Question for renters..Aren't you tired of paying someone's mortgage?

[Anonymous]

Anonymous wrote:

Anonymous wrote:We bought our now rental property in 1999 for $$350k. Houses are now selling for $600k. We rent for much less than the mortgage would cost today and make money every month. Most of our tenants tend to be military.

Yes, it is silly for the renters with time machines not to buy. For the test it is more complicated and renting is far cheaper month to month unless we see high appreciation and high rent increases for close to a decade.

Investing in RE is a long term proposition. Those who bought years ago, also didn't break even back then, it takes time. You have to have patience, it's not for everyone, admittedly, just like investing into stocks is not for everyone either.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Also, when you say buy, what exactly do you mean? My husband and I live in a great apartment in Old Town now - no chance in hell we could afford to live here if we wanted to buy.

Let's leave aside the other reasons we wouldn't buy at the moment and only consider that: at least as far as we can see, we'd have to move either to a part of town where we don't want to live, or else to an apartment we wouldn't want to live in, if we were to buy.

What would you recommend we do?

This is the true crux of the issue. You believe you are entitled to a nice home in the right place, but you can't afford it. So you rent. It's just like leasing a car or buying shoes on credit. You want something you can't afford.

I did live in a part of town I didn't want to live in, in an apartment I didn't like for years - while I saved money for a downpayment. I could have rented a fabulous place for much more, but then I would still be renting.

If you are truly renting to save money and investing the rest (as PPs suggest), that's great. But I think many people are simply renting because it's a way to live beyond their means.

I own my home but I am not following this logic. They can afford the nice home - they can afford to RENT that nice home at a price that the landlord and the market have established. You think afford = ability to PURCHASE. In a real estate context, that is not true. Also, most people lease cars because want nice cars but they do not want to take the depreciation hit that comes with purchasing it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Do you forever renters worry at all about the future? I can't imagine going into retirement without a paid roof over my head. You think rents are high now - what do you think they will be in a few decades?

Rent is high for my family right now because we need the extra room for kids. By the time we retire, we can downsize. I can't imagine I'll want to maintain and keep up a big house and yard when I'm retired. I'd rather have an apartment (like I have now) and be free to travel and visit my kids.

Plus, renting allows us to throw money at retirement, rather than saving for a down payment. We pay under $3K for a 2bd apartment in boundary for a good school in DC. Our commutes are less than 30min, we can get away with owning only 1 car and only using aftercare through school. We still have student loan debt we're paying off as well. To own in our neighborhood (in our condo complex), we'd have to have at least $50K for a down payment, (that's with impeccable credit, with our credit, we'd need more) and jobs that pay much more than what we have now. Or we'd have to move to a marginal neighborhood or far out suburb, increasing our commute, changing our kid's school and increasing the time he's in daycare, buying another car and generally lowering our quality of life.

+1

[Anonymous]

I can only afford to buy an ugly house in this area. Im ok with renting an ugly house, but don't want to buy one.

[Anonymous]

[quote=Anonymous][quote=Anonymous]Do you forever renters worry at all about the future? I can't imagine going into retireent without a paid roof over my head. You think rents are high now - what do you think they will be in a few decades?[/quote]

You'll have a paid off house, the renters will have invested the difference between mortgage and rent in vehicles other than equity. [/quote]

That is if they are good and serious about investing. Truth is, most people are not. Especially, when it comes to stock markets. People talk and talk about investing, but most have money in low interest paying accounts, 401K, some mutual funds if that. Many financial investment vehicles also have fees and commissions, which can be quite high and returns are not guaranteed. If you are good at investing, and growing money without touching RE and are disciplined to put money away instead of wasting it, all the power to you, but for many people, unfortunately, owning their home at the end is the only way they get any cash or equity in the old age. Even if numbers don't add up, given interest you pay off during the lifetime of your mortgage, lost opportunity to invest the difference between higher mortgage+expenses and lower rent, etc, you do end up having something, that at least would have kept up with inflation. It's just a way to discipline some people into putting money into something every single month. Many people are just spenders, and that difference between mortgage+RE expenses and rent would just end up going into frivolous expenses.

[Anonymous]

Those who bought years ago, also didn't break even back then, it takes time

This is false. Monthly carrying costs (with modest downpayments) were at a discount to rents, before the bubble. Property investments were cash positive from day one, which is the whole point. In fact, rental income is an historic measure of property value. This was another bubble casualty. It'll be back, though.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Some friends who own don't understand why I rent but I pay about $5500 per month for a really truly gorgeous place that would cost me at least $8k per month to purchase. I do it because I love renting and see no need to live in something sub-par.

