The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Just Joe on July 24, 2019, 07:31:52 AM
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We're looking to rent our "old" house. Mortgage is about $750 and rental value seems to be about $1250.
DW asked me why someone would rent that house rather than simply buy a similar house with a smaller mortgage. I have no answer.
Forgive our naivety but who is the typical home rental customer?
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-Poor credit, so they don't qualify for a mortgage.
-Low savings, so they can't afford a down payment.
-Need for flexibility. If you live in an area where people move for work on an interim basis, renting is best in these situations. Or, there's life needs- moving in with a new partner, not ready for the commitment of co-owning, can't afford a place on their own.
-Not wanting to be on the hook for all the house bullshit- replacing crap that breaks. It is SO NICE to just ring someone up and have them pay for and fix it for you!
Lots of reasons, but I hope those help!
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It's not every market or personal situation where those numbers work like that. Check out the rent or buy calculator
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
I rent because I don't have a big enough downpayment for an investment property yet, I don't need a large space yet and I don't want a condo, and rent is much cheaper than mortgages for the type of apartment I need. Also being able to get the landlord to fix shit is a great perk.
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We're looking to rent our "old" house. Mortgage is about $750 and rental value seems to be about $1250.
DW asked me why someone would rent that house rather than simply buy a similar house with a smaller mortgage. I have no answer.
Forgive our naivety but who is the typical home rental customer?
What about when you add mortgage, property taxes, insurance, and maintenance (which people always grossly underestimate)? Also, depending on how "old" that mortgage/value is, it could be at least somewhat higher now.
Then there are people who know they are likely to be in an area of a house only a few years. They will likely be moving due to work, downsizing when the kids go off to college, etc., so buying and eating the transactions costs would be an unwise move.
And finally, you may be on one of the markets where it does still make financial sense in many cases to buy. Where I live, a $1m house rents for about $4000. That math makes is financially ridiculous to buy.
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DW asked me why someone would rent that house rather than simply buy a similar house with a smaller mortgage. I have no answer.
Forgive our naivety but who is the typical home rental customer?
I (temporarily) fit this demographic! We live in an area where the Rent vs Buy calculation is majorly skewed towards buying, yet we currently rent.
Personally, we rent because
- We will likely move in < 2 years (upfront costs of buying are not worth it)
- With full-time jobs and a youngin' we don't have the time to spend on basic maintenance and like that every problem is dealt with by our landlord.
- We landed in this area (job) and needed to find a place within 2 weeks.
Also, a number of our friends are in similar circumstances because:
- They lack the capital for a down payment (most have substantial SL debt + little/no savings. a $30k downpayment seems like a pipe dream)
- They are either single, or in newish relationships and aren't in a life-stage to commit to one living situation for many years
- Their careers are just ramping up, and what they *want* in a house is more than they can afford at present, but expect to double their incomes in the next ~5 years. In other words they are saving up.
- There's a perception that home ownership is for people in "older adults" (people nearing 40 or over it). I can't tell you the number of late-20-somethings I know who view home ownership the same way they might view having a will or life insurance... something old(er) people do.
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If the roof leaks, I the renter am not going to be the one climbing the ladder.
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We continued to rent so we could pay down student loans before buying responsibly (having an e-fund and 20% down). Meanwhile the housing market doubled in that time. Now I don't want to buy an overpriced, 100+ year old house that would require updates, tons of money, and my time every weekend. We also stay for flexibility. It's great knowing that we could throw everything and leave on a months notice.
Sure we could have made 200k+ in equity in 5 years. But we also could have been ruined just as well. I lived with stress of 200k+ of student loans. I didn't need an aging house on top of that.
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If the roof leaks, I the renter am not going to be the one climbing the l5adder.
You won't be climbing the ladder even if the roof doesn't leak, when you are a renter. Cleaning gutters is a maintenance that should be done on a regular basis annually, and if there are trees around the property then at least twice a year. Lack of such maintenance is the number one reason why the properties go down the hill in the area where I buy my rentals.
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I owned for almost 20 years, but am currently a renter. I would prefer to own, but I will probably only be in this area less than 5 years. Unless you are buying at investor prices, the house is not going to appreciate enough in 5 years to offset the entry and exit costs of real estate. Yes, I know your brother's friend's wife's uncle's neighbor made a killing once paying full retail and only owning for 82 days, but that is not the norm.
If I were going to be in this area long term, say 5+ years, then I would buy. I miss my woodshop.
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I miss my woodshop.
Me too. That's probably my top reason why I want to buy (or at least have a separate barn/2+ garage in our next rental - common in our area).
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What about when you add mortgage, property taxes, insurance, and maintenance (which people always grossly underestimate)? Also, depending on how "old" that mortgage/value is, it could be at least somewhat higher now.
My all-in aside from maintenance is $800 per month. Maintenance cost of the house has been affordable. Amortizing what we have spent on the house in the 15 years we've lived there amounts to about $1K a year.
I assume it will be somewhat higher with renters b/c they don't own it, why be careful?
