can keep the same salary and work remotely, that's a no brainer for me. Others might place some intrinsic value on living in the hustle and bustle of a HCOLA that justifies the higher expenses to them, but it doesn't really sound like you do.

Bottom line is that you have the freedom to choose where you live. If the current place is making you unhappy, then move. Maybe to a nicer rental unit. Maybe to a suburb/exurb of the same city. Maybe to someplace 500 miles away. People have been moving in search of a better life for as long as there have been people.

Dicey

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #25 on: May 26, 2020, 07:25:44 AM »
Hi again @Dicey ... thank you as always for your thoughtful response (sincerely). And for teaching me to use the bat signal! I've enjoyed reading your journal and I've lurked and learned from other threads here for a long time. I am here to learn from other friendly people and I'm sorry I frustrated you and other members, but just hearing from someone who made it on their own means a lot to me. I made the thread to try and get personal and emotional perspectives of the upsides of renting and the downsides of owning and vice versa. Maybe that one particular comment was trying to be helpful and not mean-spirited and the tone just didn't translate online, but I gotta say that for me it just came across as dismissive and discouraging rather than well-meaning. Strangers on the internet and all that... I certainly wasn't dismissing this entire community's advice-giving.

And I am indeed underinformed... and maybe a little whiny... and I'm definitely privileged. I'd say mostly I'm just scared, though. Especially now. I'm the first from my family to have this kind of a chance at this "wealth" thing and I am plain scared of getting it wrong and messing everything up. I know I'm on easy street, but I'm the only one there and it can feel like a lot of pressure. So reading MMM for the last 6 years or so has really helped me keep my head on straight when it comes to money and other life stuff too, but it's only ever been me talking to myself in my own head. I've enjoyed learning from blog posts over the years, but I'm grateful that there are people to talk to about this stuff with here because I just haven't come across it often in the real world, especially not with people my own age. I often feel like I'm moving too slowly.

I won't go too far into it because it's complicated to articulate, but most of my young peers in my field come from what I would call extreme familial wealth. And I've been humiliated and called entitled by older colleagues when I've describe feeling alone and like a fish out of water among my peers because of my background. This seemed like it might be a better place to muse on my insecurities. I'm sorry I came off entitled; I feel much less like I deserve anything and more like I lucked into it and could lose it at any moment. Maybe others here feel the same. I hope one day to have the confidence of you and the other successful people here, and knowledge of my own to share. Thank you for your well wishes.
I reacted specifically to your negative comments about landlords, because I am one, as are a number of people around here. We're not greedy, faceless monsters. We're hard-working, risk-taking people with decisions to make and bills to pay, just like you. Your dismissive tone about something you clearly don't know a lot about really rankled. You are welcome to come here and learn and share, but insulting people who started where you did or perhaps even lower, is not the way to get along.

Maybe the incorrect assumptions you've made about landlords could also apply to your perception of your colleagues' familial wealth as well. Instead of positioning yourself as poor in comparison, try to think of yourself as aspiring to be successful on your own merits. Believe me, the victory is sweeter when you earn it. Compare yourself to yourself. Disparaging others is a complete waste of your time and life energy.

I can appreciate that you did not mean to be insulting, but being dismissive of people really inhibits your ability to learn from them. As every cyclist and hypermiler knows, the path is a lot easier if you can draft someone ahead of you.

iva

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #26 on: May 26, 2020, 11:44:10 AM »
@Dicey I think some things are getting lost in translation here. In one of my earliest replies I mentioned that I might want to become a landlord eventually too. I don't think all landlords are greedy faceless monsters and I never accused them of such, you are putting some pretty harsh words in my mouth.

I've just had some bad renting experiences and I'm trying to logic my way through whatever it is I've still gotten out of them. It's been a helpful discussion because I'm realizing that I just don't think what I get from living here is worth the cost and upgrading to a better situation or better landlord wouldn't fix that. And I do really like working hard for what I have and I hope I am successful so one day I can provide for my parents and other loved ones who haven't been so lucky. Being a woman and a first-generation college student is uncommon enough in my field for it to cause some social stress that I didn't expect going into it. But I'm not mad that I'm surrounded by good people who are great friends, who happen to have had it a little easier in life so far. I just have different problems and worries about the future that they can't always relate to so I'm puzzling through it all here instead with nice, well-informed people who are also trying to figure it all out for themselves.

srad

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #27 on: May 26, 2020, 01:00:17 PM »


So I guess what I'm wondering is... if you've ever had to rent, how did you cope with feeling like you were throwing $$ away? If you're a landlord, what do you feel is the value you provide to your tenants? (edit: I don't think I phrased this right... see comments below). When did you decide to buy your own place? Is the freedom to move when I want to worth $1300/mo? Love to hear your thoughts.


