renting vs. homeowning

TheRomanSpartan · 2016-12-30T13:01:22+00:00

The problem with home ownership is that people consider this an investment, when it's not. The only time it would be an investment is if you buy a revenue generating building, live in it and profit from the other rents or buy and flip houses. Single dwelling homes are a liability. They cost you money and even if the value of the home goes up, you still have to consider what it cost you in property taxes, maintenance and the furnitue you spent to match the home. Often, the appreciation in the value of the home doesn't make up for the other associated costs.

The key to renting is to take the money that you would be spending on a mortgage and invest it. This is what I do. Currently, my rent costs me $860/month for a 2 bedroom aparment. If I were to buy a house I would need a mortgage of $300k. (Decent homes start at around $400k where I live. I would put $100k as a down payment and mortgage the rest.) The mortgage at 2.5% is $1300 with a fixed 5 year term. (Who knows what the rate will be in 5 years). Add $400/month of taxes, plus heating, insurance, maintenance fund, etc., and you end up with around $2200 - $2500/month.

I am able to pay this amount, but I don't want to spend all of that money. Instead, I take the balance and I invest it in dividend stocks. I have been able to generate a return 14% between dividend and capital gains since I started, which has been several years.

Let's take a 10 year snapshot and compare the two.

Renting: $100k cash (This is the money that I would have put down as a down payment). Plus investing $1500/month. At a return rate of 10%, the total amount would be $580k.

Buying Home: After 10 years with the same mortgage rate I would have paid down $98k. (The interest make up the bulk of the payments in the first few years). This means that I have $202k left to pay. With the $100k that I put down, the mortgage payment and costs, after 10 years I would have paid $376k. Let's say the value of the home appreciates at 5% annually and the interest rate remains the same (highly unlikely), the value of the home would be $651k. If we deduct the balance, we are left with $449k.

This is a simple calculation, but it gives you an idea of the difference between the two. There are many variables that are not added in the sale of the home. The cost would probably be a lot more, but with this example at the end of 10 years, the difference would be more than a $130k.

My approach to buying a home is this. Make enough money that I can easily pay the mortgage, continue investing and living the life that I am currently living.

Buying a home for financial investment is not a good idea if you have the discipline to invest the difference. If you don't have the discipline, then buying a home is a good option because it forces you to pay into something at which point you can cash out sometime in the future.

Eyes_Of_The_Dragon · 2016-12-30T14:03:06+00:00

I have owned my home for 12 years and it consumes far too much of my time for maintenance. If free time is your goal then rent and move around as necessary. Besides not all houses go up in value over time.

Adrian3199 · 2016-12-30T11:02:08+00:00

I read an analysis about this not long ago. In a nutshell, it is better to rent but only if you invest the difference between the rent and what a mortgage would cost you. And you keep the same place for the duration of the mortgage.

SmokeyMcGruff · 2016-12-30T09:54:19+00:00

Curious about this too. Thinking about moving out of my parents' house and renting a room closer to work. While I'll get my freedom to do whatever I want, I don't know whether it'll work out better for me in the long run. Hoping the experience of being independent will be more beneficial than the amount of money I'd save otherwise.

Sivitiri · 2016-12-30T15:28:37+00:00

I have always been more partial to renting only because jobs dont have much security anymore and I view owning a home as an anchor and being able to go where the work is lets get the better paying jobs. Rent is cheaper and the upkeep falls on the landlord not yourself, plus you can put extra money away for your own retirement plan.

JStheHammer · 2016-12-30T15:33:01+00:00

Flexibility of renting.

nigelh · 2016-12-30T12:46:19+00:00

As ever real life is more complicated than a sound bite reply. If you expect to move around a lot buying is a pain as moving is expensive. Conversely I have lived in my place for decades now and having it all paid off before I retired was a big part of the plan to live well but to do it cheaply.

Koburg7 · 2016-12-30T16:44:57+00:00

Apart from finances, there are some extra points to weigh-in:

commute duration and ease. Wasting your most precious resource in life: time. (unless you love driving)
your job's stability. (unless you can find many employment opportunities nearby)
amenities. (depending on what you really want and can afford)

When retiring, you don't need to commute and worry about job stability. With the money you've saved, you can buy a cheap house far away from expensive cities. With all the amenities you need maxed-out. Maybe even buy in a different country, where it can be cheaper and the climate is nicer and healthier. Health-services might be worse, though.

wordjedi · 2016-12-30T18:19:32+00:00

You don't need to tell us where you live, OP, but it would be helpful to know what a small starter house there costs vs. your income.

