Would You Rather Rent or Own?

[Bosoxfan5990]

Inspired by the debate in the "Observations on the current state of the hobby from a show this weekend" thread, would you rather rent or own a home/apartment?

[oldgoldy97]

What is the argument for not building equity?

[Bosoxfan5990]

Originally Posted by oldgoldy97

What is the argument for not building equity?

Essentially this.

https://www.blowoutforums.com/showpo...postcount=7057

[oldgoldy97]

Originally Posted by Bosoxfan5990

Essentially this.

https://www.blowoutforums.com/showpo...postcount=7057

He’s always been smarter at life than everyone else since the tender age of 26.

If anyone wants more current life advice, you can ask my oldest. He’s almost 25 and just as smart at life as Jim. Let me go get him from the basement to tell you.

[jcardstore]

Originally Posted by Bosoxfan5990

Essentially this.

https://www.blowoutforums.com/showpo...postcount=7057

This is such a broad generalization and mostly anecdote.

If you do timely maintenance on your things, you’re gonna have a lot less random unexpected failures and repairs.

Insurance on major expenses is also cheap. Gas line, water, sewer. A roof you’ll need once in your lifetime at most. HVAC systems last a really long time if they are well maintained.

The rest is marginal.

[auctionjmm]

Originally Posted by oldgoldy97

What is the argument for not building equity?

It was more of an investing discussion when someone brought up investing in houses.

Using national averages, if you bought a home for 100k in 1970, on average, that home would be worth 1.5 million today (lots of variables to consider, but this is just an average).

If you put 100k in the S&P in 1970, it would be worth 22.4 million today (no variables to consider. The S&P is what it is).

And if you add up all of the home costs you would incur over the life of home ownership and compared it to rent, renting is cheaper. So basically you could have rented your entire life and walked away with 22.4 million, or owned your entire life and walked away with 1.5 million, if 100k was your starting point.

The counter argument is that if you don't treat your home as an investment, it still provides better stability. You can raise your children in one place, send them to one school district, obtain as much yard space as you need, have a roof over your head in the event of financial crisis, and not have to worry about being asked to leave. So there are plenty of benefits to the peace of mind you get from owning a home. Also if you have enough money to do both (invest in stocks and own a home), then the paltry returns on a home wouldn't bother you.

But from a purely investment standpoint, if you were, say in your early 20's, had 100k and could choose a down payment on a home or to invest the money, you'd be better off investing the money and renting. Your investment (even minus your rent) would return many multiples.

[jcardstore]

Originally Posted by auctionjmm

It was more of an investing discussion when someone brought up investing in houses.

Using national averages, if you bought a home for 100k in 1970, on average, that home would be worth 1.5 million today (lots of variables to consider, but this is just an average).

If you put 100k in the S&P in 1970, it would be worth 22.4 million today (no variables to consider. The S&P is what it is).

And if you add up all of the home costs you would incur over the life of home ownership and compared it to rent, renting is cheaper. So basically you could have rented your entire life and walked away with 22.4 million, or owned your entire life and walked away with 1.5 million, if 100k was your starting point.

The counter argument is that if you don't treat your home as an investment, it still provides better stability. You can raise your children in one place, send them to one school district, obtain as much yard space as you need, have a roof over your head in the event of financial crisis, and not have to worry about being asked to leave. So there are plenty of benefits to the peace of mind you get from owning a home. Also if you have enough money to do both (invest in stocks and own a home), then the paltry returns on a home wouldn't bother you.

But from a purely investment standpoint, if you were, say in your early 20's, had 100k and could choose a down payment on a home or to invest the money, you'd be better off investing the money and renting. Your investment (even minus your rent) would return many multiples.

None of this is taking into consideration any of the tax benefits or the ability to leverage the home.

The assumption that you’d just park 100k either in the S&P or in a house for 50+ years is just a fantasy scenario

You can also own a house, not pay down the principal and invest that money instead and get the best of both worlds

[auctionjmm]

Originally Posted by jcardstore

None of this is taking into consideration any of the tax benefits or the ability to leverage the home.

The assumption that you’d just park 100k either in the S&P or in a house for 50+ years is just a fantasy scenario

You can also own a house, not pay down the principal and invest that money instead and get the best of both worlds

I was replying to the article that was linked by another member. Did you read the article I was responding to? The author covered all of that. Others were discussing homes as investments, and I added one reply. I don't know how my reply ended up being the center of this all lol. Especially considering most of the replies after mine were pro-rent.

There are obviously a zillion variables to consider. I think the bottom line is that the difference between owning and renting is not what people think it is. There is absolutely a stigma in the U.S. that renting is just "throwing money away" even if there are many cases where that simply isn't true.

[jcardstore]

Originally Posted by auctionjmm

I was replying to the article that was linked by another member. Did you read the article I was responding to? The author covered all of that. Others were discussing homes as investments, and I added one reply. I don't know how my reply ended up being the center of this all lol. Especially considering most of the replies after mine were pro-rent.

There are obviously a zillion variables to consider. I think the bottom line is that the difference between owning and renting is not what people think it is. There is absolutely a stigma in the U.S. that renting is just "throwing money away" even if there are many cases where that simply isn't true.

Renting, for the average person, is absolutely throwing money away.

A house will be the single biggest asset most people will ever own. Are there some edge cases where a renter may come out ahead? Sure but if you’re financially savvy you can do so much more with a house AND invest.

In the real world it’s one or the other for most people. If you’re in a position to choose, the home appreciation is negligible to you anyways

[Josh611]

Originally Posted by auctionjmm

I was replying to the article that was linked by another member. Did you read the article I was responding to? The author covered all of that. Others were discussing homes as investments, and I added one reply. I don't know how my reply ended up being the center of this all lol. Especially considering most of the replies after mine were pro-rent.

