Would You Rather Rent or Own?

[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.

[theshowandme]

Two different things are being discussed and intertwined with one another.

The original prompt that sparked this rabbit hole was a statement alluding to one’s personal home being an investment.

It’s not an owning vs. renting debate. It is not a discussion of “or.”

It’s focused on the single act of home ownership and viewing it as an investment.

Your personal home is a terrible investment if that’s how you think about investments.

You owning real estate and leveraging debt and producing cash flow to your advantage is a different discussion. That’s not your average homeowners experience. Park this idea to the side for now.

Your average homeowner takes on a 30 year mortgage for a house and most of the time has their net worth immediately go red on the balance sheet. Add in the student loans, cars, and the inevitable remodeling of a kitchen and a bathroom or two, and houses can be ridiculous “investments” for the average homeowner.

Then throw in taxes and the fact you’re responsible for any roof, HVAC, electrical, plumbing, etc. issues. Things add up quick. These are recurring fees on your “investment.” Yikes.

Then you have to add in insurance, especially if you own in risky areas that they have deemed is inevitable to experience floods, fires, hurricanes, etc.

Owning a home is surely rewarding to maintain a specific lifestyle with a family and produce memories in. It’s a lifestyle choice with tradeoffs. But that has nothing to do with a house being an investment or renting vs. owning and “throwing money away”

Stick to the topic at hand of a single family home and treating it as an investment

Your house is a terrible investment

https://jlcollinsnh.com/2023/03/02/w...le-investment/

[corndog]

Easy answer.

I would rather own a home than rent.

[jcardstore]

Originally Posted by theshowandme

Two different things are being discussed and intertwined with one another.

The original prompt that sparked this rabbit hole was a statement alluding to one’s personal home being an investment.

It’s not an owning vs. renting debate. It is not a discussion of “or.”

It’s focused on the single act of home ownership and viewing it as an investment.

Your personal home is a terrible investment if that’s how you think about investments.

You owning real estate and leveraging debt and producing cash flow to your advantage is a different discussion. That’s not your average homeowners experience. Park this idea to the side for now.

Your average homeowner takes on a 30 year mortgage for a house and most of the time has their net worth immediately go red on the balance sheet. Add in the student loans, cars, and the inevitable remodeling of a kitchen and a bathroom or two, and houses can be ridiculous “investments” for the average homeowner.

Then throw in taxes and the fact you’re responsible for any roof, HVAC, electrical, plumbing, etc. issues. Things add up quick. These are recurring fees on your “investment.” Yikes.

Then you have to add in insurance, especially if you own in risky areas that they have deemed is inevitable to experience floods, fires, hurricanes, etc.

Owning a home is surely rewarding to maintain a specific lifestyle with a family and produce memories in. It’s a lifestyle choice with tradeoffs. But that has nothing to do with a house being an investment or renting vs. owning and “throwing money away”

Stick to the topic at hand of a single family home and treating it as an investment

Your house is a terrible investment

https://jlcollinsnh.com/2023/03/02/w...le-investment/

This is nonsense.

It’s like saying the S&P is a terrible investment because Bitcoin exists. You’re taking all the negatives of home ownership, and applying them to a completely different asset class while also ignoring any negatives of the asset class you’re comparing it to.

Something isn’t a “terrible investment” because better investments in separate asset classes exist

Nobody in the real world is making a choice investing in the market or buying a house and if they are the house isn’t important to them anyways

Something being “bad” relative to something else doesn’t make it bad in an absolute sense

[jcardstore]

The same people telling you a house is a terrible investment will turn around and tell you to buy T bills

[packman80]

The market still have limited houses for sale and mortgage rates are still sky high. The average house for sale in the US is about $400K. So you would need about $80K to put 20% down to avoid the scam called Private Mortgage Insurance or PMI. Though because of the limited housing market even renting rates are sky high. I think renting is for only the people who don't want to have any reasonability or costs to maintain a home. Otherwise why not build equity into something you will own outright some day.