In some big coastal cities, you're looking at a half a mil just for something livable in a decent neighborhood. If you're in a city like that, I would say rent the cheapest studio apartment you can find, save some money, then plan on moving somewhere cheaper in a few years. Don't sit there and pay $2000 a month rent for decades because you're afraid to move to a new place.

By contrast, a few years ago little hundred year old houses like that in my little western town were listing for $25K. I'm not exaggerating.

kuhlhandluke · 2016-12-31T00:50:28+00:00

Or, you could do a mix of both, like buy a sailboat and live on it, float down a coast and chill in a place you like, do some work there doing whatever you do, then float away again.

Houses seem like a trap, the prices on them all seem excessive, sort of like the student loan bubble because colleges figure they own the gateway to success and with .gov backed loans they can charge whatever they want.

I own a decent mobile home in a decent sized college town in a prime location (which means it'll likely be super easy to offload/sell when I want to) and pay 200-300 a month in lot rent, plus utilities. Best of both worlds in my opinion, rent is cheap, no BS that usually goes along with apartments (no one stomping around above me at 2am), etc. No garage yet but hey, it ain't all perfect.

DWShimoda · 2016-12-31T05:30:05+00:00

Renting provides FLEXIBILITY.

Owning provides STABILITY.

RENTING is ideal/better when you are young & starting out, when your career is just beginning, when you are capital poor, and when you anticipate (fully expect) the likelihood/need to be "mobile" in your location (much easier to change jobs when you DON'T have to sell a home). The downsides are that you are NOT in control of the property NOR the costs (typically at most you will be able to guarantee or "lock in" a rental cost for a period of 12 months, at which point the landlord CAN increase rent at their whim). Yes you can counter that by moving, but the assumption that other (equal) housing will be available at the previous (lesser) rate is often fallacious (making the move a "zero-sum" scenario at best, probably a net loss) -- especially as frequent moves themselves contain costs (not merely monetary in terms of "movers" but also damage to your personal property, and the inconvenience of time lost/wasted moving, the various deposits, damage compensation claims, etc) -- those costs are easy to bear if/when you are moving in order to obtain BETTER (higher) paying work; when they are done merely to try to AVOID an increase rental cost, well then they are a net loss.

Oh, and don't listen to the BS about "property taxes" -- ALL RENTERS are in fact indirectly paying property taxes (in fact on a per sq ft basis, especially in multi-unit "apartment" buildings, they are usually paying a HIGHER rate than private stand-aloe homeowners do) -- they simply AREN'T paying the taxes directly (ergo it is a "hidden cost" that is buried within the rent -- likewise with "interest," most rental properties are leveraged/mortgaged these days, so that cost too is "buried/hidden" within the rent, but it is still present).

By contrast, OWNING is better overall when your career (profession OR business) has itself reached a level of stability & predictability -- that is you not only do NOT anticipate any need (or desire) to move within the next few years, but in fact you fully expect (and want) to remain in that location/position for a decade or more. At that stage (usually age 30+ to 40+) in life, you will probably be both TIRED of moving around, AND you will likely desire a place you ARE in "control" over (which in various ways can "dirty" or "change/rearrange" in ways beyond merely moving furniture; but also in terms of building, moving walls, adding on {rooms, workshop, deck/patio, etc} to allow you to enjoy/engage in hobbies, shop stuff, gardening, etc).

And by that age, you probably (ideally SHOULD) have a certain level of capital built-up that you both CAN, and possibly desire to "invest" at least SOME of it in a form or asset that can provide a (relatively decent) "inflation hedge."

And yes, a home IS both an "asset" AND an "investment" -- it is (generally) not a 'performing' asset or investment in that (unless it is some "multi-family" property that includes rental units) it is NOT going throw off any dividends, and the capital gains are going to vary (across a wide spectrum, and essentially unpredictable on the timeline in question -- that is a decade+ relative to a given location).

