If you're still renting, and do not have a house yourself, you better save and pay it all down as soon as posssible, because no matter what, you need to have a roof over your head, but if this is your investing property, then, it might be different, but once again, pay it all down for at least one so that you will have a place to live no matter what happen.
Very true and it is especially critical to buy at the right time for investment property. However what you are saying refutes blindly following the generalization that buying is better than renting for a domicile. Like many, I suspect, if we had not purchased our home 27 years ago we could not afford to live where we do.
Thanks for the clarification Vaulted Treehouse and Dawoofdaddy.
Most will never understand the concepts that you both are so politely attempting to explain because they have been hogwashed by the media and realters of this country on almost a daily basis and will always believe buying a home is clearly better than renting.
Most will never understand the concepts that you both are so politely attempting to explain because they have been hogwashed by the media and realters of this country on almost a daily basis and will always believe buying a home is clearly better than renting.
The market has retreated in most areas in the country in value. But lets not get doomsday. People will continue to buy homes and they aren't making any more land and the population continues to increase. All of those factor will drive home values up long term. You also fail to mention that the biggest welfare break in the tax laws is the tax deduction for home ownership. So in Woof's example of rent for $2,500 or mortgage for $2,500. Guess what uncle Sam is willing to give you $800 a month to own. Historically properties have gone up approximately 3%. There was no way they were going to continue to go up 10-20% a year because incomes weren't inreasing like that and basically thye priced too many buyer out of the market. Iceman is riight on in not paying off the mortgae. A huge falacy of a good financial move. Invest in a 401k or IRA, since 1970 the market has averaged a 11.9% return Your house loan of 6% is really about 4% after the tax break and the mrket makes you close to 12%, you end up with a net of 8%. Leverage on the house is another huge advantage. Oh did I mention real estate is the number 2 way to become a millionare in the USA. Now why would you want to rent???
Again more rubbish. This example is equally blanketing every market in the entire country.
"Buy a house and everyone gets rich, everyone proclaims"!
Sorry, but markets dont operate this way and real estate, is no exception.
Thus, this is exactly why this is a huge bubble and in most markets the bust will be tremendous.
:drink:
RE is a bad investment currently.
Try to pick a dip and buy. The ridiculous outstanding loans that default are going to bring down the price of 99% of every home in the the nation.
Wait it out. Banks knew that these subprime peeps would begin defaulting when the piper came/comes.
Try to pick a dip and buy. The ridiculous outstanding loans that default are going to bring down the price of 99% of every home in the the nation.
Wait it out. Banks knew that these subprime peeps would begin defaulting when the piper came/comes.
Its a wash since the cost of maintaining the house, taxes, insurance, etc 30 years later would rise equal or greater than monthly rent costs.
Again, people fail to acknowledge anything appearing at all negative regarding housing.
Its as if the majority believe if a person buys a home, regardless of price or regional market conditions, they will automatically become the next Donald Trump billionaire tycoon.
Complete rubbish.
I actually agree with this.
However, too many people have been conned into believing their homes were permanent atm machines.
Hundreds of thousands...possibly millions of households, that have extracted bloated "equity" from their homes via refinancing scams will end up in foreclosure or paying alot more for their homes than they ever expected.
This may shock some people, but when all costs/expenses involved with home ownership are considered, including adjusting for annual inflation and opportunity costs (which of course most people willingly refuse to do), as often as not residential-owner-occupied real estate should be viewed as a depreciating asset.
:drink:
Actually, that is greatly dependent upon what you had otherwise decided to do with that same money.
This is the "opportunity cost" I mentioned in other posts and again, most people completely fail to consider when discussing home ownership.
Example: Its quite possible you could have instead rented a place, and used the extra saved money to invest in something like microsoft, cisco, etc.
27 years ago...1980, that was damn near rock bottom prior to the historic grand daddy of all stock market price increases from 1982-2000.
Had you instead made that decided to forgo a home purchase, possibly bought a less expensive house, and instead found made an investment such as msft or one of the high flying stocks of 80s-90s, Id argue you could probably buy 10-50 homes similar to what you currently own.
$1000 invested in Cisco in 1990 was worth well over $1,000,000 in 2000. Similar returns were made in many other stocks during same period. One didnt have to get in at rock-bottom or out at tippy-top to get rich...just have been anything close to 50 percentile and it was a jackpot.
Of course, you also could have lost those funds via stock investing or whatever else you chose, but thats life. There are very few guarantees and real estate is not exempt from losses.
This is still a very positive picture!
Where I live now (Macau) the rents are half of what people pay on their mortgage. All one big speculation. Same thing was happening in Hong Kong in 1997. It did all collapse there with the Asian crises. Same thing should happen here in the next 2-3 years, when it becomes oh so obvious that there are way too many casinos.
Related post from 2+2 about this topic. Basically, even with house prices going crazy, renting only lost out by a tiny bit.
Posted by: PokerPaul
My home rent / own comparison after 6 years - call it a draw
moved into brand new house march 2001
paid 950k for it, in a very nice neighbourhood, which has gotten quite hot in the last several years.
Anyways for personal reasons we had to get an appraisal on it. It came back from 2 agents around 1.35 mill.
So roughly a 400k gain in 6 years, less commisions (if we were to sell) for agents of about 50k, and we're looking at a 350k net gain if we get fair market value.
At first thought a very nice residual gain and tax free income. For the entire time we lived here up to now that translates into a weekly gain on the property of about $1000 / week tax free.
Pretty mindboggling when you think about it. Its like as if we had a third person in our family earning an additional paycheck every week.