I have more homework to do on whether this makes sense but it looks like I can pay off the property in 5 years assuming full occupancy which i know is a pipe dream.
I know folks often hire out their chores but I've always taken care of my own yard, cleaned the gutters, power washed whatever was turning green, picked up the sticks, etc.
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People rent because, as mentioned above, they don’t qualify for a mortgage. This is number one reason, imho. But also people rent because they have no idea how to do maintenance themselves. It's way easier to pick up a phone and call your landlord about water in the basement, leaking toilet or faucet, than to figure out who to call for those issues, then wait for them to arrive and then pay who knows how much. In my area plumbers charge $50-100 per hour (and they move exceptionally slow). That's why I do all my plumbing maintenance myself.
My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
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My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
...well that's kind of condescending...
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I rented because I didn't want to pay $14k a year in property taxes for a house that was worth buying, and it's far easier to rent something that I would not buy than to buy something that I do not want.
Then I got tired of not having shop space, so I now have a house.
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What about when you add mortgage, property taxes, insurance, and maintenance (which people always grossly underestimate)? Also, depending on how "old" that mortgage/value is, it could be at least somewhat higher now.
My all-in aside from maintenance is $800 per month. Maintenance cost of the house has been affordable. Amortizing what we have spent on the house in the 15 years we've lived there amounts to about $1K a year.
I assume it will be somewhat higher with renters b/c they don't own it, why be careful?
I have more homework to do on whether this makes sense but it looks like I can pay off the property in 5 years assuming full occupancy which i know is a pipe dream.
I know folks often hire out their chores but I've always taken care of my own yard, cleaned the gutters, power washed whatever was turning green, picked up the sticks, etc.
What you've paid over a relatively short time in maintenance is not the same as a reasonable estimation of the average cost of maintenance for the average home. The fridge and the water heater die. The roof need to be replaced. The carpet wears out. The a/c unit craps out and needs a full replacement. These are the types of things that don't happen very often, but when they do, they are expensive.
We own a home (that used to be our residence and is now a rental), and we are renters on the other side of the country. My husband is in them military. We had friends move to the area and 6 weeks after they moved in to their home, they were leaving. Had they purchased, they'd have been in trouble, especially because they couldn't rent here for anywhere near even their PITI, much less all the other costs. There are definitely things I miss about owning our residence, but they are mostly things like wishing I could make small changes to the house. It is nice when we don't have to worry about the costs then the a/c goes out after the basement floods though!
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Location.
I rent downtown where a house is easily 400k+ (and requires lots of updating/fixes). Or I can buy a house in the suburb with strip malls, families, and car trip required for every errand. I would die inside.
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I rent because $975/mo is cheaper than buying the property for seven figures, but I'm in an odd case where we live on 200+ acres with most of it cornfield.
Lots of people don't plan on living in an area for more than 2-3 years. Or they don't have a down payment. Or their credit sucks due to whatever. Or they just don't want to deal with maintenance/etc. Lots of reasons.
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My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
...well that's kind of condescending...
And?
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My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
...well that's kind of condescending...
And?
Gotta love the self-righteous landlords on this forum...
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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.
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My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
...well that's kind of condescending...
And?
Gotta love the self-righteous landlords on this forum...
Relax.
No one said landlords should skip on the maintenance.
The question was, why do people rent as oppose to buying.
The answer: because some people are renters, can't do house maintenance. When and if the renters start doing their own maintenance, they might think about buying. Until then, they should rent. In my opinion many homeowners should still rent.
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My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
...well that's kind of condescending...
And?
Gotta love the self-righteous landlords on this forum...
Relax.
No one said landlords should skip on the maintenance.
The question was, why do people rent as oppose to buying.
The answer: because some people are renters, can't do house maintenance. When and if the renters start doing their own maintenance, they might think about buying. Until then, they should rent. In my opinion many homeowners should still rent.
There's a difference between saying "some people are renters, and they need mom and dad [or a landlord] ..." and "some renters can't do maintenance and need mom and dad [or a landlord]". note the difference?
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My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
...well that's kind of condescending...
And?
Gotta love the self-righteous landlords on this forum...
Relax.
No one said landlords should skip on the maintenance.
The question was, why do people rent as oppose to buying.
The answer: because some people are renters, can't do house maintenance. When and if the renters start doing their own maintenance, they might think about buying. Until then, they should rent. In my opinion many homeowners should still rent.
There's a difference between saying "some people are renters, and they need mom and dad [or a landlord] ..." and "some renters can't do maintenance and need mom and dad [or a landlord]". note the difference?
There are also plenty of able-bodied intelligent people with no interest at all in house maintenance.
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Because people who never ran the numbers are willing to rent them a house for less money than in costs to pay the mortgage, taxes, insurance, and maintenance?
$1k for maintenance per year on a freestanding SFH is a bad joke. Even just painting inside and out once every decade (which you'll need to do to keep/attract renters) will almost account for that by itself. Carpet ain't free. Appliances, either. Roof will go in 15-20 years, no matter what the "warranty" on the shingle says. I could go on and on...