But, it is a STABLE thing -- IOW if the stock market crashes, or your work hours are cutback, you get downsized, or lose your job/are forced to change jobs, etc -- you will/should STILL have a place to sleep, and at a generally long-term PREDICTABLE cost. (That may not SEEM like it's all that important when you're 25 -- I mean big deal, so you have to sleep in your car, or on some buddy's sofa, right? Ayah... you can do that when you're 25... but you really DON'T want to be doing that {or even face the imminent possibility of it} when you're 45, much less 65.)

BTW, I rented (various apartments and then a small house for several years) until I reached my mid 30's -- I bought a home at age 36 (20% down, paid it off 8 years later), and have lived here now for well over a decade and a half, and don't really anticipate selling/moving (really EVER) -- I don't regret EITHER, neither the years I rented (it was appropriate, even beneficial), nor the fact that I have ever since owned (it too has been "appropriate" and beneficial).

nomadderp · 2016-12-30T13:44:06+00:00

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nomadderp · 2016-12-30T14:49:02+00:00

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t3nchi · 2016-12-30T16:54:39+00:00

I've owned a home (for 2 years) and have been renting since. I prefer renting.

When you buy a home, you have to pay property taxes. How is the property tax money used? I know some goes to local schools. I'm not having any kids so it doesn't benefit me.

Say you own your home for 5 years and you pay X in property taxes a year. Say you want to sell your home. Will the (sale price of your home) - (5x plus your loan) result in any significant profit? Maybe, maybe not.

If you have to pick up and move for a new job, you'll have to sell your home. Selling a home isn't easy. Time, fees, hassle. Neither is renting it out unless you are lucky and find good renters.

Don't forget time and costs for maintenance and upkeep of your property.

Personally, I move around quite a bit. Every few years, I take off for a year to travel. And I hate wasted space. Renting is preferable in my situation. But maybe you like where you live, want to stay there for a while. So maybe home ownership may work for you.

Stupidiot2 · 2016-12-30T19:50:45+00:00

You will never have a lower cost of living than you will in a "paid for" house (barring buying a terrible house that you must put extra money into) and you are very unlikely to end up with a paid for house by renting apartments. You will never recoup any of your rent money but mortgage payments become yours when the house is paid in full. Also, once your house is paid in full it's pretty easy to get equity loans which are virtually always a better rate than any other type of loan.

In one of these comments someone said "The key to renting is to take the money that you would be spending on a mortgage and invest it" But that money is what is paying your rent, so at best you are investing whatever small portion is left over after your rent is paid assuming your rent is less than what your mortgage would be (and it often is more not less).

Sure apartments are less work for you, but they come with a whole list of cons and ultimately cost you money you will never recoup.

nomadderp · 2016-12-30T20:06:40+00:00

...disadvantages of owning:

Property taxes. Mine are $4,000/ yr. (Seattle)
If market goes down...you can be screwed.
You are tied to the house. Renting is much more flexible.

I'm selling my house due to DR...I won't buy again.

Davidkpa · 2016-12-30T21:50:07+00:00

If you want to live alone and do your own thing. Consider mini-houses on trailers. I have a spare sixteen foot trailer that's gone unused for awhile now (only used it to move into my latest house and I'm not interested in moving again). So I'm going to turn it into a "mini-house" next year in the summer (plus use it as another training moment for my Godson). It'll have solar panels, a battery storage system for the solar pannels. A fifty-five gallon water reservoir for drinking water (separate filtration resevoir) and minor hygiene (washing hands and flushing a small chemical toilet) with water catching apparatus on the roof for when it rains. The plan is to be able to run a window A/C unit up to nine hours straight and still have enough juice for a small flat screen and video game counsel for five hours of use a day. I'm also working up a rig using four alternators to charge the batteries as well (to charge while driving), but it's only in the planning stages. I know someone who built a similar system for their mini-house using one alternator but it's charge ability is very minor (eight hours of driving mean barely an hour of battery life running a TV and a DVD player).

I'm doing it so I can vacation with the wife and kids in the Keys (Bahai Honda National Park) in the summers every other year. But you could use it to liberate your finances. Most Walmart parking lots have a 24 hour rule for parking. Also you can label it an "Art Exhibit" demonstrating renewable technologies and efficient living (even do a Youtube Vlog about it).

