Rent Vs. Buy housing

Deathwing · Jun 24, 2013

Tuco_sl said:
I'm way over on the side of renting after doing the math of how much home ownership really costs when you consider home repairs/renovations/tools vs investing the money not spend on a house in typical securities.

The argument of enjoying a home vs enjoying the freedom of renting is a personal decision, but it's really hard to plot out a scenario where you get a competitively priced house and are able to live in it and use it as an investment vehicle. I don't tell people what to do but it's hard to recommend a house to an average person unless they have kids.

You're paying for repairs. Renovations are optional. Tools seem kinda minor cost-wise for what's typically needed around the house for repairs. So, again, you're not saving this money by renting. The landlord should be making you pay by folding it into your monthly payments.

I bought a house last month. My rent was 1250, my piti is 1652. I easily got double the house and 6x the amount of land(yay?). I'm still in shock at how much more my money is getting me. Caveat: I live in Ithaca, so the rental market is in high demand.

Abefroman · Jun 24, 2013

You can repair the majority of problems in a house yourself. You can learn to do it yourself with google. You can buy just about every tool you need for super cheap at yard sales, estate sales, goodwill etc. You don't need new tools. How you guys feel about people buying alienware is how I feel about people calling a plumber or electrician or roofer for something you can learn to do on you tube.

Having a garden is also another great perk that I can't live without. We all spend a lot of money on things that make us comfortable. Nothing makes me more comfortable then a house. Fuck renting.

Gravel · Jun 24, 2013

Porkchop_sl said:
Thanks for the write up. Am I the only one that thinks saving $50-60k is unrealistic, especially in today's economy? Even if I saved $1k a month, which is nearly impossible for me to do and still maintain a family and decent lifestyle, that would take 60 months, or 5 years of saving and not using that money for any other life event. Not to mention, 5 years from now, there will be no such thing as a $250k house in a nice area and I'll have to tack on another $10-20k of savings, and more time.

Maybe the system is just setup so people like me in the lower-middle class can't/shouldn't own homes.

That's precisely the reason I thought about buying recently (and the historically low interest rates). People buy houses with equity. It's a fact in the modern market. No one can afford a >$500,000 house, unless you're making high 6 figures or better. But people CAN ride their increases in equity and use that as a "downpayment" on an upgrade. Whether that holds true for the future, I'm not sure, since a lot of that was predicated on the housing bubble. But since houses are coming back up again, it either means everything is overvalued or the system is going to keep grinding on.

So if you can get into a $100,000 house, go for it and hope it appreciates $50,000 over the next few years. Use that to upgrade. Keep doing that over 20-30 years and you'll have a decent house. Otherwise, there's just no fucking way you're going to afford what the housing market currently has.

The only reason I didn't go ahead and buy is because I'll likely be moving in 2-3 years.

Joeboo · Jun 24, 2013

If you do decide to buy, try to get as much information as you can from the sellers and your home inspector on exactly how old the roof, heating/AC, and appliances are in the home. Buddy of mine bought a house 2 or 3 years ago, it was a 15 year old home and pretty much everything was original to the home. In the past 18 months he's had to replace the furnace, AC, his roof, his hot water heater, and his stove. The 15-20 year range is usually when ALL of your major appliances and utility room equipment starts crapping out on you. Hell, in this day and age, appliances(fridge, dishwasher, stove, etc) may only last 10 years, they just don't last as long as they used to. This was my friends home, and he's had to load up his credit card to the tune of about 10 grand for home repairs that absolutely could not be put off (roof started leaking, stove went out, furnace went out in the winter, etc), not to mention he chewed right through his 10 grand in savings that he had.

There's definitely a reason you pay a premium for a brand new home, maintenance costs are damn low for the first 10 years(assuming something isn't flat-out defective from the start), but a 50 year old home that was just completely remodeled 5 years ago can be just as good. Just be wary of those homes where everything in the house is well over a decade old, and approaching 2 decades.

Deathwing · Jun 24, 2013

WTF are you doing that cat6 cable can't handle?

Cad · Jun 25, 2013

McCheese_sl said:
I know that feel, bro. I live in the DC metro area and it rustles my jimmies seeing people on here occasionally talk about the enormous, cheap houses they've bought out in the Midwest/South.

I've said the same you responded to, about living a decent lifestyle. It's incredibly hard with the ridiculously high prices for rent and houses in some areas.