-W
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We just sold our home in June and became renters. Here are our reasons:
1) We hated -- HATED -- being home owners. Owning a home is like having a spoiled, ungrateful child. Most weekends have to be spent doing some annoying house task -- mowing the lawn, fixing shit that breaks, maintaining other shit so it doesn't break. Not only does a house rob you of time, it also raids the wallet constantly. And we didn't own a money pit or anything like that, this was our experience in a well built home in good condition. I don't want to piss away my life cutting grass that will just grow back again or building a pergola in the backyard. I have better things to do.
2) Constantly having to adjust the budget for house projects. Sure, the mortgage may only be $900, but then there's the constantly rising taxes and insurance, random maintenance charges, etc, etc. We actually paid an average of $1400/per month for the privilege of being owned by our home.
3) You are stuck with your neighbors. When crappy people buy a home next to you, or even down the block, you are stuck. When you rent, you can either stick it out for a couple months (crappy neighbors tend to move on at the end of their lease term) or you can easily pack up and move yourself.
4) Cost is often less with rent, and it isn't as variable as with home ownership. Not only is renter's insurance a hell of a lot cheaper, all costs are fixed. My rent is $900 + $15 pet fee every month. My renter's insurance is $8/mo. I don't have to pay water, sewer, or garbage. My electricity is less (in part because we are on the top floor and heat rises, with two shared walls and a shared floor). My housing costs are always $923/mo. It doesn't matter if the hot water heater goes or if the toilet fails, it doesn't come out of my pocket.
5) Flexibility. Man, I might not want to move in a year or two, but it is mentally freeing to know that I easily could should an opportunity arise or if my current area became a total shithole.
6) Flexibility -- bears mentioning twice. We started in our home as a family of four. Then kid #1 grew up and headed off to college. In a couple of years kid #2 will be off. I don't want nor need a big house to clean and maintain once there are only two of us. People change, and it's difficult to change housing once you own. We can downsize or upsize much more easily as renters.
Yeah, we might own again, then again, we might not.
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There is no "typical renter" as the prior responses indicate. In many HCOL/VHCOL markets renting is simply the cheaper option.
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My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
...well that's kind of condescending...
And?
Gotta love the self-righteous landlords on this forum...
Relax.
No one said landlords should skip on the maintenance.
The question was, why do people rent as oppose to buying.
The answer: because some people are renters, can't do house maintenance. When and if the renters start doing their own maintenance, they might think about buying. Until then, they should rent. In my opinion many homeowners should still rent.
There's a difference between saying "some people are renters, and they need mom and dad [or a landlord] ..." and "some renters can't do maintenance and need mom and dad [or a landlord]". note the difference?
There are also plenty of able-bodied intelligent people with no interest at all in house maintenance.
@ketchup it seems like you just got too much time on your hands. But, hey, it makes me feel very ... umm..... significant when someone spends so much time analyzing my two sentences.
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My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
...well that's kind of condescending...
And?
Gotta love the self-righteous landlords on this forum...
Relax.
No one said landlords should skip on the maintenance.
The question was, why do people rent as oppose to buying.
The answer: because some people are renters, can't do house maintenance. When and if the renters start doing their own maintenance, they might think about buying. Until then, they should rent. In my opinion many homeowners should still rent.
There's a difference between saying "some people are renters, and they need mom and dad [or a landlord] ..." and "some renters can't do maintenance and need mom and dad [or a landlord]". note the difference?
There are also plenty of able-bodied intelligent people with no interest at all in house maintenance.
@ketchup it seems like you just got too much time on your hands. But, hey, it makes me feel very ... umm..... significant when someone spends so much time analyzing my two sentences.
It sure makes me feel umm.... significant when someone reverts to an ad hominem attack against me. :)
And just to get further into the weeds, I've lived in a home as an owner-occupant, rented while being a landlord, lived as an owner-occupant again while still playing landlord, and currently rent while being a landlord again and also collecting payments on a rental house I sold on payments. I've seen all sides of this. There are good reasons for someone to be on either side.
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I don't want to piss away my life cutting grass that will just grow back again or building a pergola in the backyard. I have better things to do.
hahaha! Seriously! Who convinced us all that "gardening" was a great use of our limited weekend time!!
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Because where I live, it's cheaper than the insurance, council rates and maintenance/depreciation of owning.
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For us, I think the choice to rental is primarily psychological. I saw my parents bankrupted when I was young by a home purchase and the circumstances afterwards that were out of their control. If they had rented the financial impact would not have followed them for the next 2 decades. We were preapproved for a mortgage but did not jump into a decision, and kept looking for the right place for us. In the meantime we saw the major issues my brother was having with his neighbours that he couldn't escape and decided to just keep renting. We enjoy yard work, home maintenance, and having a garage and have all of those things in the rental we have been in close to 10 years now. Now it's time to move, but we chose to rent again. Partly because 3 close friends in the last year have had to leave the city after long time ownership and been forced to rent out due to a shortage of buyers. Home prices are falling, we have a down payment ready, and it is still not appealing to us in the least.
