Author Topic: Why does someone rent?  (Read 4475 times)

bacchi

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Re: Why does someone rent?
« Reply #50 on: July 28, 2019, 02:19:01 PM »
All of the pro-renting posts make my landlord's heart sing. :)

I'm finding it difficult to make the NYT calculator work for renting for any of the places I'm looking at living. It seems like a landlord's market, just as it is in my current city, at least in the urban areas.

We'll be renting for one reason only: To decide where to live. Packing up everything every 6-12 months, including the pets, will suck greatly, though.

mspym

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Re: Why does someone rent?
« Reply #51 on: July 28, 2019, 02:36:17 PM »
The maths is different where I live - we would be paying at least twice as much for a mortgage as our rent is, the only way landlording makes sense is if you got in the market a decade ago or betting on capital gains. There is still the weird attitude though - all these people with investment properties, despising their tenants and 'renters'. Dudes, who is paying off your mortgage for you?

Malkynn

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Re: Why does someone rent?
« Reply #52 on: July 28, 2019, 03:49:16 PM »
The maths is different where I live - we would be paying at least twice as much for a mortgage as our rent is, the only way landlording makes sense is if you got in the market a decade ago or betting on capital gains. There is still the weird attitude though - all these people with investment properties, despising their tenants and 'renters'. Dudes, who is paying off your mortgage for you?

M'eh, hating clients is common in a lot of industries

Wrenchturner

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Re: Why does someone rent?
« Reply #53 on: July 30, 2019, 01:01:19 PM »
The landlords that get mad at their tenants are probably the same ones subsidizing their rental rates without knowing it (by underpricing maintenance, time-value of capital, etc).  It's the same behavior--failure to assess and manage risk/price properly.

Aside from the other points raised, renters also might be hedging against a housing downturn(market timing, I know).  Or they could be renting a room to save or something.

fixie

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Re: Why does someone rent?
« Reply #54 on: July 31, 2019, 01:13:25 PM »
Until this very day, I was a homeowner for the last 9.5 years.  I bought a turd for $250k and polished it almost constantly during that period, and sold it for $700k.  The new millennial owners have a lot to learn, as they asked my agent how to water the garden today...hahaha.

The things that I'll miss the most are a sense of pride and personal space, along with my awesome wood shop.  Now I get to listen to the adjoining neighbors' morning eructations through 2x4 walls hahaha.  However, it got to the point with that house where I spent nearly all my free time fixing things and making improvements.  I built a kitchen and a bathroom in the last month of ownership, and then it went on the market and bingo, done.

What I gain is immeasurable, which is time doing things I value like hanging out with my kiddo more and planning the next life adventure.
I also rent because I couldn't get a sprinter van built out quickly enough before the house closed.  :)

-fixie

spartana

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Re: Why does someone rent?
« Reply #55 on: July 31, 2019, 02:19:47 PM »
 I was also a homeowner for a long time. Bought my last house during the housing downturn for cash (fixer foreclosure) and really hated all the work even of fairly minimal (and I did most of it myself) and don't really want to own again. Renting is great and I like the flexibility and freedom to move. And I also like not having to spend so much of my free time working on house stuff. It gets old after awhile especially on an older home. That said I'll probably buy again soon (already looking for a place) but am looking for an easy care, smaller, newer, low maintenance place on a tiny lot to minimize my work load. I absolutely didn't FIRE to be spending my time re!singling the roof or fixing.the plumbing when I would rather be out skiing! Life is short and I don't want to spend it working on a damn house. I would like to rent forever but it isn't something I like either. Or condos but that's an option.

« Last Edit: July 31, 2019, 02:25:59 PM by spartana »

Swish

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Re: Why does someone rent?
« Reply #56 on: July 31, 2019, 02:52:51 PM »
The landlords that get mad at their tenants are probably the same ones subsidizing their rental rates without knowing it

+1 This. I always have a good guess who the bad landlords are in our town because their properties are consistently 15-20% lower than market values and seem to regularly be vacant. We have a landlord fb group and they are on there always complaining about how the market has turned and tenants are terrible wa wa wa. CTFO fix up your place and raise your rents. Most tenants will gladly pay an extra $100-200 per mo if they know their landlord keeps a place up and is not an insecure phsyco who got into the business after watching one episode of Flip That House.

Wrenchturner

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Re: Why does someone rent?
« Reply #57 on: July 31, 2019, 03:10:52 PM »
The landlords that get mad at their tenants are probably the same ones subsidizing their rental rates without knowing it

+1 This. I always have a good guess who the bad landlords are in our town because their properties are consistently 15-20% lower than market values and seem to regularly be vacant. We have a landlord fb group and they are on there always complaining about how the market has turned and tenants are terrible wa wa wa. CTFO fix up your place and raise your rents. Most tenants will gladly pay an extra $100-200 per mo if they know their landlord keeps a place up and is not an insecure phsyco who got into the business after watching one episode of Flip That House.
I always have to remind myself that my rental market is not like most.  The price to rent ratio favors renting and rent hasn't gone up in ten years(as an average).

Lots of bad landlords here although I haven't had many issues.  The biggest frustration is shitty photos, inability to reach people in a timely fashion, etc. 