I know some people might be waiting for another recession and the housing market to fall apart again to buy. But who knows it that will ever happen again.

[Twalk1975]

If I had the means to do so, I would probably rent a nice apartment in a major city. I'd live there for a year or two, then move on to someplace else that looked interesting. Home ownership is tied to finances, family, and career, but if those weren't factors, I'd probably rent.

[auctionjmm]

Originally Posted by packman80

The market still have limited houses for sale and mortgage rates are still sky high. The average house for sale in the US is about $400K. So you would need about $80K to put 20% down to avoid the scam called Private Mortgage Insurance or PMI. Though because of the limited housing market even renting rates are sky high. I think renting is for only the people who don't want to have any reasonability or costs to maintain a home. Otherwise why not build equity into something you will own outright some day.

I know some people might be waiting for another recession and the housing market to fall apart again to buy. But who knows it that will ever happen again.

Based on all the responses gathered from both threads, it seems the single crowd sees the value in renting and the married with kids crowd sees the value in owning, and that is probably the main catalyst tbh.

A divorced guy like me would traditionally end up in a condo and either stay for life or re-marry and start over with perhaps a house, new kids, or even an "insta family" lol.

The problem, as I alluded to above, is that those prior "cheap" condos for single people and couples are now 300K and have HOA's starting in the $500s but I've seen as high as $900. Couple that with the mortgage interest and you'll spend over 500k for that 300k of equity and really need to commit to staying the full 15 years to even have that.

Alternatively, there are lower priced ranches in the 200k range but those are 50+ years old so you'd still spend quite a bit of money to keep that asset in good condition. Condos, for the most part, are newer builds and won't have quite the maintenance costs, but that's also why they sell higher.

So my choices come down to spending 500k+ to own a 300k asset in 15 years, or continue to pay rent and save/invest the difference while keeping all options open. Those options could include better market conditions, re-location, re-marrying, etc. I also understand appreciation, but I'm skeptical that there is much room left to appreciate on the types of properties I mentioned above. If everything just keeps going up, a single-family home will be a million dollars and at some point 90% of the country won't be able to afford that, so something has to give.

I read that the average age of a home buyer today is 56. 15 years ago it was 40. If things continue this way, house prices will continue to go up and the average age of home buyers will continue to go up. It isn't sustainable. Something big is going to happen even if it's a whirlwind of inherited assets. But for the 20's and 30's who don't make enough to afford a home and whose parents are still relatively young, I don't know what's going to happen.

We could completely table the investment discussion and I'll simply say I feel very "free" right now with a hard-capped housing expense and the ability to make a move at the drop of a dime, while preserving and adding to my nest egg in the market where it presently sits. Once that money is converted to a downpayment, I would have to be fully committed to staying there for quite awhile and that's a decision I don't need to make right now with my present life circumstances.

[BostonNut]

Bought in 2011.

Happy as a clam.

[jcardstore]

People have been claiming housing is overvalued for decades now and there’s a crash imminent. There’s always a scary crash lurking right around the corner.

Are there some hyper local markets that are overvalued? Yea of course but just like other assets the trend is up and to the right. Housing has out performed inflation and acts as a hedge against the decrease in USD buying power.

Yea if you’re single it may make more sense to rent vs own a home but to say it’s a terrible investment is objectively false

[packman80]

Originally Posted by jcardstore

People have been claiming housing is overvalued for decades now and there’s a crash imminent. There’s always a scary crash lurking right around the corner.

Are there some hyper local markets that are overvalued? Yea of course but just like other assets the trend is up and to the right. Housing has out performed inflation and acts as a hedge against the decrease in USD buying power.

Yea if you’re single it may make more sense to rent vs own a home but to say it’s a terrible investment is objectively false

Bought in 2009 my home has nearly doubled in value. So yes home ownership never a bad investment.