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My opinion is that some people are renters. They need mom and dad, aka a landlord, to take care of their property related problems.
...well that's kind of condescending...
And?
Gotta love the self-righteous landlords on this forum...
Relax.
No one said landlords should skip on the maintenance.
The question was, why do people rent as oppose to buying.
The answer: because some people are renters, can't do house maintenance. When and if the renters start doing their own maintenance, they might think about buying. Until then, they should rent. In my opinion many homeowners should still rent.
There's a difference between saying "some people are renters, and they need mom and dad [or a landlord] ..." and "some renters can't do maintenance and need mom and dad [or a landlord]". note the difference?
There are also plenty of able-bodied intelligent people with no interest at all in house maintenance.
@ketchup it seems like you just got too much time on your hands. But, hey, it makes me feel very ... umm..... significant when someone spends so much time analyzing my two sentences.
It sure makes me feel umm.... significant when someone reverts to an ad hominem attack against me. :)
And just to get further into the weeds, I've lived in a home as an owner-occupant, rented while being a landlord, lived as an owner-occupant again while still playing landlord, and currently rent while being a landlord again and also collecting payments on a rental house I sold on payments. I've seen all sides of this. There are good reasons for someone to be on either side.
Wow, you are very hard to get rid off. :)
I need to be frank, I am sure you misunderstand me and I misunderstand you. I can’t figure out why you bring up the example of you being a landlord-owner or an owner-landlord without saying anything about the maintenance - my main point.
Sure, if one wants to find a reason to justify anything, there is absolutely nothing that can stop them.
If one wants to be a renter - they are going to find their reasons and are going to rent, if one want to be a homeowner - they are going to buy. It doesn't mean they should. They might be "renters" - have renters' mentality, being used for someone else to do the maintenance for them, someone like mom and dad aka a landlord. Why did they buy is a different story.
In computers world there are lamers/users and hackers. Some people are just users, similar to the RE world where some people are renters. I don't know if there is a "renter/tenant error" similar to a "user error," but there should be one. I, for example, alway build my rentals "tenant proof." I alway add 2x4s under the drywall where a towel rack goes or a toilet paper holder, and it still doesn't work. I resort now to anchors able to hold 200 lbs for a toilet paper holder.
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I need to be frank, I am sure you misunderstand me and I misunderstand you. I can’t figure out why you bring up the example of you being a landlord-owner or an owner-landlord without saying anything about the maintenance - my main point.
Sure, if one wants to find a reason to justify anything, there is absolutely nothing that can stop them.
If one wants to be a renter - they are going to find their reasons and are going to rent, if one want to be a homeowner - they are going to buy. It doesn't mean they should. They might be "renters" - have renters' mentality, being used for someone else to do the maintenance for them, someone like mom and dad aka a landlord. Why did they buy is a different story.
In computers world there are lamers/users and hackers. Some people are just users, similar to the RE world where some people are renters. I don't know if there is a "renter/tenant error" similar to a "user error," but there should be one. I, for example, alway build my rentals "tenant proof." I alway add 2x4s under the drywall where a towel rack goes or a toilet paper holder, and it still doesn't work. I resort now to anchors able to hold 200 lbs for a toilet paper holder.
For clarity I was the one who first called you out for saying that some people were renters / they need mom and dad, aka a landlord, to take care of their related problems.
It's the way you've characterized an entire group of people that's objectionable, and made even more offensive by the long list of reasons given by numerous other posters in this thread. Had you said "some people lack the knowledge or desire to undertake home maintenance" I'm sure everyone here would have agreed. But that's not what you said. For starters, describing a group of people as needing mommy and daddy condescending. Then you double-down on this by referencing another obnoxious and derogatory term, 'lamers' for anyone who is not a hacker.
The whole reason why ketchup mentioned that s/he has also been a owner, renter and landlord is to highlight that your dichotomy of splitting people into owners who are competent and renters who need assistance from their parents or landlords is false. FWIW I'm in a similar situation to ketchup (outlined above) and I'm pretty adept at home maintenance. In fact I've recently watched our appointed handyman take 2x as long to do a few repair jobs in our rental that I know I would have done better.
Stop trying to 'get rid' of people just because they don't agree with your responses. This forum promotes open discussion, within the forum rules, even when its discordant.
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I need to be frank, I am sure you misunderstand me and I misunderstand you. I can’t figure out why you bring up the example of you being a landlord-owner or an owner-landlord without saying anything about the maintenance - my main point.
Sure, if one wants to find a reason to justify anything, there is absolutely nothing that can stop them.
If one wants to be a renter - they are going to find their reasons and are going to rent, if one want to be a homeowner - they are going to buy. It doesn't mean they should. They might be "renters" - have renters' mentality, being used for someone else to do the maintenance for them, someone like mom and dad aka a landlord. Why did they buy is a different story.