It's a good sign as a renter if there are financially questionable landlords around.   Keeps downward pressure on rent!  And it suggests that rent is low proportionally.

Imma

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Re: Why does someone rent?
« Reply #58 on: July 31, 2019, 03:53:18 PM »
It's not every market or personal situation where those numbers work like that. Check out the rent or buy calculator


That!

In my case, as a single person my housing needs/wants are just a small room in a shared apartment. There's no buying market in the size that I'd want (= super tiny) and I prefer flatmates as long as I'm single. That means I could 1. rent a room in a shared house or 2. buy a place with multiple bedrooms and rent those out. As I cannot afford option 2 in my current city I've opted for option 1.

Add in that I can move to anywhere in the world at any moment I want and I'm a committed renter for now :)

I'm in the same country. We were renters for years, because it's extremely difficult to qualify for a mortgage in our country and even when you do, many homes are bought by cash (buy to let) buyers who then charge extortionate rents.

We eventually were able to buy and I can pretty confidently say my 3-bedroom home is probably cheaper than @Hirondelle 's room. At current market price the mortgage wouldn't be that cheap but still a very good deal compared to renting  We rented out one of our bedrooms to a former roommate for more than a year - most of our friends are still renting in their 30s for a very high price because they just don't qualify for a mortgage.

So far home ownership has been cheaper than expected. All that maintenance that everyone complains about never materialized (and we live in an old house) and most things that break can be replaced cheaply.

Seadog

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Re: Why does someone rent?
« Reply #59 on: August 02, 2019, 06:33:03 AM »

This is the only reason why I'm halfway looking into buying a condo. I just don't want to be priced out of my hometown, which is rapidly moving from HCOL to VHCOL.

All the soft "pride of ownership" reasons and most of the hard math ones don't really motivate me much, but locking in a workable monthly housing cost does, as long as it's rentable when I am in a position to do some longer term traveling.

I was always sort of confused by the concept of being priced out of a market, for something as fundamental as a living place. I think the general trend on this forum is to at least average if not above average income, so in essence you *are* the market, so any pricing out can not last forever. If you make above average income, but can't afford even an average home, that situation is simply not sustainable long term for society. Eventually the masses die, people need to sell, and people can only pay what they can afford. 

Vancouver I've mentioned before, but it's like the poster child for this. Yes it takes something like 85% of the average pretax income to afford a mortgage on the average abode, and what happened was everyone who got in years ago was just flipping homes to each other at higher and higher prices. It was almost impossible for anyone to enter the market, and when you realize that $4m home that you just bought (and can only rent out for 5k a year) wont be appreciating any more, you're in a pretty rough spot. I mean even with record low mortgage rates, you aren't even covering interest let alone tax, maintenance, vacancy etc. But now we see, especially on the high end, loses of 40%+ is just a couple years.  Given the talk about 1% a month rent being a good rule of thumb, it would suggest these are overpriced by a factor of 6-12.

https://vancouversun.com/news/local-news/five-metro-vancouver-mansions-being-rented-for-relatively-cheap-cheap-cheap.

Unfortunately the housing market moves sloooooow, most people consider yesterdays ceiling to be today's floor, along with this ridiculous mindset that housing is a no-lose investment, despite evidence to the contrary for every country in the world. So while long term average houses can't be out of reach for average people, you might end up waiting a decade.

Malkynn

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Re: Why does someone rent?
« Reply #60 on: August 02, 2019, 09:18:26 AM »

This is the only reason why I'm halfway looking into buying a condo. I just don't want to be priced out of my hometown, which is rapidly moving from HCOL to VHCOL.

All the soft "pride of ownership" reasons and most of the hard math ones don't really motivate me much, but locking in a workable monthly housing cost does, as long as it's rentable when I am in a position to do some longer term traveling.

I was always sort of confused by the concept of being priced out of a market, for something as fundamental as a living place. I think the general trend on this forum is to at least average if not above average income, so in essence you *are* the market, so any pricing out can not last forever. If you make above average income, but can't afford even an average home, that situation is simply not sustainable long term for society. Eventually the masses die, people need to sell, and people can only pay what they can afford. 

Vancouver I've mentioned before, but it's like the poster child for this. Yes it takes something like 85% of the average pretax income to afford a mortgage on the average abode, and what happened was everyone who got in years ago was just flipping homes to each other at higher and higher prices. It was almost impossible for anyone to enter the market, and when you realize that $4m home that you just bought (and can only rent out for 5k a year) wont be appreciating any more, you're in a pretty rough spot. I mean even with record low mortgage rates, you aren't even covering interest let alone tax, maintenance, vacancy etc. But now we see, especially on the high end, loses of 40%+ is just a couple years.  Given the talk about 1% a month rent being a good rule of thumb, it would suggest these are overpriced by a factor of 6-12.

https://vancouversun.com/news/local-news/five-metro-vancouver-mansions-being-rented-for-relatively-cheap-cheap-cheap.

Unfortunately the housing market moves sloooooow, most people consider yesterdays ceiling to be today's floor, along with this ridiculous mindset that housing is a no-lose investment, despite evidence to the contrary for every country in the world. So while long term average houses can't be out of reach for average people, you might end up waiting a decade.