I used to own a house but if I have my way, and I believe I will, I'll never buy again. I plan to rent this place for another year and then move to Rio for about 3 months before I head to Los Angeles. After that who knows. I have no desire to be tied to one place, or think about maintenance. The day before Mother's Day my oven went out in the middle of me making a meal. I called my landlord's property manager and in less than 2 hours the maintenance guy was here fixing the problem.

Obviously some people really like owning. Fine. Keep doing it. I pay a premium for my peace of mind. I invest my money in things other than real estate.

That is ridiculous to me. I don't care how gorgeous the place is. $5500/mo is crazy, especially when I have nothing to show for it, other than show off someone else's house.

So what? What you probably don't understand is that the sort of person (me) who rents for this amount wouldn't buy a place that costs less. I would be spending MORE if I bought. I throw thousands per month (the difference I would pay in a mortgage) into investments. I'm doing very well.

[Anonymous]

Anonymous wrote:I can only afford to buy an ugly house in this area. Im ok with renting an ugly house, but don't want to buy one.

good for you pp. I own an ugly house and the daily mental toll cannot be quantified in $$.

[Anonymous]

The New York Times Rent Vs. Buy tool is very good at helping to understand when it makes sense to buy. Unless I plan on staying in the exact same spot for 10 years, I won't buy. I don't want a mortgage that requires I live a certain type of lifestyle for 15-30 years. I enjoy my freedom and my savings and investments are doing well. Choosing to buy is just ONE form of investment.

www.nytimes.com/interactive/business/buy-rent-calculator.html

[Anonymous]

I rent instead of buying because I am concerned about the cost of maintenance for a home, given my income. Also, because prices are so high, it feels like a very risky investment. I plan to move in ten years. I fear (and for the good of all, hope) that housing prices will go down in ten years, and that I will end up underwater.

Right now renting is more affordable for me. But to the pp, who pointed out that rents go up while mortgages stay the same, your point is well taken. This does not, however, take into account maintenance costs each year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We bought our now rental property in 1999 for $$350k. Houses are now selling for $600k. We rent for much less than the mortgage would cost today and make money every month. Most of our tenants tend to be military.

Yes, it is silly for the renters with time machines not to buy. For the test it is more complicated and renting is far cheaper month to month unless we see high appreciation and high rent increases for close to a decade.

Investing in RE is a long term proposition. Those who bought years ago, also didn't break even back then, it takes time. You have to have patience, it's not for everyone, admittedly, just like investing into stocks is not for everyone either.

RE has not moved linearly in terms value/salary ratio over the years.

in 1999 DC home value to salaries was a much lower ratio than today.

The first time home buyer finds it much more difficult today get on the ladder than in 1999.

[Anonymous]

Desperately wish I could buy. But I have very little for a down payment and closing costs and I didn't come from an upper middle class family.

EVERY single one of my friends that have bought in the last three years have had downpayments paid by their parents. Hundreds of thousands of dollars. I'll never get there and I earn low 6 figures.

[Anonymous]

I am another who hates owning. I hate it. We were so happy in our rental. We went ahead and bought because we believed (and still do) that it is in our financial best interest, but it's marginal, and depends on a lot of factors, so who knows, things could go either way.

[Anonymous]

Anonymous wrote:Desperately wish I could buy. But I have very little for a down payment and closing costs and I didn't come from an upper middle class family.

EVERY single one of my friends that have bought in the last three years have had downpayments paid by their parents. Hundreds of thousands of dollars. I'll never get there and I earn low 6 figures.

I'm the pp just after you. We were the same as you, and raided our retirement after working for about 5 years to make the purchase. We are still young enough that I think that's ok, but not ALL of us had parental help.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Desperately wish I could buy. But I have very little for a down payment and closing costs and I didn't come from an upper middle class family.

EVERY single one of my friends that have bought in the last three years have had downpayments paid by their parents. Hundreds of thousands of dollars. I'll never get there and I earn low 6 figures.

I'm the pp just after you. We were the same as you, and raided our retirement after working for about 5 years to make the purchase. We are still young enough that I think that's ok, but not ALL of us had parental help.

How did you raid your retirement savings? All my retirement savings are wrapped up in my Thrift (which has a good $60-70K in it) and I'd have massive penalties if I didn't pay it back within one year.
Or did you just take the penalty hit?