There are obviously a zillion variables to consider. I think the bottom line is that the difference between owning and renting is not what people think it is. There is absolutely a stigma in the U.S. that renting is just "throwing money away" even if there are many cases where that simply isn't true.

Sure, renting could work out well too. But I bet the majority of people renting wouldn’t be investing excess cash in the S&P.

We had new single story townhomes/apartments built in my town a year or two ago. 2 bed 2 bath, 1700 sq foot. Rental was $2,700 when they became available. I’m sure it’s higher now.

I’ll take my 4 bed 3 bath 2400 sq foot house on 5 acres with a $880 mortgage that was bought 3 years earlier.

Renting allows a ton of flexibility in where you live, but it comes down to how you want to spend your time. Theres no price you can put on peace of mind. Renting is probably better for single people or couples who have no intentions of having children and want the flexibility to move.

Nobody can change my mind that it makes more financial sense to rent than own. If anyone believes that, they need to check themselves into a mental institution.

[TheHeel]

Originally Posted by auctionjmm

It was more of an investing discussion when someone brought up investing in houses.

Using national averages, if you bought a home for 100k in 1970, on average, that home would be worth 1.5 million today (lots of variables to consider, but this is just an average).

If you put 100k in the S&P in 1970, it would be worth 22.4 million today (no variables to consider. The S&P is what it is).

And if you add up all of the home costs you would incur over the life of home ownership and compared it to rent, renting is cheaper. So basically you could have rented your entire life and walked away with 22.4 million, or owned your entire life and walked away with 1.5 million, if 100k was your starting point.

The counter argument is that if you don't treat your home as an investment, it still provides better stability. You can raise your children in one place, send them to one school district, obtain as much yard space as you need, have a roof over your head in the event of financial crisis, and not have to worry about being asked to leave. So there are plenty of benefits to the peace of mind you get from owning a home. Also if you have enough money to do both (invest in stocks and own a home), then the paltry returns on a home wouldn't bother you.

But from a purely investment standpoint, if you were, say in your early 20's, had 100k and could choose a down payment on a home or to invest the money, you'd be better off investing the money and renting. Your investment (even minus your rent) would return many multiples.

I would think not too many people had 100k cash in 1970. They had a mortgage. If you had 100k cash and was able to put it in the market back then, you would be doing pretty well for yourself.

[oldgoldy97]

Funny you ask this. The house down the street was put up for sale. My son is renting for a few hundred less a month than it would cost on a mortgage if he were to somehow buy that house.

[jrinne17]

The goal in life is to own everything you have, you only rent if you have to. I've never understood why so many people choose to rent and lease when they have the money to own.

[corndog]

Of course!

[TheHeel]

Never rented, never will.

Lived at home until I was 26 to be able to buy.

[JosieD]

Currently, own. We started in an apartment. I prefer owning. It can be a rather huge pain but I dont have to wait for anyone else to do stuff. I have painted every room myself minus the main bedroom.

[jcardstore]

I don’t see any good reason to rent if you have the means to own.

[oldgoldy97]

What he doesn’t seem to grasp is, gasp!, my mortgage is a third of current rental prices.

He’s thinking too small. If you live in a cardboard box and eat out of trash cans, you can save 100% of your check

[asujbl]

Renting is for poors

[jcmel323]

In today's market, I would say rent. In other markets, I would say buy. But it really depends on the situation and the area. Right now, I'm renting because it's significantly cheaper than a mortgage payment.

[auctionjmm]

Originally Posted by jcmel323

In today's market, I would say rent. In other markets, I would say buy. But it really depends on the situation and the area. Right now, I'm renting because it's significantly cheaper than a mortgage payment.

That's the other part of it. Anyone who owned a home prior to 2020 is feeling great right now. And if they caught the gap between 2009 and 2020, then they are feeling amazing right now. In today's market, a 1700 sq. ft. attached condo with a hefty HOA goes for 300k in this area. I couldn't justify going that route. I'm not opposed to buying in a better market. For now, keeping my money in the S&P and paying rent is the only option that makes financial sense. That could change, but not today.

[quackhead]

Originally Posted by jcmel323

In today's market, I would say rent. In other markets, I would say buy. But it really depends on the situation and the area. Right now, I'm renting because it's significantly cheaper than a mortgage payment.

This. Especially in CA, where insurance companies are dropping policies because of where the homes are located.

[eastbayak]

Originally Posted by jcmel323

In today's market, I would say rent. In other markets, I would say buy. But it really depends on the situation and the area. Right now, I'm renting because it's significantly cheaper than a mortgage payment.

Agreed.

I’d rather rent in CA/NY (probably even OR/WA/TX) than live in a state like OH/OK/etc.

[jkampis]

What percentage of millionaires do you suppose rent rather than own their home? That’s got to be a very low number.

I don’t mean to imply that owning a home is part of what made them rich, but real estate is certainly a good component of an asset mix.

[auctionjmm]

Originally Posted by jkampis

What percentage of millionaires do you suppose rent rather than own their home? That’s got to be a very low number.

I don’t mean to imply that owning a home is part of what made them rich, but real estate is certainly a good component of an asset mix.

This thread would be null and void if mortgages weren't considered. If you can pay for a house in cash, that is a no-brainer.

A 250k 15-year mortgage costs 142k in interest.

A 250k 30-year mortgage costs 319k in interest.

90% of Americans take the 30-year, so they pay more in interest than what their home costs. I'm surprised how many people are overlooking this part.

EDIT: And yes, I realize you can refinance as rates change. Unfortunately, predicting those rates is like predicting what the housing market will do in the future. If you have prime credit and can lock in a low-fixed, that's great. I know people with not-so-great credit that were denied a refinance. Yet another variable to consider.