Except that's not exactly how supply and demand works for highly desirable housing markets. Manhattan has certainly never cooled down because it's average resident couldn't afford to live there.

Vancouver and Toronto are the only major urban centers where winter won't literally try and rip your face off. The demand is overwhelming.

ketchup

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Re: Why does someone rent?
« Reply #61 on: August 02, 2019, 09:23:36 AM »

This is the only reason why I'm halfway looking into buying a condo. I just don't want to be priced out of my hometown, which is rapidly moving from HCOL to VHCOL.

All the soft "pride of ownership" reasons and most of the hard math ones don't really motivate me much, but locking in a workable monthly housing cost does, as long as it's rentable when I am in a position to do some longer term traveling.

I was always sort of confused by the concept of being priced out of a market, for something as fundamental as a living place. I think the general trend on this forum is to at least average if not above average income, so in essence you *are* the market, so any pricing out can not last forever. If you make above average income, but can't afford even an average home, that situation is simply not sustainable long term for society. Eventually the masses die, people need to sell, and people can only pay what they can afford. 

Vancouver I've mentioned before, but it's like the poster child for this. Yes it takes something like 85% of the average pretax income to afford a mortgage on the average abode, and what happened was everyone who got in years ago was just flipping homes to each other at higher and higher prices. It was almost impossible for anyone to enter the market, and when you realize that $4m home that you just bought (and can only rent out for 5k a year) wont be appreciating any more, you're in a pretty rough spot. I mean even with record low mortgage rates, you aren't even covering interest let alone tax, maintenance, vacancy etc. But now we see, especially on the high end, loses of 40%+ is just a couple years.  Given the talk about 1% a month rent being a good rule of thumb, it would suggest these are overpriced by a factor of 6-12.

https://vancouversun.com/news/local-news/five-metro-vancouver-mansions-being-rented-for-relatively-cheap-cheap-cheap.

Unfortunately the housing market moves sloooooow, most people consider yesterdays ceiling to be today's floor, along with this ridiculous mindset that housing is a no-lose investment, despite evidence to the contrary for every country in the world. So while long term average houses can't be out of reach for average people, you might end up waiting a decade.
“The market can stay irrational longer than you can stay solvent.”

therethere

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Re: Why does someone rent?
« Reply #62 on: August 02, 2019, 09:31:52 AM »
Getting priced out is real. At one point we were considering buying but we literally could not save a downpayment fast enough to keep up with the house price increases. Homes were increasing 10% a year for like 5-6 years straight. By the time we got near what would have been a 20% downpayment we needed almost 15k more than initially planned. This is just the downpayment. Now the same houses that was 275k is selling for like 430k with no updates. So not only would we need 15k-20k more in downpayment our actual mortgage payment would be 1/3rd larger also.

Wrenchturner

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Re: Why does someone rent?
« Reply #63 on: August 02, 2019, 12:02:24 PM »

This is the only reason why I'm halfway looking into buying a condo. I just don't want to be priced out of my hometown, which is rapidly moving from HCOL to VHCOL.

All the soft "pride of ownership" reasons and most of the hard math ones don't really motivate me much, but locking in a workable monthly housing cost does, as long as it's rentable when I am in a position to do some longer term traveling.

I was always sort of confused by the concept of being priced out of a market, for something as fundamental as a living place. I think the general trend on this forum is to at least average if not above average income, so in essence you *are* the market, so any pricing out can not last forever. If you make above average income, but can't afford even an average home, that situation is simply not sustainable long term for society. Eventually the masses die, people need to sell, and people can only pay what they can afford. 

Vancouver I've mentioned before, but it's like the poster child for this. Yes it takes something like 85% of the average pretax income to afford a mortgage on the average abode, and what happened was everyone who got in years ago was just flipping homes to each other at higher and higher prices. It was almost impossible for anyone to enter the market, and when you realize that $4m home that you just bought (and can only rent out for 5k a year) wont be appreciating any more, you're in a pretty rough spot. I mean even with record low mortgage rates, you aren't even covering interest let alone tax, maintenance, vacancy etc. But now we see, especially on the high end, loses of 40%+ is just a couple years.  Given the talk about 1% a month rent being a good rule of thumb, it would suggest these are overpriced by a factor of 6-12.

https://vancouversun.com/news/local-news/five-metro-vancouver-mansions-being-rented-for-relatively-cheap-cheap-cheap.

Unfortunately the housing market moves sloooooow, most people consider yesterdays ceiling to be today's floor, along with this ridiculous mindset that housing is a no-lose investment, despite evidence to the contrary for every country in the world. So while long term average houses can't be out of reach for average people, you might end up waiting a decade.

Except that's not exactly how supply and demand works for highly desirable housing markets. Manhattan has certainly never cooled down because it's average resident couldn't afford to live there.

Vancouver and Toronto are the only major urban centers where winter won't literally try and rip your face off. The demand is overwhelming.

I somewhat disagree.  Vancouver housing isn't THAT desirable.   It's a bubble due to money laundering and speculation.  The big drop we're seeing now is indicative of that.  Time will tell how overpriced they are.