In computers world there are lamers/users and hackers. Some people are just users, similar to the RE world where some people are renters. I don't know if there is a "renter/tenant error" similar to a "user error," but there should be one. I, for example, alway build my rentals "tenant proof." I alway add 2x4s under the drywall where a towel rack goes or a toilet paper holder, and it still doesn't work. I resort now to anchors able to hold 200 lbs for a toilet paper holder.
For clarity I was the one who first called you out for saying that some people were renters / they need mom and dad, aka a landlord, to take care of their related problems.
It's the way you've characterized an entire group of people that's objectionable, and made even more offensive by the long list of reasons given by numerous other posters in this thread. Had you said "some people lack the knowledge or desire to undertake home maintenance" I'm sure everyone here would have agreed. But that's not what you said. For starters, describing a group of people as needing mommy and daddy condescending. Then you double-down on this by referencing another obnoxious and derogatory term, 'lamers' for anyone who is not a hacker.
The whole reason why ketchup mentioned that s/he has also been a owner, renter and landlord is to highlight that your dichotomy of splitting people into owners who are competent and renters who need assistance from their parents or landlords is false. FWIW I'm in a similar situation to ketchup (outlined above) and I'm pretty adept at home maintenance. In fact I've recently watched our appointed handyman take 2x as long to do a few repair jobs in our rental that I know I would have done better.
Stop trying to 'get rid' of people just because they don't agree with your responses. This forum promotes open discussion, within the forum rules, even when its discordant.
+1. Thanks for jumping back in, nereo.
I don't think I've heard the term "lamers" since the late 90s/early 00s. I didn't realize anyone over the age of 12 used it unironically.
His goal is to get rid of me? He sounds fun.
I completely understand him. Until he just re-doubled down, part of me still thought I might be misinterpreting.
I happen to work in IT, and comparing "users" and "renters" in this way is hilariously insulting to both groups. Does IT exist just because people are too dumb to set up their own AD user account? Because Karen in accounting isn't smart enough to maintain the Quickbooks server so mommy and daddy (IT) does it instead? IT exists so that nobody else has to patch the network hoses and top off the internet fluid so everyone else can do their damn job. And that doesn't make us better than everyone else at the company (our users). Without them, there's no business. Just like without renters, there are no rental properties.
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Man...if my renters referred to me as "mommy", that would be fucking weird.
Landlords get paid to provide a service, it's not a parental arrangement, it's a professional one.
Back on topic though, I am a "renter" through and through. I have no interest in owning, I take no pride in ownership, I hate lawn care/gardening with a fiery passion, and I like the ability to move.
Except...I own two properties. Lol.
DH's career is located here, so we're married to this location for the next 10-15 years. If it were just me, there's no way I would commit to a single location for that long. Until recently, I had never lived anywhere for more than 2 years.
The new place is my "dream home", so hopefully I can stay put now and enjoy my nice reasonable mortgage payment as the neighbourhood gentrifies and becomes completely unaffordable.
We don't care about this place appreciating because we never plan on selling, it's more like buying into rent-control.
Ugh, it is so nice to no longer have a yard to worry about, or a furnace, or hot water tank, or a roof, etc. The more of that shit I can offload, the better.
Because I *do* own though, I've made the most of the privilege by painting the place an insane colour that no landlord would allow. So at least there's that.
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Everyone on here would be a renter under the right circumstances...and an owner under the right circumstances. Is the OP even still here?
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Because I *do* own though, I've made the most of the privilege by painting the place an insane colour that no landlord would allow. So at least there's that.
I think you and I might be good neighbors Malkynn - once upon a time I found a ramshackle rental in a VHCOL area. The 'landlord' (I should just say "owner" since he did no landlording duties) was an aging hippie who agreed to rent to me for waaaaaay below market price provided I evicted all the mice and repaint the walls and take care of all the non-critical problems myself and deduct materials from rent. And so it was "mine, but not mine". And I compensated by painting every room a different, bright color (all I'll say is my bathroom for a while was a color called "Macbeth").
At one point he came over and his only comment was "didn't anyone ever tell you this is a house and not a box of crayons?!" I loved that quirky little place.
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We don't care about this place appreciating because we never plan on selling, it's more like buying into rent-control.
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.
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For us, I think the choice to rental is primarily psychological. I saw my parents bankrupted when I was young by a home purchase and the circumstances afterwards that were out of their control. If they had rented the financial impact would not have followed them for the next 2 decades.
I think this really gets at a generational difference- for so long, home ownership was core to the 'american dream', and had this aura of security. But for those of us who were impressionable during the recession, I think we take a very different view of home ownership oftentimes. Ownership doesn't seem more secure to me. Even without a mortgage, the nonsense I've seen with property taxes alone makes it feel so much more tenuous than I think it's felt for a lot of previous generations.
