What if we just rent for the long haul...

[Anonymous]

Anonymous wrote:We recently moved from NYC (renters) to a pricey suburb in a large city (not DC) where there is NO inventory. The homes that are even on the market are overpriced and/or need so much work/something wrong with them (no garage, busy street, etc).

We are currently renting a SFH while we save more money for a down payment. DH just said to me, what if we just rent for the long haul and ride out the market as long as we can? It just seems like renting in our area is looked down upon... do I just need to get over that? We are trying to make some friends out here, but the people we meet seem very into where we are looking to buy, who our realtor is, etc.

Why is renting so frowned upon?? Maybe we just need to make new friends?

This reads to me as though you’re renting a place you couldn’t afford to buy. Find a less expensive rental. If you’re renting in a pricey neighborhood but still saving for a down payment then something is wrong

[Anonymous]

Anonymous wrote:People put a lot of meaning into growing equity through owning. My family has owed three homes in last 15 years. I did the math and had we just rented same place and put the difference in money - down payment and extra if took to own- into market, we would have a lot more money than we do now. All homes ended up being headache if you asked me.
We didn't overpay any of them, but just simply owning a home costs a lot.
We sold all three, got the equity out and it doubled in this market in two years. It is still going up. The homes would have never appreciated like that. They were not assets.
Most people know real estate, but they don't know anything about market. Being in the market taught me a lot more than owning real estate.
I make $13k to $20k a day easily on the money I have in the market. People still keep asking me when am I ready to buy. No time soon or even never. Seeing the markets move up so fast is more exciting that owning a home. I also love my rental. My landlord is awesome. But also, like PP, mentioned, I can move right next door to the middle school and three years after that, right next door to child's high school.
I got to be crazy to take out cash right now from the market and buy a home with those interest rates.
You have to do the math to see it.
I did get a finance degree, but most of what I know about markets, came from being in the market hands on the last four years.

Congratulations on your success. Just be careful out there -- stories like this pop up during red hot bull markets (like now), but the market has a way of turning really fast and for no real reason. If you've ridden the market for the last four years, you've no doubt been witness to this.

[Anonymous]

You’ll likely miss out on millions in appreciation.

[Anonymous]

You miss out on appreciation but pay all the costs and a huge loss vs inflation over a long period.

It’s a mistake to think you aren’t paying for interest, taxes, insurance, maintenance over the long haul - who do you think pays for these on rentals? You reduce risk of major system failure hitting at the wrong time and you’re sharing in the discount with the landlord of tax deductibility and depreciation (landlord needs less cash flow to be flat/positive) but over the long haul, these advantages pale in comparison to locking in a huge portion of your cost of living.

15 years ago I left an apartment paying 2200, it was re-rented at 2500 after I left. I purchased a house and my PITI was 1600. After doing significant renovations it went as high as 2400 and was eventually 2000.

I sold that house and banked (gross) 935k.

I bought a new house with a 80/20LTV (didn’t use proceeds of house sale) to buy and my PITI is around 3700.

In 14 years, I’m paying 1500 more for a whole house as I was paying for a builder grade inside the beltway near the metro rental. For a huge portion of that time I was paying less than I paid in rent.

That’s why you buy.

[Anonymous]

OP re the neighbors being into it, they’re probably just making conversation if they know you just relocated. If you moved to an area with mostly home owner occupied SFHs, they’re just chatting. Like if they know you have a kid they’ll ask about schools. I wouldn’t overthink it.

If you end up in a long term rental you like, people won’t even notice. That will just be where you live. No one cares whose name is on the deed.

[Anonymous]

I ended up buying because the owners of my previous 2 rentals decided to sell and not renew my lease. I got tired of moving and won't rent again.

[Anonymous]

Anonymous wrote:You miss out on appreciation but pay all the costs and a huge loss vs inflation over a long period.

It’s a mistake to think you aren’t paying for interest, taxes, insurance, maintenance over the long haul - who do you think pays for these on rentals? You reduce risk of major system failure hitting at the wrong time and you’re sharing in the discount with the landlord of tax deductibility and depreciation (landlord needs less cash flow to be flat/positive) but over the long haul, these advantages pale in comparison to locking in a huge portion of your cost of living.

15 years ago I left an apartment paying 2200, it was re-rented at 2500 after I left. I purchased a house and my PITI was 1600. After doing significant renovations it went as high as 2400 and was eventually 2000.

I sold that house and banked (gross) 935k.

I bought a new house with a 80/20LTV (didn’t use proceeds of house sale) to buy and my PITI is around 3700.

In 14 years, I’m paying 1500 more for a whole house as I was paying for a builder grade inside the beltway near the metro rental. For a huge portion of that time I was paying less than I paid in rent.

That’s why you buy.

