Comments on: That Damned Rent vs. Buy Question

By: Robert Andrew

Robert Andrew — Sun, 23 Oct 2011 16:36:42 +0000

Seems like a great calculator, I ran the numbers and I am confused by the “value of investment” category can you elaborate more?

By: Ricardo A. Alvarez

Ricardo A. Alvarez — Wed, 15 Sep 2010 20:37:03 +0000

Residences shouldn’t be seena s a main vehicle of investment. Specially in a recesion like economy. unless you pay cash and got a great deal there is really no match if you add up maintenance costs, mortgage interest and taxes. Better put you rmoney somewhere else. I will not buy a house unless I can pay 90% down and somehow turn it into a rental property. Good luck. Pride ownership is not cuantifiable and doe snot pay interest.

By: Nancy

Nancy — Mon, 15 Mar 2010 20:14:57 +0000

Excellent post. The cost of home ownership is more than the mortgage. If you have a secure job that can handle adjustments in the economy and you feel you are secure than do it. If you are just beginning wait and see what happens. There really is no rush. “Normal” as Cvan puts it can change in a moment. Based on research in global events(my day job) we are far from the end of this so called “recession”. The are multiple factor at play. Frankly these days be grateful to have a roof over your head. So many don’t and if they do 25% are underwater which I imagine is not a good feeling.

By: Cvan

Cvan — Sun, 14 Mar 2010 02:36:05 +0000

There’s a good link for calculating the same thing at http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=1.

Problem, is, if you get sick, lose your job, or something happens, all those numbers don’t stick and you’ll owe a lot of money for a house on top of the emergency. Quick slide to huge problems. Given the situation right now, I’d imagine it would be best to freeze in your position for a couple of more years. If you’re in stick it out, if you’re out pack away the difference plus interest.

If the interest rate goes up while I wait, plus the price of the home, I would be able to earn a higher credit score in the meantime, put the difference toward a larger down payment it and break even. Still got a couple of more years for the resets to occur, who knows how many more will be foreclosed.

Do you think it’s over when you buy the house? You’ll probably need to furnish it, if you’re picky you’ll tear stuff out and redo it. Things will break, and don’t expect things to get done for less than 1-2k per pop. One simple roofing job will set you back 10k easily. What if your foundation starts to sink?

They don’t mention how much more it costs to heat/cool/water/gas/electrify all the stuff compared to an apartment. The occasional $50 bag of fertilizer, $200 garbage disposal, HOA restrictions and fines for everything from leaving the trash can by the sidewalk or height of the grass.

No one advertises to make the highest down payment possible, or even pay the whole thing in cash. It would be stupid for all involved in selling, as the cash magically created from nowhere as interest can go to their accounts. They just focus on people getting in as quickly as possible to feel “normal”.

By: Zeke

Zeke — Wed, 10 Mar 2010 23:46:38 +0000

wafireman

You are 100% accurate. Nothing wrong with owning a home, but let’s not give it the “investment” label. Home equity is dead money, it builds over time with no simple or free way to access it.
Real estate is very slow, real appreciation may be a decade plus away. If you look over the longer term, the vast majority of real estate gains have been made in 2 huge bubbles

If you want the best financial decision, rent, invest the difference. If it’s your desire to own a home,go for it, just don’t expect it to be an investment

By: Nancy

Nancy — Wed, 10 Mar 2010 22:46:30 +0000

Since you are relocating out of the area do you have an individual who will be there for your renter if something should go wrong like appliance or plumbing issues? Also consider if you do rent your place, unless the renter is a friend, you may not find your place in the same condition it was when you left. Often a security deposit does not even begin to handle the repairs that need to be done. 6% appreciation seems to be a number that is thrown out but has very little statistical backing. The stock market has been fairly good but employment and general growth is still a wild card in my opinion. Best of luck in your new location.

By: halfpint

halfpint — Wed, 10 Mar 2010 21:04:34 +0000

This is good data. I own a condo. Due to overbuilding in my city-there is a condo surplus. I am relocating and cannot decide if I should sell the condo and “be free” or rent it out, hoping for the 6% appreciation. Right now, with mortgage and costs I would NOT have enough to put down on a new home. However with the going rent rate, I would net -300 each month (includes mortgage and HOA dues). If I wait 2 to 3 years the value “might” go back up to where I would net enough to buy another home. Oh decisions…. Am I missing any considerations?