Also, add me to the bucket of- I absolutely CAN do my own maintenance. I just really enjoy not having to. Husband and I had a house for a couple years. And it was lovely and amazing but a total time and energy suck. We put a lot of work in while we were there, and also got lucky with the market timing, and flipped it for a tidy profit. And yet, we're quite happy being back to renting. We've got a baby coming- I'm delighted not to have more things to stay on top of. Plus, husband just got a new job. It's nice to know we'll easily be able to move areas if it proves to be more convenient.
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I think this really gets at a generational difference- for so long, home ownership was core to the 'american dream', and had this aura of security. But for those of us who were impressionable during the recession, I think we take a very different view of home ownership oftentimes. Ownership doesn't seem more secure to me. Even without a mortgage, the nonsense I've seen with property taxes alone makes it feel so much more tenuous than I think it's felt for a lot of previous generations.
Good point - my parents definitely subscribe to the doctrine that home ownership is core to stability. We actually feel LESS secure with our mortgage than we do with rentals, in part because we know that we can pick up and leave in a couple of months if opportunity knocks. No doubt this was influenced by living through the mortgage crisis when we saw numerous friend who went underwater and 'got stuck'.
Also, add me to the bucket of- I absolutely CAN do my own maintenance. I just really enjoy not having to. Husband and I had a house for a couple years. And it was lovely and amazing but a total time and energy suck. We put a lot of work in while we were there, and also got lucky with the market timing, and flipped it for a tidy profit. And yet, we're quite happy being back to renting. We've got a baby coming- I'm delighted not to have more things to stay on top of.
I didn't say this in your other thread but I'm so happy for you guys! Yay!
From recent experience having a baby takes up much of your otherwise free time. For us we were deeply thankful not to need to spend hours each week on home maintenence/yardwork with our current rental. I'm pretty confident that we'll go back to owning in a few years once the kid is in school and our workload has dropped substantially. In the meantime I get just a few hours/week at best. And I don't want to spend them cleaning gutters or caulking windows or replacing the air filter like I did with my last home.
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I didn't say this in your other thread but I'm so happy for you guys! Yay!
From recent experience having a baby takes up much of your otherwise free time. For us we were deeply thankful not to need to spend hours each week on home maintenence/yardwork with our current rental. I'm pretty confident that we'll go back to owning in a few years once the kid is in school and our workload has dropped substantially. In the meantime I get just a few hours/week at best. And I don't want to spend them cleaning gutters or caulking windows or replacing the air filter like I did with my last home.
Thank you! We're so excited. Now that I'm 25 weeks and getting kicked all the time, it's starting to feel like this may actually work out and result in an infant... how cool!
We're in a similar boat. At some point we'll almost certainly go back to being home owners. Right now though, it just doesn't make sense for us!
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I need to be frank, I am sure you misunderstand me and I misunderstand you. I can’t figure out why you bring up the example of you being a landlord-owner or an owner-landlord without saying anything about the maintenance - my main point.
Sure, if one wants to find a reason to justify anything, there is absolutely nothing that can stop them.
If one wants to be a renter - they are going to find their reasons and are going to rent, if one want to be a homeowner - they are going to buy. It doesn't mean they should. They might be "renters" - have renters' mentality, being used for someone else to do the maintenance for them, someone like mom and dad aka a landlord. Why did they buy is a different story.
In computers world there are lamers/users and hackers. Some people are just users, similar to the RE world where some people are renters. I don't know if there is a "renter/tenant error" similar to a "user error," but there should be one. I, for example, alway build my rentals "tenant proof." I alway add 2x4s under the drywall where a towel rack goes or a toilet paper holder, and it still doesn't work. I resort now to anchors able to hold 200 lbs for a toilet paper holder.
For clarity I was the one who first called you out for saying that some people were renters / they need mom and dad, aka a landlord, to take care of their related problems.
It's the way you've characterized an entire group of people that's objectionable, and made even more offensive by the long list of reasons given by numerous other posters in this thread. Had you said "some people lack the knowledge or desire to undertake home maintenance" I'm sure everyone here would have agreed. But that's not what you said. For starters, describing a group of people as needing mommy and daddy condescending. Then you double-down on this by referencing another obnoxious and derogatory term, 'lamers' for anyone who is not a hacker.
The whole reason why ketchup mentioned that s/he has also been a owner, renter and landlord is to highlight that your dichotomy of splitting people into owners who are competent and renters who need assistance from their parents or landlords is false. FWIW I'm in a similar situation to ketchup (outlined above) and I'm pretty adept at home maintenance. In fact I've recently watched our appointed handyman take 2x as long to do a few repair jobs in our rental that I know I would have done better.
Stop trying to 'get rid' of people just because they don't agree with your responses. This forum promotes open discussion, within the forum rules, even when its discordant.
Stop telling people what they should or should not do.
I had no idea someone disagreed with my responses.
You are so hilarious to read, I can't even believe you seriously are still on this topic trying to convince me that I am condescending (it's also amusing to read you calling me names and at the same time referencing that I break the forum rules; do you do this on purpose? C'mon, tell us the truth. It's only us, I won't tell anybody).