The bigger problem is that Canadian GDP is pretty much entirely tied to housing now.  And we haven't seen the wage growth to support these prices.  Mean reversion will be a b*tch.

mspym

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Re: Why does someone rent?
« Reply #64 on: August 02, 2019, 02:53:14 PM »
Sydney house prices are insane and we are not prepared to put down $300k for a deposit on a fixer-upper and then pay twice our rent in mortgage payments + any "spare" money going to the aforementioned fixing-up. Maybe it's money laundering, maybe it's the cult of property & negative gearing, but even downturns are just stopping the prices rising quite as steeply.

Seadog

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Re: Why does someone rent?
« Reply #65 on: August 03, 2019, 08:18:25 PM »
Getting priced out is real. At one point we were considering buying but we literally could not save a downpayment fast enough to keep up with the house price increases. Homes were increasing 10% a year for like 5-6 years straight. By the time we got near what would have been a 20% downpayment we needed almost 15k more than initially planned. This is just the downpayment. Now the same houses that was 275k is selling for like 430k with no updates. So not only would we need 15k-20k more in downpayment our actual mortgage payment would be 1/3rd larger also.

With housing though, 5-6 years is short term. I wholly agree that the market can remain irrational longer than you can stay solvent - all the more reason to avoid getting into the game when the metrics don't make sense. That is one huge detriment that you may wait 15 years for prices to "revert to the mean" where stocks may go there and back in a 5th of the time. The financially wise choice in that case is simply to rent or move.

Here's a thought experiment. Let's say for the sake of argument you want the median home and have a median income. You're diligently saving your down payment, and as you say, over 5 years in increased 10% YoY. You're priced out. Who then are the 50% that are buying the 50% of houses over the median? The answer is people with below median incomes, who got above average returns from that 10% YoY from housing gains.

Great. So housing doubles in 7 years. Now, unless you already own a house and have been enjoying said gains, you are effectively "priced out". Not only that, but because housing has become such a mania, everyone who can afford one who thinks it's a good deal, (70%+ in Canada Ownership rate - Higher than the US at GFC time) Who do these people sell to? If it takes 85% of your pretax income to buy a home similarly correlated to said income, how can homes move without buying massively below your equivalent market? That's what you seen happen now on the top end where it starts. It's the least afforable on absolute terms across all income levels. So pretty much no one can rationally afford the top end, so prices have been plummeting. 40%+ in 2 years in some cases. So where do they move to? Are they literally going to pay what they just sold their 6,000 sq ft mansion for a home half the size of the one they just sold? Or would they expect to pay half? Or will they move else where? So now the tier 2 homes stagnate too. Who do they sell to? similarly someone looking for a deal. Similarly on the way down, it starts at the top then cascades down as market segments similarly can't find buyers. ANd why would they buy? You can't rent it out to cover even interest let alone maintenance or vacancy (forget profit), and you can rationally expect it to be worth less in a year from now. So prices drop... Then eventually the prices get so low, as so few people want in, that the rents they can provide make it all but irresistibly to investors, purely on a cash flow basis. People see money being made, prices go up, interest rises, more people get in, and the wheels on the bus go round and round...

afox

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Re: Why does someone rent?
« Reply #66 on: August 05, 2019, 09:45:25 AM »
If I were "rich" I would choose to rent instead of own. Renting is less risk, less work, more mobile, etc. The landlord works for you. Its definitely the premium option and lots of wealthy folks choose to rent instead of buy. The notion im reading here that wealthier people own and poorer/financially illiterate people rent is laughable. There is so much stupid money in RE its amazing. I think of stupid landlords as offering a community service, those that can't or wont do the math offer below market rentals that would otherwise have to be offered by governments/organizations. Without stupid landlords that volunteer their time and capital with unrealistic expectations of a return our housing costs would be higher and many people would be in need of affordable housing.

I define "rich" as having more money than I or my heirs could ever spend in their lifetimes.

Imma

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Re: Why does someone rent?
« Reply #67 on: August 05, 2019, 01:00:47 PM »
But if you are rich, you can afford a high rent. Money can buy anything. For someone with an average income, in many places it's enough of a struggle to find a landlord willing to rent anything to you. After that you don't even dare to complain about any issue at all from fear of being kicked out.

The home we own is the only home I've ever lived in in my life where maintenance actually happens, because I make sure it does. We've lived in homes were hot water didn't work for weeks, one place where the water was cut off by the supplier because the landlord didn't pay the bill, one place the fire department came by to switch off the gas because it wasn't installed safely. Landlords have dozens of candidates for every place so they can set absurd income requirements and charge a high rent.

Now if you have money, there are special letting agencies for that market and you can easily find a well taken care of rental, but you pay massively for that service. And the most well known one in my country explicity bans anyone who is FIRE'd - I guess people of independent means have to go to even more specialized (=expensive) agencies.

Of course the housing market isn't this terrible everywhere, I've heard it's much easier in rural areas, but it seems to be very tight in all big cities around the world.

Wrenchturner

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Re: Why does someone rent?
« Reply #68 on: August 06, 2019, 11:10:24 AM »
But if you are rich, you can afford a high rent. Money can buy anything. For someone with an average income, in many places it's enough of a struggle to find a landlord willing to rent anything to you. After that you don't even dare to complain about any issue at all from fear of being kicked out.

