Rent Vs Own

[Big Empty]

I know the rule of thumb here is there is equity in a home and you own it. But is it really completely better than renting? Im considering buying a house but when i think of how much more ill be paying it kinda bums me out. Renting is cheaper even though ill never own my townhome. I dont have to pay taxes, I dont have to pay for any maintenance, I can easily max out my 401k, there is no insurance i need to buy on it but renters, I wouldnt be able to get rid of my large credit card balances i like to put on it, no home ownser association fees. When i plug in the insurance, home owner association fees, taxes. I would be paying 425.00 a month more for a 160K house i was looking at. Over 30 years thats $153000. not counting interest i might have earned on it, or lost. so the savings are about what the house is worth. I've always been told owning is better. but is it really?

[Rogue]

it depends on what kind of usage you're gonna expect from the house imho. if your job requires you to travel a lot over the country and only allows you a few months at home in a year (like an NBA player something) then renting would be a better choice imho. otherwise i'd rather choose to buy one myself if i got the money. real estate ain't no longer a good investment but still better than putting your money in the bank. rental fee will increase in proportion to inflation, while the tax rate something will remain relatively stable in the long run.

[CubanMustGo]

Another consideration is that, at least initially, you will probably be paying enough interest to itemize deductions on your income tax ... interest and property taxes both are itemizable. If you have other deductions that normally don't add up (charitable contributions, state income or sales tax) it can make a difference.

There is always the potential for appreciation in the value of your house, but it's not a sure thing in this day and age.

But the best advice regardless of whether you buy or not would be to quit screwing around with 'large credit card balances.'

[Fabbs]

Forbes did a great article on this.
Cliffnotes are if home does not appreciate at 10% for each year, renting is the better $$ value.
The 10% a year can come in any order (0,0,0,40% jump in one year)...
But they had all the math, repairs, insurance, taxes etc.

Timing is of course everything.

[Wild Cobra]

I know the rule of thumb here is there is equity in a home and you own it. But is it really completely better than renting? Im considering buying a house but when i think of how much more ill be paying it kinda bums me out. Renting is cheaper even though ill never own my townhome. I dont have to pay taxes, I dont have to pay for any maintenance, I can easily max out my 401k, there is no insurance i need to buy on it but renters, I wouldnt be able to get rid of my large credit card balances i like to put on it, no home ownser association fees. When i plug in the insurance, home owner association fees, taxes. I would be paying 425.00 a month more for a 160K house i was looking at. Over 30 years thats $153000. not counting interest i might have earned on it, or lost. so the savings are about what the house is worth. I've always been told owning is better. but is it really?

Well, one advantage is you have a constant payment which is effectively less as wages and inflation take their toll.

I will suggest that the home market prices are still too high. Work on paying off your credit cards and max your 401k. Wait a few years, then borrow from your 401k for a down payment, or even the house if you have enough built up and the return looks low in the future from that point.

If you buy, make sure you keep some avenue open for unexpected thousands of dollars of repairs. Have your cards paid off but keep them.

Find a nice neighborhood without a HOA. Surely, they are available at times.

Make sure you know the designated zoning as well.

[Avante]

Nobody wants to live around renters. A whole different deal living around fellow homeowners. Total step up in class.

Renters usually rent for a reason, low income, lack of motivation and drive. While homeowners are usually better educated and more successful. You can tell a neighborhood of rentals and one with homeowners.

[CosmicCowboy]

With interest rates at historical lows it's smarter to buy if you plan to live there more than 7 years.

First priority should be paying off your credit card balances and never run a balance again.

[CubanMustGo]

Two more cents about HOAs ... they can certainly be over-anal at times but my experience (at least in our price range, which have been homes $300K or less) is that HOAs usually help keep the neighborhood maintained at a certain standard that helps property values in the long run. In the two non-HOA neighborhoods where we lived earlier in life, the areas started out well but after the initial buyers started moving out the areas declined fairly rapidly. In one case we got out just before this started to happen and made a nice profit, in the other it had already occurred and we had to sell at a loss (tho the economy had also tanked badly which contributed).

If you can find an established non-HOA neighborhood that has been maintained over time this may not be as much of a concern - but such areas are often cost-prohibitive for a first-time buyer.

[silverblk mystix]

I know the rule of thumb here is there is equity in a home and you own it. But is it really completely better than renting? Im considering buying a house but when i think of how much more ill be paying it kinda bums me out. Renting is cheaper even though ill never own my townhome. I dont have to pay taxes, I dont have to pay for any maintenance, I can easily max out my 401k, there is no insurance i need to buy on it but renters, I wouldnt be able to get rid of my large credit card balances i like to put on it, no home ownser association fees. When i plug in the insurance, home owner association fees, taxes. I would be paying 425.00 a month more for a 160K house i was looking at. Over 30 years thats $153000. not counting interest i might have earned on it, or lost. so the savings are about what the house is worth. I've always been told owning is better. but is it really?