Sure, if it makes you feel better, I'll tell you that tenants are great, they never do anything stupid, and lamers don't even exist, it's all a fragment of my imagination, a fiction I made up because I was bored out of my mind. Here, you can live in an ideal world. No "mom and dad" stuff,
-Here, mom, it broke, fix it.
- Did you break it?
- Noooo, it was broken.
That's a real conversation I have had with my kids and my tenants (tenants don't call me "mom," tho).
Just for the sake of it, because it's soooo funny, and is going to rob others of a good Friday entertainment. Have you even read what I wrote? Have you noticed that I wrote several times that some owners should rent, which means I DO NOT think that homeowners are competent. What are you going to say to that? There was no dichotomy? Or was there? Or wait, you said it was false. What was false? Wait a sec...
But, hey, hooray to you for being "adept," someone has to be, I guess. Since we have decided already that I'm condescending, can I call you "adept" from now on, it's just "nereo" seems a bit dull.
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My $1050/month apartment would cost 3-400 000 to buy, plus $6-800/month in condo fees. I'd love to buy, but I'd need to win a huge lottery to make that kind of wasteful choice. Instead I'll eventually become both a landlord and a tenant, buying a property that makes money but that is not for me to live in.
I love the flexibility of renting, but I do want the security of owning.
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I need to be frank, I am sure you misunderstand me and I misunderstand you. I can’t figure out why you bring up the example of you being a landlord-owner or an owner-landlord without saying anything about the maintenance - my main point.
Sure, if one wants to find a reason to justify anything, there is absolutely nothing that can stop them.
If one wants to be a renter - they are going to find their reasons and are going to rent, if one want to be a homeowner - they are going to buy. It doesn't mean they should. They might be "renters" - have renters' mentality, being used for someone else to do the maintenance for them, someone like mom and dad aka a landlord. Why did they buy is a different story.
In computers world there are lamers/users and hackers. Some people are just users, similar to the RE world where some people are renters. I don't know if there is a "renter/tenant error" similar to a "user error," but there should be one. I, for example, alway build my rentals "tenant proof." I alway add 2x4s under the drywall where a towel rack goes or a toilet paper holder, and it still doesn't work. I resort now to anchors able to hold 200 lbs for a toilet paper holder.
For clarity I was the one who first called you out for saying that some people were renters / they need mom and dad, aka a landlord, to take care of their related problems.
It's the way you've characterized an entire group of people that's objectionable, and made even more offensive by the long list of reasons given by numerous other posters in this thread. Had you said "some people lack the knowledge or desire to undertake home maintenance" I'm sure everyone here would have agreed. But that's not what you said. For starters, describing a group of people as needing mommy and daddy condescending. Then you double-down on this by referencing another obnoxious and derogatory term, 'lamers' for anyone who is not a hacker.
The whole reason why ketchup mentioned that s/he has also been a owner, renter and landlord is to highlight that your dichotomy of splitting people into owners who are competent and renters who need assistance from their parents or landlords is false. FWIW I'm in a similar situation to ketchup (outlined above) and I'm pretty adept at home maintenance. In fact I've recently watched our appointed handyman take 2x as long to do a few repair jobs in our rental that I know I would have done better.
Stop trying to 'get rid' of people just because they don't agree with your responses. This forum promotes open discussion, within the forum rules, even when its discordant.
+1. Thanks for jumping back in, nereo.
I don't think I've heard the term "lamers" since the late 90s/early 00s. I didn't realize anyone over the age of 12 used it unironically.
His goal is to get rid of me? He sounds fun.
I completely understand him. Until he just re-doubled down, part of me still thought I might be misinterpreting.
I happen to work in IT, and comparing "users" and "renters" in this way is hilariously insulting to both groups. Does IT exist just because people are too dumb to set up their own AD user account? Because Karen in accounting isn't smart enough to maintain the Quickbooks server so mommy and daddy (IT) does it instead? IT exists so that nobody else has to patch the network hoses and top off the internet fluid so everyone else can do their damn job. And that doesn't make us better than everyone else at the company (our users). Without them, there's no business. Just like without renters, there are no rental properties.
Only a few comments here,
First, I'm glad I used 'Lamers' ironically, so passed their by the skin of my teeth, since I'm way above 12.
Second, I'm a "she," not that it really matters, but at least I won't skip it thinking that it wasn't about me.
Again I feel... um significant because I made people realize how important everyone is in our lives, and what important role everyone plays. Even though, I didn't mention IT at all, I think I should totally take credit for them being mentioned. What else? Why do I feel that it has nothing to do with me, but some transference takes place from the past unresolved conflicts?
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Ilsy, I am confused. Are you saying that choosing to rent a place to live means you're an inferior human being? Because that's what you seem to be saying.
On the other hand, if you can rent a million dollar house for $3k a month... maybe it's not that you need mommy and daddy, but that you can do math.
