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Renting vs. Buying a House

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My wife and I are in the market for a house.  So I crunched some numbers today, or should I say built some spreadsheets.  

I took into consideration different mortgage interest rates, federal tax savings due to interest/state property tax, PMI cost, estimated yearly maintenance cost, and estimated equity growth.

After triple checking my spreadsheets, it is apparent that in my scenario renting is more cost effective.  

It would literally take us 30 years to break even with a mortgage with a 15 year loan at 6%.  What kills us other than interest payments are "sunk cost" like homeowners insurance and state property taxes.  

My numbers show I am better off renting an equivalent property and investing the difference in the securites/bond market over the longterm , basically my investments would have a higher return.

Any forum member find this to be true?

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YOU ARE WRONG.....

Many if not most rentals cost more to rent than having an actual mortgage.  

With rates being low right now, you can have a 250k mortgage around 1300 a month.  And I guarantee the house would be bigger and nicer than the one you find renting at that price.

It's a buyers market.

Renting gives you no equity. no tax write off.  

If you made by weekly payments then you would pay off the hose in

d**n near half the time and save thousands in interest.

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Real estate is one of the best long term investments you can make, bar none. History will prove that regardless of what you see in todays short term market, (value loss) you will make a solid return over time with your home.

Don't get me started on the current real estate debaucle and what it's done to values...

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At $400/mo, I think I'm one of the few people renting who, although I may not be making money, I'm not losing any at such a low cost.

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At $400/mo, I think I'm one of the few people renting who, although I may not be making money, I'm not losing any at such a low cost.

$400 is a deal in your part of the country.

I tune into those home flip show and first time home buyer shows and it never ceases to amaze me the prices houses are going for on the east and west coasts.  Folks are paying $300 - 500k for what amount to old cracker boxes.  For that amount of money here in the Midwest, you could buy the same house, along with a lake house and possibly have money left over to furnish both.  

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At $400/mo, I think I'm one of the few people renting who, although I may not be making money, I'm not losing any at such a low cost.

$400 is a deal in your part of the country.

I tune into those home flip show and first time home buyer shows and it never ceases to amaze me the prices houses are going for on the east and west coasts.  Folks are paying $300 - 500k for what amount to old cracker boxes.  For that amount of money here in the Midwest, you could buy the same house, along with a lake house and possibly have money left over to furnish both.  

It would be a steal if it were in a bad neighborhood.  This is a 1865 house, beautiful detail and architecture, located in the historic district of the seaside village of East Greenwich.  I'm about 300 yards from where my Whaler is docked also.  

ULTRA steal. :)

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Real estate is one of the best long term investments you can make, bar none. History will prove that regardless of what you see in todays short term market, (value loss) you will make a solid return over time with your home.

Don't get me started on the current real estate debaucle and what it's done to values...

Return on you investment

Renting: $0.00

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Renting is a waste of money! By 34 I had our home paid for (bought it when I was 19!). Your home is really your biggest investment.

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I think you need to check your numbers one more time. Buying a home is probably one of the best investments you can make.

Falcon

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I'd say you are definately in the minority with your thought process but that is your business.

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Now, or at some point in the very near future would be a great time to buy a house. In addition to the investment considerations, a house is a "home".

8-)

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I guess I'm in the minority...  while I do own, I see that many people are better off renting.  There are A LOT of people being foreclosed on that should have been renting...  few people consider that the cost of ownership far exceeds the "monthly payment".

I took into consideration different mortgage interest rates, federal tax savings due to interest/state property tax, PMI cost, estimated yearly maintenance cost, and estimated equity growth.

No one here knows your specific situation and none of them will bail you out if something happens, so trust your numbers and continue to rent as long as it makes sense to your situation and family.  What you did was very smart and it's what very few of the people in trouble did.

Owning real estate can be a great blessing, but it isn't for everyone, all the time.  

My numbers show I am better off renting an equivalent property and investing the difference in the securites/bond market over the longterm , basically my investments would have a higher return.

You did your homework, so try to weigh the facts against the reactions posted here.  But I'd weigh your facts 50X heavier, at least.  

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Sent my spreadsheet to my college accounting professor, guess what he said in my scenario I would be better off renting!!!!  

Don't get me wrong home ownership is usually the way to go, but I can rent a place on a local lake  (Lake Clarke Shores, for you locals  ;) )3,200sq feet for $3474K including additional yearly tax since we can't claim property tax and interest deductions.  Actual rent is $2500, I hate taxes!