The home we own is the only home I've ever lived in in my life where maintenance actually happens, because I make sure it does. We've lived in homes were hot water didn't work for weeks, one place where the water was cut off by the supplier because the landlord didn't pay the bill, one place the fire department came by to switch off the gas because it wasn't installed safely. Landlords have dozens of candidates for every place so they can set absurd income requirements and charge a high rent.

Now if you have money, there are special letting agencies for that market and you can easily find a well taken care of rental, but you pay massively for that service. And the most well known one in my country explicity bans anyone who is FIRE'd - I guess people of independent means have to go to even more specialized (=expensive) agencies.

Of course the housing market isn't this terrible everywhere, I've heard it's much easier in rural areas, but it seems to be very tight in all big cities around the world.
Definitely depends on the market.  I rent in Edmonton.  I pay $1050 monthly for a basement in a new house, utilities included, furnished.  Proper legal suite with high ceilings and all the appliances.  The light sucks but the cold summer basement more than makes up for it.

The upstairs I suspect rents for $1400 ish.  It's about 1400-1600 sqft I think.  Garage rents for maybe $200.  Landlord pays utilities.

This is a $380k house.  Renting wins here, easily.

Wrenchturner

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Re: Why does someone rent?
« Reply #69 on: August 06, 2019, 11:18:42 AM »
Also, regarding being priced out--this seems like a very weak bullish argument.  Why would you celebrate a market that has diminishing customers?  I've seen people bragging that they bought when prices were lower and had they waited, they would have been priced out.  Doesn't this suggest the rally has no legs?

spartana

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Re: Why does someone rent?
« Reply #70 on: August 06, 2019, 01:45:13 PM »
Also, regarding being priced out--this seems like a very weak bullish argument.  Why would you celebrate a market that has diminishing customers?  I've seen people bragging that they bought when prices were lower and had they waited, they would have been priced out.  Doesn't this suggest the rally has no legs?
Its a real thing in most metro area of Calif. The run- up in house prices (and rental markets too) has been over 10% a year and has lasted years. Salaries don't keep pace and if you are a FIREd person living on a passive income you will likely be priced out of the area you want to live in if you don't already own.  That is often true for buyers and renters. I was only able to FIRE and continue living in a HCOL area of coastal SoCal because I was able to get into the housing market during a downturn. If I was trying to buy now, over 10 years later,  there would be no way I could do it. I would even struggle as a single renter because one bedroom apts are around $2k/ month.

Wrenchturner

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Re: Why does someone rent?
« Reply #71 on: August 06, 2019, 02:38:19 PM »
Also, regarding being priced out--this seems like a very weak bullish argument.  Why would you celebrate a market that has diminishing customers?  I've seen people bragging that they bought when prices were lower and had they waited, they would have been priced out.  Doesn't this suggest the rally has no legs?
Its a real thing in most metro area of Calif. The run- up in house prices (and rental markets too) has been over 10% a year and has lasted years. Salaries don't keep pace and if you are a FIREd person living on a passive income you will likely be priced out of the area you want to live in if you don't already own.  That is often true for buyers and renters. I was only able to FIRE and continue living in a HCOL area of coastal SoCal because I was able to get into the housing market during a downturn. If I was trying to buy now, over 10 years later,  there would be no way I could do it. I would even struggle as a single renter because one bedroom apts are around $2k/ month.
Renters struggling is a real sign of overpricing, but silicon valley is a global nexus of productivity.   If you're not making high income in tech, gtfo.  That's what the market is saying, anyway.  And that's the source of the competition.

People will keep moving to LA to chase their dreams, I'm sure. 

spartana

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Re: Why does someone rent?
« Reply #72 on: August 06, 2019, 03:04:23 PM »
Also, regarding being priced out--this seems like a very weak bullish argument.  Why would you celebrate a market that has diminishing customers?  I've seen people bragging that they bought when prices were lower and had they waited, they would have been priced out.  Doesn't this suggest the rally has no legs?
Its a real thing in most metro area of Calif. The run- up in house prices (and rental markets too) has been over 10% a year and has lasted years. Salaries don't keep pace and if you are a FIREd person living on a passive income you will likely be priced out of the area you want to live in if you don't already own.  That is often true for buyers and renters. I was only able to FIRE and continue living in a HCOL area of coastal SoCal because I was able to get into the housing market during a downturn. If I was trying to buy now, over 10 years later,  there would be no way I could do it. I would even struggle as a single renter because one bedroom apts are around $2k/ month.
Renters struggling is a real sign of overpricing, but silicon valley is a global nexus of productivity.   If you're not making high income in tech, gtfo.  That's what the market is saying, anyway.  And that's the source of the competition.