[Blazed]

Funny thread

One thing people miss is, just because your home doubled or tripled or quadrupled in value doesn't mean you made double or triple when you sell it

Buy your house for $100k > pay property taxes (unrealized gains on the now 3x 4x valuation of your house)/insurance/new roof/all other major expenses for 10 or 20+ years > then sell it for $400k (have to pay capital gains tax on the sale too) > minus all expenses/taxes over the years you could simply break even on that initial $100k investment or be in the negatives

So all the people bragging their homes went up in value during the covid boom.... lol

Reality is, most people are negative equity at the end of the day on their house. But they don't teach or talk about that

That said, I own and will always own. Some of the rental properties I own will be passed to the kids so they can start off life after high school with an asset because everyone should have a place to call their own

[packman80]

Originally Posted by Blazed

Funny thread

One thing people miss is, just because your home doubled or tripled or quadrupled in value doesn't mean you made double or triple when you sell it

Buy your house for $100k > pay property taxes (unrealized gains on the now 3x 4x valuation of your house)/insurance/new roof/all other major expenses for 10 or 20+ years > then sell it for $400k (have to pay capital gains tax on the sale too) > minus all expenses/taxes over the years you could simply break even on that initial $100k investment or be in the negatives

So all the people bragging their homes went up in value during the covid boom.... lol

Reality is, most people are negative equity at the end of the day on their house. But they don't teach or talk about that

That said, I own and will always own. Some of the rental properties I own will be passed to the kids so they can start off life after high school with an asset because everyone should have a place to call their own

Your home doubles or more in value even after paying property taxes and capital gains taxes you are still walking away with a profit zero change you are losing any money. Renting you are making another person money. You build zero equity and are paying the person who owns the property mortgage and property taxes and likely enough to cover any repairs needed to the home.

[jcardstore]

Originally Posted by Blazed

Funny thread

One thing people miss is, just because your home doubled or tripled or quadrupled in value doesn't mean you made double or triple when you sell it

Buy your house for $100k > pay property taxes (unrealized gains on the now 3x 4x valuation of your house)/insurance/new roof/all other major expenses for 10 or 20+ years > then sell it for $400k (have to pay capital gains tax on the sale too) > minus all expenses/taxes over the years you could simply break even on that initial $100k investment or be in the negatives

So all the people bragging their homes went up in value during the covid boom.... lol

Reality is, most people are negative equity at the end of the day on their house. But they don't teach or talk about that

That said, I own and will always own. Some of the rental properties I own will be passed to the kids so they can start off life after high school with an asset because everyone should have a place to call their own

Up to 500k for MFJ can be excluded from cap gains on a house sale and you can do it every 3 years

[jcardstore]

I do also find it funny that people think they don’t have to pay for repairs because they are renting. You’re paying for all the repairs, it’s just covered in your rent

[asujbl]

This thread is absolutely wild

[auctionjmm]

Originally Posted by jcardstore

I do also find it funny that people think they don’t have to pay for repairs because they are renting. You’re paying for all the repairs, it’s just covered in your rent

Not quite. Anyone who rents knows that all of these things are baked into the price. The difference is the price is fixed, and like health insurance, everyone is paying into one pot. If you don't see a doctor for 20 years, oh well. You lost money. If you need bypass surgery, that six figure bill goes away and other people pay to keep you alive. Some units are going to cost a lot, others won't, but there are no major surprises. You'll never pay for a 10k roof or a 20k sewer. They did my driveway last summer. What would a new driveway have costed me? There are 84 homes in my community. All rentals. You can say we split the repairs 84 ways (via rent) no matter which unit needs work.

[jcardstore]

Originally Posted by auctionjmm

Not quite. Anyone who rents knows that all of these things are baked into the price. The difference is the price is fixed, and like health insurance, everyone is paying into one pot. If you don't see a doctor for 20 years, oh well. You lost money. If you need bypass surgery, that six figure bill goes away and other people pay to keep you alive. Some units are going to cost a lot, others won't, but there are no major surprises. You'll never pay for a 10k roof or a 20k sewer. They did my driveway last summer. What would a new driveway have costed me? There are 84 homes in my community. All rentals. You can say we split the repairs 84 ways (via rent) no matter which unit needs work.