To buy that some place would cost me $5371/month including tax savings, insurance, maintenance, and mortgage payment.  It doesn't include the money down to buy and closing cost associated with the purchase and down payment.  

Since extra cashflow is not an issue we are going to invest the difference $1.9K saved by renting an a diverse portfolio, that has traditionally averaged a faster growth rate over the longterm when compared to real estate equity growth.

Is anyone here in a section of the country where it is better to rent right now?

Here is a great article for those of you who think its always better to buy then to rent:

http://www.nytimes.com/2005/09/25/realestate/25cov.html?pagewanted=1&_r=1

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There are goods and bads on either one.

Renting you can pretty much just walk away when you want. (within contract) but unlike owning a place you will not ever get any of your money back.  

I'm one that is against renting.  But I do see why people do it.  I just cant throw my money away like that and never build anything with it.  I'd rather know when I sell my house I will be coming out ahead.

I looked at my ameritization statement on my house loan.  The first 10yrs approx is all intrest.  If you can make additional payments say 100 a month this will save you tons of cash.  

A loan for approx 80k at about 6% will cost you 100k over 30 years.  By making that simple extra payment It will save you 1ks plus cut your loan time.

The way I've always viewed it is I want something back out of what I'm paying out.  The way I am I can not just pay for something knowing it will never have value once I walk out.  Its just not me.

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Buy.  Here in Virginia, where we have a lot of Military, people buy even when they know they are only going to be in a house for a few years.  Home prices will bottom out shortly, or may already have.  That combined with low interest rates makes it a buyer's market.  Buy.

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Here is a great article for those of you who think its always better to buy then to rent:

http://www.nytimes.com/2005/09/25/realestate/25cov.html?pagewanted=1&_r=1

Look at the date of that article.  September 2005.  A LOT has changed since then.

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I plan on buying within the next several years. Here in the midwest it seems much better to buy as opposed to rent, but I'm sure it's a much different situation elsewhere (where house prices are unruly imho).

My parents bought their house for $110,000~. 3 Bdrm, 1.5 bath with an unfinished basement built only 3-4 years before purchasing. Best part? It's a pond lot. To get something like that near the coast there would be another zero on the end  :o I love Kansas  :D

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From the point of view who owns properties for rent:

I don 't pay for the property, you do it.

I end up owning the property, you will never own it

Renting is for people that have to move a lot on a regular basis, like managers from the big chain stores, for military personel n 'such. But for people that don 't have to move renting a house is not a good option. Buying a house is an investment, renting a house is an expense.

You say you hate to pay taxes; taxes my friend will hit you one way or the other, ok, you don 't pay all those taxes that come with the house, then your income increases and you 'll be struck by a higher income tax rate, in the end you still have to pay taxes.

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Here is a great article for those of you who think its always better to buy then to rent:

http://www.nytimes.com/2005/09/25/realestate/25cov.html?pagewanted=1&_r=1

Look at the date of that article.  September 2005.  A LOT has changed since then.

It could have said 1805,  doesn't matter.  It may have changed in those particular markets (Cali/New York), but it applies to markets elsewhere in the USA. Home values in my area are still overpriced for what I want.  

Instead of paying that extra cash to lower my principal I will be investing it in another investment option. Throwing money away is never a good thing, but if you invest money into a home certain "sunk cost"  exist that are equivalent to throwing your money away (PMI, Property Tax, Interest Payments, etc.).  

The scales would tip toward buying if prices fell, property tax law changes, and/or insurance premiums go down, but I don't really have the luxury of waiting it out much longer.

Here is a spreadsheet for those of you in the market for a new home to run the numbers through. Remember it doesn't always pay to own vs. rent.  

http://www.box.net/shared/r659yg74hf

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The one thing that it does not appear that you have taken into account is that rent typically increases year over year whereas a mortgage will remain the same for the entire life of the mortgage.  Also, you need to estimate in some moving costs as the typical renter does not stay in the same home for 30 years.

That being said in the short term you probably are better off (from a monthly expense standpoint) with renting.  The current housing market in Miami is not good and "investors" who have purchased homes are renting them out very cheaply in order to be able to carry the cost of the property.  When the market turns again I would expect those "investors" to dump the property.

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Renting is a waste of money! By 34 I had our home paid for (bought it when I was 19!). Your home is really your biggest investment.

KUDOS !!!!!  awesome dude.

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True, a lot of people are being forclosed on. But why?   MANY of them exceeded their budget buy cashing in retirement funds, taking lines of credit to buy more than they could chew .  And now look, they are screwed.  They weren't smart and could not manage a nickel.

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