People will keep moving to LA to chase their dreams, I'm sure.
Part of the problem is that high income tech workers raise up the rental markets but they still want the low paid laborer and service workers around to make their Lattes and avocado toast and scrub their cubicals ;-). 
« Last Edit: August 06, 2019, 03:06:27 PM by spartana »

Wrenchturner

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Re: Why does someone rent?
« Reply #73 on: August 06, 2019, 03:25:06 PM »
Also, regarding being priced out--this seems like a very weak bullish argument.  Why would you celebrate a market that has diminishing customers?  I've seen people bragging that they bought when prices were lower and had they waited, they would have been priced out.  Doesn't this suggest the rally has no legs?
Its a real thing in most metro area of Calif. The run- up in house prices (and rental markets too) has been over 10% a year and has lasted years. Salaries don't keep pace and if you are a FIREd person living on a passive income you will likely be priced out of the area you want to live in if you don't already own.  That is often true for buyers and renters. I was only able to FIRE and continue living in a HCOL area of coastal SoCal because I was able to get into the housing market during a downturn. If I was trying to buy now, over 10 years later,  there would be no way I could do it. I would even struggle as a single renter because one bedroom apts are around $2k/ month.
Renters struggling is a real sign of overpricing, but silicon valley is a global nexus of productivity.   If you're not making high income in tech, gtfo.  That's what the market is saying, anyway.  And that's the source of the competition.

People will keep moving to LA to chase their dreams, I'm sure.
Part of the problem is that high income tech workers raise up the rental markets but they still want the low paid laborer and service workers around to make their Lattes and avocado toast and scrub their cubicals ;-).

...which works fine until you run out of desperate people.  But LA runs on dreams, so I don't see it ending anytime soon. 

The homeless situation in LA is the bigger issue though.

spartana

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Re: Why does someone rent?
« Reply #74 on: August 06, 2019, 03:48:15 PM »
Well there are nice beaches too. That and a lot of aerospace companies so big tech there too. I'm about 50 miles south of LA so not as dream-driven but for some reason people want to live here and do what they can to make it happen even on low incomes. But yes, with so many people of all income levels wanting to live here,  everyone is driving up the cost of housing whether they rent or own.

ETA: To be honest I'd be very concerned renting here as I'd be afraid of the continuous price increases over the years and not being able to cover that once older (see.the 109 year old renter getting the boot thread). I've known some older people in.similar situations and its scary. Ill be buying again soon (even have an offer in) but not here. Somewhere more MCOL that I can buy with cash.
« Last Edit: August 06, 2019, 03:53:38 PM by spartana »

Laserjet3051

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Re: Why does someone rent?
« Reply #75 on: August 06, 2019, 06:18:06 PM »
Well there are nice beaches too. That and a lot of aerospace companies so big tech there too. I'm about 50 miles south of LA so not as dream-driven but for some reason people want to live here and do what they can to make it happen even on low incomes. But yes, with so many people of all income levels wanting to live here,  everyone is driving up the cost of housing whether they rent or own.

ETA: To be honest I'd be very concerned renting here as I'd be afraid of the continuous price increases over the years and not being able to cover that once older (see.the 109 year old renter getting the boot thread). I've known some older people in.similar situations and its scary. Ill be buying again soon (even have an offer in) but not here. Somewhere more MCOL that I can buy with cash.

I, too, live 50 miles south of LA and agree with you that low income folks still flock here and despite the insanely high rental prices (especially right by the coast), people do make it work somehow. That somehow means stuffing a whole lotta folks into each rental unit and splitting the cost. Nevermind that it is illegal and the overflow of excess cars spills out into surrounding neighborhoods. But hey, despite huge difference in incomes, renters from all tiers of the income ladder still get to surf curls together shoulder to shoulder. At that moment in time, rent, income, etc become meaningless.

Imma

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Re: Why does someone rent?
« Reply #76 on: August 07, 2019, 06:18:34 AM »
But if you are rich, you can afford a high rent. Money can buy anything. For someone with an average income, in many places it's enough of a struggle to find a landlord willing to rent anything to you. After that you don't even dare to complain about any issue at all from fear of being kicked out.

The home we own is the only home I've ever lived in in my life where maintenance actually happens, because I make sure it does. We've lived in homes were hot water didn't work for weeks, one place where the water was cut off by the supplier because the landlord didn't pay the bill, one place the fire department came by to switch off the gas because it wasn't installed safely. Landlords have dozens of candidates for every place so they can set absurd income requirements and charge a high rent.

Now if you have money, there are special letting agencies for that market and you can easily find a well taken care of rental, but you pay massively for that service. And the most well known one in my country explicity bans anyone who is FIRE'd - I guess people of independent means have to go to even more specialized (=expensive) agencies.

Of course the housing market isn't this terrible everywhere, I've heard it's much easier in rural areas, but it seems to be very tight in all big cities around the world.
Definitely depends on the market.  I rent in Edmonton.  I pay $1050 monthly for a basement in a new house, utilities included, furnished.  Proper legal suite with high ceilings and all the appliances.  The light sucks but the cold summer basement more than makes up for it.

The upstairs I suspect rents for $1400 ish.  It's about 1400-1600 sqft I think.  Garage rents for maybe $200.  Landlord pays utilities.

This is a $380k house.  Renting wins here, easily.

That sounds like a pretty good deal! I know a house in my street rents for €1200 excl utilities. It's 800 square ft and market value of the house is something like €165k. Our current mortgage payment is €300/month + €50 in local taxes and €10 insurance. Even if you would buy at the current price level without any downpayment (which is normal here) the mortgage payment would be less than €600. Buying definitely wins in that case and this isn't even an expensive part of the country.