Like I said before, with the exception of a roof. Everything else is prevented or deferred with good maintenance. You can have HVAC systems that last 20-30 years easily. Appliances are cheap and last a long time.

Gas, Water, Sewer lines are all insurable for dirt cheap.

All I’m saying is that not only is a house a good investment for almost everyone, it’s the best investment the average person will ever make.

[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.

[Blazed]

Originally Posted by packman80

Your home doubles or more in value even after paying property taxes and capital gains taxes you are still walking away with a profit zero change you are losing any money. Renting you are making another person money. You build zero equity and are paying the person who owns the property mortgage and property taxes and likely enough to cover any repairs needed to the home.

It's elementary level math, you can and do lose, not every single person, but most do due to the expenses over time

And I'm fully aware how renting vs owning works. That's why I have a rental business for people who listen to Grant Cardone tell them "owning a house is a bad investment, so come rent one from me" lol

Originally Posted by jcardstore

Up to 500k for MFJ can be excluded from cap gains on a house sale and you can do it every 3 years

True

Originally Posted by jcardstore

I do also find it funny that people think they don’t have to pay for repairs because they are renting. You’re paying for all the repairs, it’s just covered in your rent

True - repairs are fully deductible, capital improvements are also deductible but have to be spread out across years, in addition to all the other legal deductions we can claim

Se it's a win win for us either way as it's still rolled into the monthly rent

Renters don't understand this part though

[auctionjmm]

Originally Posted by jcardstore

All I’m saying is that not only is a house a good investment for almost everyone, it’s the best investment the average person will ever make.

Correct. The average person would never have the discipline or control to build all that equity on their own. You have no choice but to pay your mortgage or else be foreclosed. It's the perfect way to force people to put money away who might otherwise be on the beach ordering $30 cocktails from the Ritz bartender.

Let's pretend that all housing were free. Do you think the average person would still invest the equivalent of a mortgage payment each month, or would they be more likely to spend it? I think we know the answer.

For the average person, their home is the only thing left to pass down when they die. There are people who die with a 250K paid-off home and $13 in the bank lol. Home ownership protects people from bad decisions, or at least shelters those decisions enough, and that's a good thing.

[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.

[jcardstore]

Originally Posted by auctionjmm

Correct. The average person would never have the discipline or control to build all that equity on their own. You have no choice but to pay your mortgage or else be foreclosed. It's the perfect way to force people to put money away who might otherwise be on the beach ordering $30 cocktails from the Ritz bartender.

Let's pretend that all housing were free. Do you think the average person would still invest the equivalent of a mortgage payment each month, or would they be more likely to spend it? I think we know the answer.

For the average person, their home is the only thing left to pass down when they die. There are people who die with a 250K paid-off home and $13 in the bank lol. Home ownership protects people from bad decisions, or at least shelters those decisions enough, and that's a good thing.

I 100% agree with everything you put here and were totally aligned. I just have an issue when people say a house is a negative investment or a bad investment.

[jlzinck]

The ONLY correct situation is "Depends on the situation"

[jlzinck]

Originally Posted by Blazed

Funny thread

One thing people miss is, just because your home doubled or tripled or quadrupled in value doesn't mean you made double or triple when you sell it

Buy your house for $100k > pay property taxes (unrealized gains on the now 3x 4x valuation of your house)/insurance/new roof/all other major expenses for 10 or 20+ years > then sell it for $400k (have to pay capital gains tax on the sale too) > minus all expenses/taxes over the years you could simply break even on that initial $100k investment or be in the negatives

So all the people bragging their homes went up in value during the covid boom.... lol

Reality is, most people are negative equity at the end of the day on their house. But they don't teach or talk about that

That said, I own and will always own. Some of the rental properties I own will be passed to the kids so they can start off life after high school with an asset because everyone should have a place to call their own

Nobody who pays $100K for a home makes improvements and sells it for $400K is paying Capital Gains. Thanks for playing though