Except that right now the mortgage for the same place is roughly double what you would pay in rent for it and most of it goes to interest. The prices are also not increasing at the same rate they used to. Plus you need to consider all the transaction costs of buying and selling plus the maintenance expenses. From a purely financial perspective (I realize there are other benefits of owning) you are highly likely to come way ahead by renting and putting your down payment in the market. I own myself, so I am not some jealous renter, but I did the math for our case. With all we have put into this house we would be well ahead financially if we just continued renting and put the 500k we spent on down payment and renovations in the market. And we bought 5 years ago at much lower prices and have a sub 3 rate. People who are buying now are making a completely different calculations. It is worth remembering that many people do in fact lose money from buying.

[Anonymous]

I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

[Anonymous]

Anonymous wrote:I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

Renting is not always better but it is almost always better right now. If you don’t believe it go on Zillow and look at rentals that were recently sold and compare the rental price to what you would pay if you got a mortgage on them at the current rates. My impression with people tirelessly defending buying is that actually it is them who did not do the math. I own and did the math for myself. I would be significantly richer now if I kept renting and invested my money instead. But there are other advantages of owning, which is precisely why affluent people own too. They are very well aware it might not be financially the wisest but they do not care as they want to have a place they can renovate as they please and that no one can sell from under them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

Renting is not always better but it is almost always better right now. If you don’t believe it go on Zillow and look at rentals that were recently sold and compare the rental price to what you would pay if you got a mortgage on them at the current rates. My impression with people tirelessly defending buying is that actually it is them who did not do the math. I own and did the math for myself. I would be significantly richer now if I kept renting and invested my money instead. But there are other advantages of owning, which is precisely why affluent people own too. They are very well aware it might not be financially the wisest but they do not care as they want to have a place they can renovate as they please and that no one can sell from under them.

There is an aspect of short term thinking when you see rents being lower than comparable mortgages if you buy *now*. But rents always go up in the long run. It's rare for rents to fall, especially for better areas, and those falls never last more than a year or two. Even if you pay more with a mortgage than rent right now, you are still building equity in the property that you don't with rent, plus you get to deduct taxes and mortgage interests, which you don't with renting.

The gap between renting and mortgage payments for a comparable property is never going to be so huge in favor of renting that you can genuinely make money off investing the differential in the market. All that is theoretical. Part of it comes down to that a mortgage is a forced savings, you have no choice but to make the payments and build up your equity. But telling yourself that if I rent I'll have an extra $1k to invest doesn't mean the extra $1k always goes into investments. Given that we still higher than typical inflation, the rent is also only going to keep going up.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

Renting is not always better but it is almost always better right now. If you don’t believe it go on Zillow and look at rentals that were recently sold and compare the rental price to what you would pay if you got a mortgage on them at the current rates. My impression with people tirelessly defending buying is that actually it is them who did not do the math. I own and did the math for myself. I would be significantly richer now if I kept renting and invested my money instead. But there are other advantages of owning, which is precisely why affluent people own too. They are very well aware it might not be financially the wisest but they do not care as they want to have a place they can renovate as they please and that no one can sell from under them.

There is an aspect of short term thinking when you see rents being lower than comparable mortgages if you buy *now*. But rents always go up in the long run. It's rare for rents to fall, especially for better areas, and those falls never last more than a year or two. Even if you pay more with a mortgage than rent right now, you are still building equity in the property that you don't with rent, plus you get to deduct taxes and mortgage interests, which you don't with renting.

The gap between renting and mortgage payments for a comparable property is never going to be so huge in favor of renting that you can genuinely make money off investing the differential in the market. All that is theoretical. Part of it comes down to that a mortgage is a forced savings, you have no choice but to make the payments and build up your equity. But telling yourself that if I rent I'll have an extra $1k to invest doesn't mean the extra $1k always goes into investments. Given that we still higher than typical inflation, the rent is also only going to keep going up.

Well, you are clearly another one who has not done the math for comparable properties RIGHT NOW. The mortgage for a house I considered renting for 7.2k would be almost double that (sold recently for 2.3mil). And an absolute majority of that is interest so the equity you are building is minuscule. And as a foreigner with a particular visa situation I cannot deduct any of it. Why would I buy that house right now knowing I won’t be staying there for more than 10 years anyway? You always need the full picture. Also it is very unlikely that the rent would double in the next 10 years. Many of the houses on the rental market I have been watching, have been renting at about the same rate for the last 5-7 years. And I would never have to replace the AC or roof in them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You miss out on appreciation but pay all the costs and a huge loss vs inflation over a long period.

It’s a mistake to think you aren’t paying for interest, taxes, insurance, maintenance over the long haul - who do you think pays for these on rentals? You reduce risk of major system failure hitting at the wrong time and you’re sharing in the discount with the landlord of tax deductibility and depreciation (landlord needs less cash flow to be flat/positive) but over the long haul, these advantages pale in comparison to locking in a huge portion of your cost of living.

15 years ago I left an apartment paying 2200, it was re-rented at 2500 after I left. I purchased a house and my PITI was 1600. After doing significant renovations it went as high as 2400 and was eventually 2000.

I sold that house and banked (gross) 935k.

I bought a new house with a 80/20LTV (didn’t use proceeds of house sale) to buy and my PITI is around 3700.