I'm a LL and like almost everyone else on here, I have rented.  I'll start with when i was 24 i didn't own a house either.  My first few years out of college i rented a house with a steady rotation of 5 roommates. I did this because the rent was less than our phone and utility bills.  I got married, moved into an apartment with the wife and started cranking up the savings.  It didn't take long because between the two of us we already had some money saved going into the marriage. About a year later, we bought a shitty property on a busy (double yellow lined) street.  We spent 2 years fixing it up, mostly cosmetically cause we were broke and didn't know what we were doing.  At the 2 year mark, both tired of that busy street we sold it and bough another shitty house in a better neighborhood.  We have rinsed and repeated for years, keeping some, selling others (read MANY hours of nights and weekends spent working on homes) and now have a handful or rentals.

So back you your original q, no i didn't think i was throwing away my rent money.  i couldn't afford to buy a home in the city i wanted to make my life in so i rented until i was able to buy.  When my friends in HCOL areas ask me if they should buy, i lay it out for them what it takes and how much they are saving by renting that 3k 1 bedroom apartment vs buying that 1mm starter home , that needs work, in SanFran....  Shoot, my sister is paying 900 for a studio which includes most utilities and internet.  I keep telling her, there is no need to buy, you can't buy a house for 900 a month in our city (portland).   Take that money saved and invest it. Of course, she's traveling instead which is her choice.

Side note, a few years back i spent 2 years in NY for work, i rented while i was out there and even though my rent was more than double the mortgage i had back in Portland, i ended up saving more money than ever before.  Not spending one penny on fixes is priceless.  I loved being able to call someone for the broken step, or backed up plumbing.   Funny, as i'm type this i just got a text from a tenant with a clogged drain. Shoot, I shouldn't of used the example of backed up plumbing.   So i'm out $100 today.

I also thought swashbuckles take on politics was spot on. 

Dicey

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #28 on: May 26, 2020, 03:24:37 PM »
@Dicey I think some things are getting lost in translation here. In one of my earliest replies I mentioned that I might want to become a landlord eventually too. I don't think all landlords are greedy faceless monsters and I never accused them of such, you are putting some pretty harsh words in my mouth.

I've just had some bad renting experiences and I'm trying to logic my way through whatever it is I've still gotten out of them. It's been a helpful discussion because I'm realizing that I just don't think what I get from living here is worth the cost and upgrading to a better situation or better landlord wouldn't fix that. And I do really like working hard for what I have and I hope I am successful so one day I can provide for my parents and other loved ones who haven't been so lucky. Being a woman and a first-generation college student is uncommon enough in my field for it to cause some social stress that I didn't expect going into it. But I'm not mad that I'm surrounded by good people who are great friends, who happen to have had it a little easier in life so far. I just have different problems and worries about the future that they can't always relate to so I'm puzzling through it all here instead with nice, well-informed people who are also trying to figure it all out for themselves.
I appreciate your apology. I also see that your original post has been edited several times. But this is still there: "but I'd say in my social circle the feeling that renting is a scam runs particularly strong"

You've effectively, and I'd like to believe inadvertently, called landlords scammers. I very much object to this characterization. Someday, perhaps when you're a LL yourself, you'll understand the hot button you pressed.

I hope you meet and exceed all of your goals!

Xlar

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Re: Rent vs buy - if you have to ask... it still feels terrible to rent?
« Reply #29 on: May 28, 2020, 12:40:34 PM »
[Snip]

I calculated that in the last 34-ish months, I've spent over $45K on rent in various average-to-falling-apart housing situations.
[Snip]

So I guess what I'm wondering is... if you've ever had to rent, how did you cope with feeling like you were throwing $$ away?

[Snip]


For me personally I have spent over $100k on rent! Obviously that is a big number and I would be much happier if I had spent $0 and saved all of that rent. But owning a house isn't free either. How do I cope with this? I calculate how much buying a house would've cost me, make sure you include the opportunity cost on the down payment closing costs, and delta in monthly expenses.

Expenses if I had of bought the house vs what I did with renting the house: Up front there is the down payment and the closing costs. Since I'm renting that was invested in the market per my investment plan. Then for the house there is the monthly payments, property taxes, HOA, maintenance, and insurance. For rent there is the monthly rent and renters insurance. In my case rent+insurance is less than all the house ownership costs and the delta is invested. If I bought the house there are closing costs when I sell and I would back get the appreciation of the house and the amount that I paid down the house with my mortgage payments.

Since I am looking backwards I can look at the actual investment return and the actual housing price increase.

What's awesome is I can plug every one of those actual numbers in! For my rent I have spent ~117k. If I had of bought I would've spent a total of $149k. So clearly renting ended up being a better option in my specific case.

Now if it didn't work out for me and buying ended up being the better option then I would have to accept that I made the best decision with the information that I had at the time.

Hope that is helpful :)