By: Nancy

Nancy — Wed, 10 Mar 2010 19:47:01 +0000

I think the days of looking at your home as a piggybank are gone. Unemployment is expected to return very slowly and even when it does many will be nervous about the potential of going through that again. Those that are employed are worried if they will have a job in this global economy where China seems to be taking the lead. Add in the fact that 25% of mortgages are “underwater” where more is owed than the value of the home please use caution before jumping in. I think the “market” for real estate is more emotional than based on facts. Remember when those folks felt on top of the world and were “flipping”??? None of us can predict what tomorrow will bring. Another 9/11, China pulling back on lending or some other crisis we could have never predicted and things change overnight. My best to all of you no matter which direction you decide to go!

By: Matt

Matt — Wed, 10 Mar 2010 18:37:38 +0000

If you can’t rent your place and cover your ownership costs….you are paying too much.

If and when Govt’t stops bailing everyone out….tax breaks, low interest…prices will have a lot of downward pressure for the next decade.

I believe renting is a safer bet.

By: wafireman

wafireman — Wed, 10 Mar 2010 08:52:38 +0000

you see what you people dont take into consideration is this if mortgage is 2400 and rent is 1100, if you take that difference(1300) and invest it in even a simple ira, you will come out ahead of any equity you will ever be getting by buying, plus you save on property tax, upkeep, and realator fees. just putting it in savings would equal out to this, say you buy a house for 300,000 and pay it off in 30 years and it has appreciated to 450,000, now you have also paid interest on your loan, upkeep and taxes so it would be fair to say that you would be into it 450,000. if you just took the difference you saved by renting and put it in savings for 30 years it would be $468,000. Seems like simple math to me.

By: aua868s

aua868s — Wed, 10 Mar 2010 07:43:15 +0000

amazing thought…..well said jeffrey

By: joe s

joe s — Wed, 10 Mar 2010 06:22:50 +0000

add repairs and replacement costs roof,appliances,heater,huge property and school taxes. my calculations say renting is by far and away the better bargain even with home appreciation.maybe years ago home ownership was cheaper it was a good value.plug in all your costs over 10 to 20 years and see how much money you really made on your house.

By: Jeffrey

Jeffrey — Wed, 10 Mar 2010 05:35:58 +0000

The truth is until you make the last mortgage payment, the Bank owns the House. You are in the same boat as the renter, no pay, you lose!!.
Meanwhile the bank makes 80% of thier interest in the first 20% of an average loan. You move up, you risk it all on market conditions.
Figure that the average family owns a house for 7 years then moves, Lets see who wins!!!
You can easily figure that what ever you finance your house for the bank makes 2.5 or 3 times that price in interest.

By: Julie Stroeve

Julie Stroeve — Wed, 10 Mar 2010 01:20:48 +0000

Mortgage payments are 2x higher than rent payments. BUT rent is money thrown away…ownership is money invested. If I spent $1500 on rent in Minneapolis, I would pay 25% income tax and have no deductions from there! Mpls mortgage payments, property tax and utilities are outrageous relative to income, but at the end of the year I don’t pay income tax. Will we get to 10% individual and corporate income tax — no deductions? We’ll see. But for now the only way I can keep my money while being house poor at the end of the year is to own my home. If I paid equivalent $ in rent versus mortgage, I’d still be house poor and have no more money in the bank. If I had $100,000 in the bank, I wouldn’t worry about mortgages OR rent payments. I buy my home for the long term. I rent for the short term.

By: Nancy

Nancy — Tue, 09 Mar 2010 22:22:53 +0000

Some of this has to be a factor of age and also geographic location. I am near retirement and have had spinal issues and am married to a workaholic who will never retire. For us living in the heart of DC in the N.W. section as renters is a dream. I have a doorman, concierge service and a Meto stop two blocks away. My rent is fair, not great but we were able to sell two cars and have saved a fortune there. If we had a house the money spent just to keep it up would kill us plus add yard/lawn service as my husband is getting just a bit too old to do it himself and for us it is a bargain both finacially and convenience wise. When I had four kids at home it was a different story!