But then i did some math and added up what we paid to live here up to now:
- Property taxes 880/mn = 64000
- Heat & Hydro 350/mn = 25000
- Interest = 230000
That totals about $320k.
I have not even included additional fees such as some repairs and upgrades, although these were relatively low as the house was new....once a week cleaning lady to keep it looking nice, summer lawncutting service, and a few others. Actually i totally forgot about home insurance, which is another $100/mn = $7200.
Point being, we have quite certain paid more in non-equity expenditures than we received in property value gains.
Of course, had we rented a similar property, we'd likely would have had to pay about $6000 in rent....at least. Over same period that would have been about $430k, and we'd still likely have to pay for cleaning lady, lawn care, and heat & hydro, so say about $470k.
So the true comparison then is what could be realistically expected from paying the $470k rent & utilities, but then being able to invest our $200k down payment into another income producing opportunity.
Lets say a balanced mutual fund yielding about 5.5%.
That would put 200k at about 275k in 6 years.
So $470k - $75k gain = $395k spent over 6 years.
Compared to roughly paying $350k in expenses going the mortgage/ownership route.
Pretty even in my opionion....i guess its slightly better going the mortgage/ownership route.....but its only a slight premium to go the renting route in comparison, but when you rent, you have the added benefit of always having all your assets liquid, and being flexible enough should you require a sudden change or move.
did i miss something?
Posted by: PokerPaul
My home rent / own comparison after 6 years - call it a draw
moved into brand new house march 2001
paid 950k for it, in a very nice neighbourhood, which has gotten quite hot in the last several years.
Anyways for personal reasons we had to get an appraisal on it. It came back from 2 agents around 1.35 mill.
So roughly a 400k gain in 6 years, less commisions (if we were to sell) for agents of about 50k, and we're looking at a 350k net gain if we get fair market value.
At first thought a very nice residual gain and tax free income. For the entire time we lived here up to now that translates into a weekly gain on the property of about $1000 / week tax free.
Pretty mindboggling when you think about it. Its like as if we had a third person in our family earning an additional paycheck every week.
But then i did some math and added up what we paid to live here up to now:
- Property taxes 880/mn = 64000
- Heat & Hydro 350/mn = 25000
- Interest = 230000
That totals about $320k.
I have not even included additional fees such as some repairs and upgrades, although these were relatively low as the house was new....once a week cleaning lady to keep it looking nice, summer lawncutting service, and a few others. Actually i totally forgot about home insurance, which is another $100/mn = $7200.
Point being, we have quite certain paid more in non-equity expenditures than we received in property value gains.
Of course, had we rented a similar property, we'd likely would have had to pay about $6000 in rent....at least. Over same period that would have been about $430k, and we'd still likely have to pay for cleaning lady, lawn care, and heat & hydro, so say about $470k.
So the true comparison then is what could be realistically expected from paying the $470k rent & utilities, but then being able to invest our $200k down payment into another income producing opportunity.
Lets say a balanced mutual fund yielding about 5.5%.
That would put 200k at about 275k in 6 years.
So $470k - $75k gain = $395k spent over 6 years.
Compared to roughly paying $350k in expenses going the mortgage/ownership route.
Pretty even in my opionion....i guess its slightly better going the mortgage/ownership route.....but its only a slight premium to go the renting route in comparison, but when you rent, you have the added benefit of always having all your assets liquid, and being flexible enough should you require a sudden change or move.
did i miss something?
More complex concepts are confusing for you. I just pointed out why not to pay off your mortgage and invest the difference and why. Later you argue you should have made a million by investing in the stock market and use an example of Cisco? How many people picked Cisco and held it and made a million? I could just win 100 sports bets in a row with last weeks newspaper.
I think you can only use history as a guide to the future and possible returns. Historically the stock market has a return over a long period of time of 10+%. Take any 10 year period. You can't judge a long term plan on a one month or one year result. Housing market has a long term increase of approximately 3%. In a free market supply and demand drives prices, if the market you are buying in has demand the prices will go up. If you are in a market where there are no jobs and people are moving it will go down. If you are buying in a area with a strong economy the risk of depreciation decreases and the likelyhood of the housing market increasing in value increase.
The recent housing slump and now the subprime fallout is going to present some good buying opportunities just like the stock market crash. I think the rental market is going to be much stronger and the ability to demand higher rents by us slum lords is going to increase because with the fall out of the subprime market is that some people that want to buy wont be able to buy. They will be forced to rent. Back to supply and demand, more renters will result in higher rents.
And renting is not the number two way to become a millionare, it is not the stock market, it is real estate!!!!
Again, you dont know facts prior to posting.
Why dont you look at what US equities did during time period 1966-1982 and then post another complete lie?
If you are going to post things about the market, at least have at least a fucking glimpse of a clue what you are posting about.
Actually, in a free market, interest rates have as much as anything regarding real estate prices, but I guess you instead shoehorn your posts to imply whatever it is that you believe.
Im not even going to begin with factoring inflation into real returns.
:drink:
Home ownership is great for those that are bad money managers and savers.
It is a natural and automatic means of saving, but for those that can manage their money wisely, renting is often times a more viable financial decision and a better way to go.
Simply amazing the amount of individuals that cannot grasp this concept.
It is a natural and automatic means of saving, but for those that can manage their money wisely, renting is often times a more viable financial decision and a better way to go.
Simply amazing the amount of individuals that cannot grasp this concept.
Fishhead...you've been throwing away money on rent for years! You buy house when you moved to FL, sell 4 years later at 50-75% profits. You've missed the boat too many times...vegas, florida....don't miss out on selling all the land you own in Iowa now while it's still high.