No house enslavement, financial freedom, and possible throwaway wannabe hippie pussy. Plus you can put more and more money away. Get enough savings put together and get a virtual gig for work and live a life of easy carefree goodness.

theoddestspot · 2016-12-30T22:26:20+00:00

Im a fan of home ownership only when its also rental property and you live in it. someone pays your mortgage, write off expenses and no capital gains on the property(in canada if its your primary residence). invest your employment income and any positive cash flow. only buy a property if you are making positive cash flow.

zachs_alligator · 2016-12-30T22:29:04+00:00

Find a small house with multiple bedrooms in a low tax area. I'm single with no debts and bought a 3 bedroom, 2 bath house for 220k. My taxes are about 2k a year. I rent out 2 of my bedrooms to friends and cover my entire mortgage. If you can deal with living with buds then buy a house. If not, than renting is better. You need money on hand for house.

I'm trying to build another bedroom in my basement for more income.

I like actually owning a house. It's not something young guys do on their own. Just don't be dumb about it and buy something you can actually afford.

JackRooks11 · 2016-12-30T23:41:16+00:00

I've been looking at smaller, one bedroom places in slightly more rural areas - honestly, it seems that there are some places that are "fine" for around 60k - not that they're "nice" by the standards women use - they definitely wouldn't make some broad's friends jealous, but for single guy and a dog? They seem ok. I just don't have any experience with home ownership as I was born and raised in the city and always lived in apartments.

We_Flatten_Stuff · 2016-12-31T01:43:37+00:00

This is a wall (over max length comment so done in two hits). It should be because this question is HARD and serious shit. This comes from my experience and professional knowledge. I am employed in the UK mortgage industry and own my own mortgaged home after several years of renting. I'll avoid UK/US specifics & stick to the considerations and principles of buying vs renting. Not here to sell you anything and couldn't give a shit what you do, this is to help you consider things you may not have thought about already. It could be in Russian and still more helpful than the other shit people have turfed at you.
TL;DR most people in this thread don't know jack about anything so just read it.

I'm going to cut through the shit, some of the responses here are utter trash. Here's the worst 'advice' with pointers:
* there was a mini-house or trailer idea; no, the question is rent or buy
* a list of owning disadvantages; thanks, next!
* vague calculations and 'may work for you, may not' bullshit; useless
* someone gave their opinion of the US economy; shove your opinion, this is an objective question
* 'just stop working'; that's the most useless so far
* 'it's too complex to sum up so I just won't really answer'; great, bye.
* renting is flexible; figured that already, thanks.
* to the homeowner whose time is full of maintenance; don't buy a shit house.
* rent is cheaper; what the fuck?
* the entire top response; OP is already investing how about a little diversification. It sounds great to invest that house money in stocks but bricks and mortar ain't going nowhere, that stock could tank TOMORROW. Then you have rent to pay, no investments AND you're stupid. Plus it's all based on 'I've done it before so it'll work next time' which is awful financial planning
* again top response, “The problem with home ownership is that people consider this an investment, when it's not.”. I'm not sure that you understand how this works.

Some helpful things to take from other answers:
* rent first or live at home (nearly rent free) save up and then PLAN moving. Don't just do it and also don't endlessly pay off someone else's mortgage and stagnate yourself in renting forever. Create a path forwards.
* consider your future plans; how much can you see yourself moving due to work or family because it's easier to end a tenancy than sell a house.
* consider commute; this is extremely important as it's everyday and non-optional. Almost a #1 consideration behind cost, I'd rather spend 30% income on living close to work to give me a 5 minute commute than spend 5% of my income on rent or a mortgage that means I have an hour and a half commute each way, that's a lot of time daily that you can do 100 other income boosting or cost effective or just fun things in!
* not all houses go up in value and the economic climate is critical to your choice; location is mega important, as is the time at which you purchase although there is only so much you can do to prepare your decision here. #nextrecession2019 – purely speculation you understand.
* consider all the possible costs involved.

Let's have a look at your post now. Single, no dependants, emergency fund in place. Okay little to go on but it's a start and makes it simple, you're going to want a small place maybe 1 or 2 beds and a driveway. Little use for a garden or 3rd room and you'll want to be mobile as in, easily able to leave the property for a few days at a time for social visits elsewhere. You sound young so you'll probably want great internet and transport connections too whether you drive or not.