Sounds like you are better off renting for now - it isn't always better to own.

A few years back - my financial advisor advised me to keep my money in my portfolio and hold off on buying as my returns were much better diversified and left alone. I did and my portfolio grew and grew- actually allowing me to buy my current house with the profits and leaving the rest untouched.

Had I bought a house/property at that point it might have cost a lot more - when you factor how much money would have been tied up in it.

Sounds like right now renting is working for you.

[Spur|n|Austin]

Nobody wants to live around renters. A whole different deal living around fellow homeowners. Total step up in class.

Renters usually rent for a reason, low income, lack of motivation and drive. While homeowners are usually better educated and more successful. You can tell a neighborhood of rentals and one with homeowners.

Your best post and I agree 100%.

[coyotes_geek]

I know the rule of thumb here is there is equity in a home and you own it. But is it really completely better than renting? Im considering buying a house but when i think of how much more ill be paying it kinda bums me out. Renting is cheaper even though ill never own my townhome. I dont have to pay taxes, I dont have to pay for any maintenance, I can easily max out my 401k, there is no insurance i need to buy on it but renters, I wouldnt be able to get rid of my large credit card balances i like to put on it, no home ownser association fees. When i plug in the insurance, home owner association fees, taxes. I would be paying 425.00 a month more for a 160K house i was looking at. Over 30 years thats $153000. not counting interest i might have earned on it, or lost. so the savings are about what the house is worth. I've always been told owning is better. but is it really?

Generally speaking it's all about how long you're going to live there. The longer you're there, the better deal buying over renting becomes. That being said, the specific numbers involved and the individual markets make every situation different. In your case it seems to me you're better off continuing to rent, at least until you get your credit cards paid off.

[DJR210]

I currently work with default mortgages for a large bank and also have a background as a Mortgage Loan Officer. I work with people who are trying to avoid foreclosure, and are selling their home for the market value, which is less than the balance owed. This is called a "Short Sale".

If you do decide that renting is the best choice for you, make sure you rent from a legitimate owner. Verify with the owner that the home is owned outright and is not currently being financed. As you mentioned, the owner would be responsible for paying the taxes and insurance along w/ maintenance, but who is to say they have the financial means to do so? I deal with people all the time who are renting a home, or are in what they believe is a "rent to own" deal, only to lose everything because the property owner is taking the payments and pocketing them w/o paying their mortgage.

A friend of mine who was renting had his outdoor AC unit go out and it needed to be replaced. These units are in the thousands. The H/O BS'ed him and eventually stopped answering his calls requesting to replace the unit. My friend installed a window unit which led to the HOA harrassing him for a violation of their terms. He eventually had to take the H/O to court because he refused to let him out of the lease minus a huge cancellation of lease fee and he wanted my friend to pay the fees from the HOA for having the window unit. Big headache when it was all said and done.

I have had tenants call in because they are served foreclosure notices, (signs in the yard, advertised in the paper, etc), their locks are changed when they return from work one day because they bank though the home was vacant, or the owner needs to allow realtors and prospective buyers into your home to show the property before they make an offer. There is nothing that can be done, and because the tenant is usually an unauthorized party, we can't even discuss the account w/ them.

My advice is research, research, research, and if you need an opinion I'd be happy to help. Good luck!

[DPG21920]

Also, keep in mind it's not always about the investment. While technically, finanically it may make more sense to rent during a certain period of time, it's about what you want. With regards to making financial decisions, a home shouldn't necessarily be viewed as an "investment", but as equity/asset building.

Keep in mind that while it could technically be better financially to rent vs own, that doesn't make owning worse. They way it is veiwed financially is that if you can make a better ROI using the extra money to invest, then it's a better financial move (as in the example above calculating you need a 10% growth in the home for it to be a better deal). That factor still means you are making money, even if it is not the optimized amount. That is where utility comes into play. So, if you rent, you may grow your money at a 10% ROI, but if you have a home you grow it at 5% ROI. Still growing, it just depends on the value you place on having a home worth getting 5% less (just an example). Another assumption is that you would actually have the control to not only invest the extra money in the market place, but make a return above and beyond what your home grows. Lot's of assumptions.

Also, often times rental prices are higher than a mortgage could be. I for example am buying my first home and after PTOI my mortgage is the same exact as I was paying in rental prices (not including the possible uptick on other bills like electric..).

[CosmicCowboy]

The payments on the house I got my daughter are cheaper than rental houses in the area and the interest is deductible.

[Big Empty]

all good info. i want a house but yea i just need to get rid of one more credit card and im gonna dive into that commitment

[coyotes_geek]

The payments on the house I got my daughter are cheaper than rental houses in the area and the interest is deductible.

Every neighborhood can be different, but that's certainly the case in my neighborhood. Rents are running about 12-15% of purchase prices per year.