In 14 years, I’m paying 1500 more for a whole house as I was paying for a builder grade inside the beltway near the metro rental. For a huge portion of that time I was paying less than I paid in rent.

That’s why you buy.

Except that right now the mortgage for the same place is roughly double what you would pay in rent for it and most of it goes to interest. The prices are also not increasing at the same rate they used to. Plus you need to consider all the transaction costs of buying and selling plus the maintenance expenses. From a purely financial perspective (I realize there are other benefits of owning) you are highly likely to come way ahead by renting and putting your down payment in the market. I own myself, so I am not some jealous renter, but I did the math for our case. With all we have put into this house we would be well ahead financially if we just continued renting and put the 500k we spent on down payment and renovations in the market. And we bought 5 years ago at much lower prices and have a sub 3 rate. People who are buying now are making a completely different calculations. It is worth remembering that many people do in fact lose money from buying.

Except, rates and prices may go up further, making now a good time to buy or, maybe rates go down and you refinance. If rates go down and prices go down (an unlikely, but possible situation) and you can’t refinance, then you wait it out because you should have purchased a home you can afford. In the long term, there’s virtually no house that loses money vs renting annually.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You miss out on appreciation but pay all the costs and a huge loss vs inflation over a long period.

It’s a mistake to think you aren’t paying for interest, taxes, insurance, maintenance over the long haul - who do you think pays for these on rentals? You reduce risk of major system failure hitting at the wrong time and you’re sharing in the discount with the landlord of tax deductibility and depreciation (landlord needs less cash flow to be flat/positive) but over the long haul, these advantages pale in comparison to locking in a huge portion of your cost of living.

15 years ago I left an apartment paying 2200, it was re-rented at 2500 after I left. I purchased a house and my PITI was 1600. After doing significant renovations it went as high as 2400 and was eventually 2000.

I sold that house and banked (gross) 935k.

I bought a new house with a 80/20LTV (didn’t use proceeds of house sale) to buy and my PITI is around 3700.

In 14 years, I’m paying 1500 more for a whole house as I was paying for a builder grade inside the beltway near the metro rental. For a huge portion of that time I was paying less than I paid in rent.

That’s why you buy.

Except that right now the mortgage for the same place is roughly double what you would pay in rent for it and most of it goes to interest. The prices are also not increasing at the same rate they used to. Plus you need to consider all the transaction costs of buying and selling plus the maintenance expenses. From a purely financial perspective (I realize there are other benefits of owning) you are highly likely to come way ahead by renting and putting your down payment in the market. I own myself, so I am not some jealous renter, but I did the math for our case. With all we have put into this house we would be well ahead financially if we just continued renting and put the 500k we spent on down payment and renovations in the market. And we bought 5 years ago at much lower prices and have a sub 3 rate. People who are buying now are making a completely different calculations. It is worth remembering that many people do in fact lose money from buying.

Except, rates and prices may go up further, making now a good time to buy or, maybe rates go down and you refinance. If rates go down and prices go down (an unlikely, but possible situation) and you can’t refinance, then you wait it out because you should have purchased a home you can afford. In the long term, there’s virtually no house that loses money vs renting annually.

And again, I cannot emphasize this enough, over the long term renters ALSO pay high cost of loans, tax increases, maintenance, etc. it’s why rent goes UP. The idea that you don’t pay for maintenance because you rent is foolish. You just pay less because your landlord is deducting and depreciating - but you’re still paying.

[Anonymous]

Some people are just snobs, OP. Those wouldn't be people I'd want as friends, but you do you. If renting works for you then you can say "The market is so tight right now, so we're going to rent until it loosens up - we don't want to compromise to such a high degree just to be a homeowner. Where we come from, everyone rents and it's no big deal. Hopefully YOU don't judge renters either."

[Anonymous]

Anonymous wrote:You miss out on appreciation but pay all the costs and a huge loss vs inflation over a long period.

It’s a mistake to think you aren’t paying for interest, taxes, insurance, maintenance over the long haul - who do you think pays for these on rentals? You reduce risk of major system failure hitting at the wrong time and you’re sharing in the discount with the landlord of tax deductibility and depreciation (landlord needs less cash flow to be flat/positive) but over the long haul, these advantages pale in comparison to locking in a huge portion of your cost of living.

15 years ago I left an apartment paying 2200, it was re-rented at 2500 after I left. I purchased a house and my PITI was 1600. After doing significant renovations it went as high as 2400 and was eventually 2000.

I sold that house and banked (gross) 935k.

I bought a new house with a 80/20LTV (didn’t use proceeds of house sale) to buy and my PITI is around 3700.

In 14 years, I’m paying 1500 more for a whole house as I was paying for a builder grade inside the beltway near the metro rental. For a huge portion of that time I was paying less than I paid in rent.

That’s why you buy.

Eh, my parents sold our childhood home for nearly the same price as what they paid for it 25 years earlier. Appreciation doesn't happen everywhere.