When the rental market isn't overheated there's also a much bigger incentive for landlords to maintain a property: if they don't the tenant could leave. That improves the overall quality of the housing stock.

Wrenchturner

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Re: Why does someone rent?
« Reply #77 on: August 07, 2019, 08:08:35 AM »
But if you are rich, you can afford a high rent. Money can buy anything. For someone with an average income, in many places it's enough of a struggle to find a landlord willing to rent anything to you. After that you don't even dare to complain about any issue at all from fear of being kicked out.

The home we own is the only home I've ever lived in in my life where maintenance actually happens, because I make sure it does. We've lived in homes were hot water didn't work for weeks, one place where the water was cut off by the supplier because the landlord didn't pay the bill, one place the fire department came by to switch off the gas because it wasn't installed safely. Landlords have dozens of candidates for every place so they can set absurd income requirements and charge a high rent.

Now if you have money, there are special letting agencies for that market and you can easily find a well taken care of rental, but you pay massively for that service. And the most well known one in my country explicity bans anyone who is FIRE'd - I guess people of independent means have to go to even more specialized (=expensive) agencies.

Of course the housing market isn't this terrible everywhere, I've heard it's much easier in rural areas, but it seems to be very tight in all big cities around the world.
Definitely depends on the market.  I rent in Edmonton.  I pay $1050 monthly for a basement in a new house, utilities included, furnished.  Proper legal suite with high ceilings and all the appliances.  The light sucks but the cold summer basement more than makes up for it.

The upstairs I suspect rents for $1400 ish.  It's about 1400-1600 sqft I think.  Garage rents for maybe $200.  Landlord pays utilities.

This is a $380k house.  Renting wins here, easily.

That sounds like a pretty good deal! I know a house in my street rents for €1200 excl utilities. It's 800 square ft and market value of the house is something like €165k. Our current mortgage payment is €300/month + €50 in local taxes and €10 insurance. Even if you would buy at the current price level without any downpayment (which is normal here) the mortgage payment would be less than €600. Buying definitely wins in that case and this isn't even an expensive part of the country.

When the rental market isn't overheated there's also a much bigger incentive for landlords to maintain a property: if they don't the tenant could leave. That improves the overall quality of the housing stock.
Where do you live?  Seems odd that rent would be so high when houses are so reasonable...

nereo

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Re: Why does someone rent?
« Reply #78 on: August 07, 2019, 08:13:07 AM »

Where do you live?  Seems odd that rent would be so high when houses are so reasonable...

not who you were asking, but in our new locale there's an active rental market driven by about 8,000 college students.  Rent for a single bedroom is in the $800-1000 range, and renting a single-family home is $1300-1500/mo.  Yet home prices are in the $125-140k range.

In my anaylsis, it's almost entirely driven by this large transient population of students who aren't interested or eligible to buy a home.  Every year ~2k leave and are replaced with another 2k. It keeps rents high but home prices remain very low.

Malkynn

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Re: Why does someone rent?
« Reply #79 on: August 07, 2019, 09:08:48 AM »

Where do you live?  Seems odd that rent would be so high when houses are so reasonable...

not who you were asking, but in our new locale there's an active rental market driven by about 8,000 college students.  Rent for a single bedroom is in the $800-1000 range, and renting a single-family home is $1300-1500/mo.  Yet home prices are in the $125-140k range.

In my anaylsis, it's almost entirely driven by this large transient population of students who aren't interested or eligible to buy a home.  Every year ~2k leave and are replaced with another 2k. It keeps rents high but home prices remain very low.

Rents where I am are unusually high too, despite housing prices being very low for the city at the moment. A lot of people here are working class and struggle to afford buying. A lot of students here too because we're very close to the university.

Oddly though, the neighbourhood right around the university is incredibly expensive to buy in, so I don't know how anyone makes any money renting to students there, which is probably why they are flocking to my 'hood instead. My condo apartment building is filled with student renters.

Wrenchturner

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Re: Why does someone rent?
« Reply #80 on: August 07, 2019, 10:00:17 AM »
That makes sense. 

Not sure what's going on up in Canada(outside of vancouver/toronto).  Cult of home ownership I guess.  Makes it tough to be a contrarian, but you all know that coming here anyway.

I've thought about buying a house but I like my cash flow as it is.  Probably in the next five years I'll buy something.  An acreage is part of my semi-retirement plans but I'm not eager for the upkeep.

JLee

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Re: Why does someone rent?
« Reply #81 on: August 07, 2019, 02:27:04 PM »

Where do you live?  Seems odd that rent would be so high when houses are so reasonable...

not who you were asking, but in our new locale there's an active rental market driven by about 8,000 college students.  Rent for a single bedroom is in the $800-1000 range, and renting a single-family home is $1300-1500/mo.  Yet home prices are in the $125-140k range.

In my anaylsis, it's almost entirely driven by this large transient population of students who aren't interested or eligible to buy a home.  Every year ~2k leave and are replaced with another 2k. It keeps rents high but home prices remain very low.

Reminds me of Phoenix in 2013 when I bought my first house -- $140k house would have rented for $1100-1300.  I bought instead and 5 years later sold it for $250k...the math doesn't quite work the same out there any more.