'I don't know where to throw my money next'

Hey man if you've got extra sloshing around I'll handle it for you, gimmie! This isn't about throwing money about, it's financial planning. You're investing already from comments I've read although this is putting the cart before the horse, still a good sign though that you're not living outside your means like millions of people in the US and UK currently do. I see bank accounts every day of people who pull in 100k a year yet have nothing at the end of every single month other than a pile of unsecured and expensive credit card debt. Yours is a GREAT position to be in, you have the power here.

'Mortgage poor'

Do you mean working to pay the mortgage and having nothing else because it's so expensive? This is where good planning comes into play.

'Don't know if a house might enslave me'

Purchase sensibly and spend your money RIGHT and it never will. You're too smart for that.

Your advantages of renting are close although not spot on. 'No sidewalk slip and lawsuit', this must be an issue for maybe 1 in 100 million homeowners [figure is imaginary although your chances of this are so so low] so I'd forget about this and ensure that if you buy, you are smart and take precautions for people coming near your home and onto your property, security cameras is a great option. Don't trust the news that peddles this fear mongering shit.
'can invest what i'm not sinking into the house' – you're already investing, diversify. You seem to be pre-disposed to shy away from owning as if it will be some huge time sink, money pit that will devour your life and isn't really an investment at all. There's a reason billions of people do it, it's not a stupid idea and it's not a bad thing, it's YOUR home, independence, everything that MGTOW is about. I'm surprised it's not championed here as the most 'be your own man' thing you can do aside from literally building your own home.
Disadvantages of renting are actually spot on, each one is correct. You're a wage slave, you own shit all. You should be MORE afraid of being 'enslaved' to a landlord forever than 'enslaved' to a mortgage for a certain, finite amount of time. Remember renting and buying both carry risk and you're just trying to mitigate your liability. Which reminds me, someone said a property is a liability. NO a debt (mortgage) is a liability. The property, physical land and building materials, that's an asset and has value that you're going to own at a gradually increasing pace.
You've not mentioned the pro's of owning at all! Legally your own space, make improvements at will, don't need to ask before hanging a fucking picture, you'll own it one day, you may see an increase in house prices, you're constantly buying equity (i.e. part of every mortgage payment will go 70% as paying off interest and 30% paying off the actual money you borrowed and buying equity, these gradually switch around the further through the mortgage you go and I can answer questions at length for you) and putting money in your future self's pockets hence old people sell their houses to release equity for retirement and inheritance, it's a money saving vehicle, if the economy goes tits up and you're in negative equity who cares unless you're actively trying to sell the house?! If you have the savings you do this will unlikely be a worry because that's the exact emergency that savings are for! Owning makes you SO much more your own man, you'll start to learn how to hang shelves, re-decorate, possibly even become your own electrician, plumber and builder if you invest the time and these are skills I've learned that will never go away plus make maintenance cheaper and you more knowledgable.
Owning negatives: you will have some maintenance bills but this is offset by the equity you're buying (remember, only a portion of each mortgage payment is money out of your pocket but rent is 100% gone never to return), buy the right house that you like and has quality to it and you'll barely maintain anything anyway. Someone mentioned furniture is a cost to consider, YES of course it is whether you rent or buy, you don't want some landlord's pile of shit sofa. Neighbours can be a pain especially if you get off on the wrong foot with them but if you're not a sociopath you'll be fine, be proactive and nice, remember Christmas cards whether you see eye to eye with them or not. Last negative and it's a biggie, it's not a 'pick up and leave' as renting hence you plan ahead.

renting vs. homeowning

Comments

Renting provides FLEXIBILITY.

Owning provides STABILITY.

Take a break bruh

Title	renting vs. homeowning
Author	nomadderp
Upvotes	22
Comments	55
Date	December 30, 2016 9:26 AM UTC (9 years ago)
Subreddit	Posted in /r/MGTOW
Original Link	https://old.reddit.com/r/MGTOW/comments/5l2md7/renting_vs_homeowning/
Archive Link	https://theredarchive.com/r/MGTOW/renting-vs-homeowning.614975 https://theredarchive.com/post/614975