-W
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I need to be frank, I am sure you misunderstand me and I misunderstand you. I can’t figure out why you bring up the example of you being a landlord-owner or an owner-landlord without saying anything about the maintenance - my main point.
Sure, if one wants to find a reason to justify anything, there is absolutely nothing that can stop them.
If one wants to be a renter - they are going to find their reasons and are going to rent, if one want to be a homeowner - they are going to buy. It doesn't mean they should. They might be "renters" - have renters' mentality, being used for someone else to do the maintenance for them, someone like mom and dad aka a landlord. Why did they buy is a different story.
In computers world there are lamers/users and hackers. Some people are just users, similar to the RE world where some people are renters. I don't know if there is a "renter/tenant error" similar to a "user error," but there should be one. I, for example, alway build my rentals "tenant proof." I alway add 2x4s under the drywall where a towel rack goes or a toilet paper holder, and it still doesn't work. I resort now to anchors able to hold 200 lbs for a toilet paper holder.
For clarity I was the one who first called you out for saying that some people were renters / they need mom and dad, aka a landlord, to take care of their related problems.
It's the way you've characterized an entire group of people that's objectionable, and made even more offensive by the long list of reasons given by numerous other posters in this thread. Had you said "some people lack the knowledge or desire to undertake home maintenance" I'm sure everyone here would have agreed. But that's not what you said. For starters, describing a group of people as needing mommy and daddy condescending. Then you double-down on this by referencing another obnoxious and derogatory term, 'lamers' for anyone who is not a hacker.
The whole reason why ketchup mentioned that s/he has also been a owner, renter and landlord is to highlight that your dichotomy of splitting people into owners who are competent and renters who need assistance from their parents or landlords is false. FWIW I'm in a similar situation to ketchup (outlined above) and I'm pretty adept at home maintenance. In fact I've recently watched our appointed handyman take 2x as long to do a few repair jobs in our rental that I know I would have done better.
Stop trying to 'get rid' of people just because they don't agree with your responses. This forum promotes open discussion, within the forum rules, even when its discordant.
+1. Thanks for jumping back in, nereo.
I don't think I've heard the term "lamers" since the late 90s/early 00s. I didn't realize anyone over the age of 12 used it unironically.
His goal is to get rid of me? He sounds fun.
I completely understand him. Until he just re-doubled down, part of me still thought I might be misinterpreting.
I happen to work in IT, and comparing "users" and "renters" in this way is hilariously insulting to both groups. Does IT exist just because people are too dumb to set up their own AD user account? Because Karen in accounting isn't smart enough to maintain the Quickbooks server so mommy and daddy (IT) does it instead? IT exists so that nobody else has to patch the network hoses and top off the internet fluid so everyone else can do their damn job. And that doesn't make us better than everyone else at the company (our users). Without them, there's no business. Just like without renters, there are no rental properties.
Only a few comments here,
First, I'm glad I used 'Lamers' ironically, so passed their by the skin of my teeth, since I'm way above 12.
Second, I'm a "she," not that it really matters, but at least I won't skip it thinking that it wasn't about me.
Again I feel... um significant because I made people realize how important everyone is in our lives, and what important role everyone plays. Even though, I didn't mention IT at all, I think I should totally take credit for them being mentioned. What else? Why do I feel that it has nothing to do with me, but some transference takes place from the past unresolved conflicts?
Apologies for the "he." Bad habit of assumption; the internet tends to be a sausage fest.
You brought up "in the computers world" and "lamers/users" as condescending terms (ironically or not). I don't think IT is a stretch at all from that topic.
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You are so hilarious to read, I can't even believe you seriously are still on this topic trying to convince me that I am condescending (it's also amusing to read you calling me names and at the same time referencing that I break the forum rules; do you do this on purpose? C'mon, tell us the truth. It's only us, I won't tell anybody).
I did not call you names, and I work hard to stay within the forum rules. I did say that your comment was condescending, and then explained why I thought that.
Also, this is an open thread that anyone can read - there is no "only us" here.
Just for the sake of it, because it's soooo funny, and is going to rob others of a good Friday entertainment. Have you even read what I wrote? Have you noticed that I wrote several times that some owners should rent, which means I DO NOT think that homeowners are competent. What are you going to say to that? There was no dichotomy? Or was there? Or wait, you said it was false. What was false? Wait a sec...
yes, I have read what you wrote, and I'm not disagreeing that some owners should rent. The topic subject is "why does someone rent"; not "when should owners rent".
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@nereo , I'm more and more just suspecting simple trolling (and successful trolling at that).
Stop trying to 'get rid' of people just because they don't agree with your responses. This forum promotes open discussion, within the forum rules, even when its discordant.
Stop telling people what they should or should not do.
We probably should have stopped at this wonderful exchange. She told you to stop telling people what to do, while telling you to do that. I had to read it twice. I was waiting for the punchline.
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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.
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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?
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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
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.”
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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.
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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.
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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.
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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...
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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.
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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.
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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.
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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?
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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.
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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.
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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.
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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.
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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...
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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/
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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.