Zamboni

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Re: Why does someone rent?
« Reply #82 on: August 07, 2019, 03:20:05 PM »
Another reason that I didn't see listed (or perhaps I just missed):
I rented for a couple of years during a separation and divorce.

This is a really common reason. I have two children so needed a decent-sized place, but the timing and stress of the situation meant that I just didn't have the mental energy I needed for home buying at the same time. I was already having to buy half a house of furniture, and shopping is not something I enjoy. Lots of divorces result in the marital home being sold and proceeds split, and many people are not in a mental or financial place to home shop right away.

It turned out the the renting was quite a nice option for us. We were on a "luxury apartment" property with a large swimming pool, hot tub, ponds with a waterfall, indoor basketball court, gym with lots of equipment, etc. I will never own things like treadmills and a full weight room or indoor basketball court, and my kids really liked having these things just outside our door. I bought a home eventually anyway, but I did seriously consider just staying in the place we were renting for an additional year.
« Last Edit: August 07, 2019, 03:23:26 PM by Zamboni »

Imma

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Re: Why does someone rent?
« Reply #83 on: August 10, 2019, 02:46:12 AM »

Where do you live?  Seems odd that rent would be so high when houses are so reasonable...

not who you were asking, but in our new locale there's an active rental market driven by about 8,000 college students.  Rent for a single bedroom is in the $800-1000 range, and renting a single-family home is $1300-1500/mo.  Yet home prices are in the $125-140k range.

In my anaylsis, it's almost entirely driven by this large transient population of students who aren't interested or eligible to buy a home.  Every year ~2k leave and are replaced with another 2k. It keeps rents high but home prices remain very low.

Rents where I am are unusually high too, despite housing prices being very low for the city at the moment. A lot of people here are working class and struggle to afford buying. A lot of students here too because we're very close to the university.

Oddly though, the neighbourhood right around the university is incredibly expensive to buy in, so I don't know how anyone makes any money renting to students there, which is probably why they are flocking to my 'hood instead. My condo apartment building is filled with student renters.

I"m in a big city in Europe. Yes, lots of students and also lots of international students who have no family over here, and thousands of expats and immigrants. In my country there's no such thing as living on campus. Everyone is competing on the private market. As it's really hard to quality for a mortgage, especially early on in your career, which means almost everyone under the age of 30 is competing for a limited amount of relatively affordable housing and many on a lower income will never be able to buy.

My house at 165k is unusually cheap for my city, it's a small old place in a working class district. The average home is around 300k. As the average family income is 38k, this means the poor half of the population spends most of their income on rent and can't save for a downpayment, even when they would qualify for a mortgage. And they can't even move somewhere else because it's the same everywhere.

Qualifying for a mortgage is difficult because after the Great Recession the government have made the rules very strict for lenders. Usually both partners need a permanent job contract and those are hard to get.

A3 Life

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Re: Why does someone rent?
« Reply #84 on: August 11, 2019, 09:10:48 PM »
This is specific to certain markets. But one might rent because they believe that this is the top of the market and they don’t want to be underwater on a $1M+ home in 2 years. Not that a 12 month lease is pleasant during a down market. But, during a downturn, it’s a lot easier to dump a lease than sell a home. I.E. renting is more expensive because the landlord takes all of the risk (or reward) for the future value of the property.


Dicey

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Re: Why does someone rent?
« Reply #85 on: August 12, 2019, 09:08:50 AM »
I can tell you why I've rented........

1) I was 22 and had just moved to a new town. Didn't know the area and wasn't ready to make a purchase.
2) At 31 I relocated and while renting out my home was renting a place that was not the home I'd want to buy, but was fine for the moment. 3 years later we found a good deal on a home we wanted.

You might like JL Collins take on this. He does not own a home. Also, Kristy Shen is very anti-home-ownership

JL Collins: https://www.bing.com/videos/search?q=talks+at+google+jl+collins&view=detail&mid=AA8D11C065030BE6D3C2AA8D11C065030BE6D3C2&FORM=VIRE

Kristy Shen: https://www.journeytolaunch.com/episode11/

I can also tell you why my renters have not bought the house they were living in (I've tried to sell it twice). One didn't have the credit, and the other didn't like the house enough to own it.
Don't know about Kristy Shen, but this happened, way back in 2017:

https://jlcollinsnh.com/2017/07/11/kibanda-mr-anti-house-buys-his-dream-house/

Villanelle

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Re: Why does someone rent?
« Reply #86 on: August 12, 2019, 12:11:45 PM »
We rent because not only is it about half the cost of owning here (a place that rents for $4000 would sell for well over $1m, and these are older--often 19th century--homes that require a lot of maintenance), but we could live here for 6 months**, or 3+ years.  It's not a place we are likely to settle longer term.

**My husband is military so we can break a lease with orders, by federal law.  Our landlord was gracious (foolish?) enough to sign a three year lease with no increases, which astounded us.  We know he's making money hand over fist since he bought in the early 90s and is the king of seriously deferred maintenance so maybe he doesn't care to get every penny he can.  Still, I can't help but think this was an unwise decision for him, especially given that this area is somewhat insulated from job losses (due to many government jobs here) and we are spitting distance of HQ2.