I consider myself able to live a pretty spartan lifestyle, and yet I can still barely manage to live in the DC metro area. Rent on any place that isn't going to be dangerous to live will be a minimum of 950 - 1100, then add on utilities. Not to mention gas, insurance, and food. Hell, that $1100 rent is more than half of my monthly salary, then subtract the other basic necessities of life and I'm already surviving on about $500/month. That's not even counting unexpected expenses like car problems, medical issues, etc. It doesn't leave much opportunity to save; at most, a couple hundred dollars a month if you're lucky.

And all of that is for a single, young guy. If you've got a young family and you're trying to get established in this area I really feel sorry for you. It's going to be almost impossible.

Dude if you bring home like $2500/month you're not going to be able to afford to live "well" in any part of the country, especially not Washington DC. Of course you're not going to be able to save for an expensive house. You need to be thinking trailer park or renting for life.

McCheese · Jun 25, 2013

Cad_sl said:
Dude if you bring home like $2500/month you're not going to be able to afford to live "well" in any part of the country, especially not Washington DC. Of course you're not going to be able to save for an expensive house. You need to be thinking trailer park or renting for life.

You might not be able to live "well" (of course, "well" is different for every individual) on $2500/month, but that amount of money will go A LOT farther in some areas of the country than others.

My whole point is that telling someone to hunker down, suck it up, and give up conveniences in order to afford to live isn't always realistic, because in some places simply affording the basic necessities will run you practically dry, and there's nothing else to give up.

Tenks · Jun 25, 2013

I don't see how you can't live well on $2500/mo. What exactly do you consider living well having caviar burgers topped with truffles every night?

Cad · Jun 25, 2013

McCheese_sl said:
You might not be able to live "well" (of course, "well" is different for every individual) on $2500/month, but that amount of money will go A LOT farther in some areas of the country than others.

My whole point is that telling someone to hunker down, suck it up, and give up conveniences in order to afford to live isn't always realistic, because in some places simply affording the basic necessities will run you practically dry, and there's nothing else to give up.

Yea, when you make half of what a fresh college grad would make first year out in an area where anybody even pretending to be middle class is going to have a college degree or a professional trade, you're going to have a hard time.

You absolutely should hunker down and save up, the down payment on the doublewide isn't going to be $60k.

Joeboo · Jun 25, 2013

If you live in the Midwest(other than chicago) $2500 a month take home is easily comfortable. My wife and I have a modest, but comfortable home, 1500sq feet + finished basement(maybe another 700?), good school district in the 'burbs, big yard, etc, and our house payment is $870 a month(that includes taxes and insurance, it was only a $150,000 house, and she put 20% down). That leaves plenty left over out of that hypothetical $2500 even for a car payment, utilities, etc. Now, you're going to be hurting if you have tons of credit card debt or student loans or something, but as far as covering the basic necessities, $2500 would be plenty with some to spare. Of course, throw kids into the mix and that all goes out the window, but a single person could easily live on that.

mkopec · Jun 25, 2013

I think it all boils down to where you are at in life. Home ownership is no longer looked upon as an investment. So its more of a question of what you want to get out of your money. If you are single, or just married without kids, spending most of your time working and being out and about, why the fuck own a house that you are only using to sleep in and watch TV a few hours a night?

On the other hand if you are married with kids, well thats a different situation. You want to provide more stability for the kids in regards to the schools, friends etc. A back yard you can just let them go and play in instead of a apartment parking lot.

Also, many of you are blowing the entire emergency maintenance shit out of proportion. Yeah, you will get a hot water heater that goes to shit, or a plugged drain in the basement you need to have snaked out. Or a kitchen faucet that goes bad and you need to replace. But in my nearly 20 yrs of home ownership, that shit is rare and overall is a non issue. Yeah, shit will go down that you have to fix or get fixed, but its time to man up and deal with it. Also you should not be buying into a house that all of a sudden you cant afford shit that comes up either. Get a good home inspector and learn what to look for when you are buying a house. Instead of looking at wall colors, you should be checking shit like windows, are they newer? Will they need replacing? Plumbing, does it look ok? Or does it look like 1970s shit thats about to burst. How is the insulation in the attic? How does the basement look? Do you see water damage? Do some research ahead of time what to look for and how shit should look. How does the electrical look? Is it some ancient system that will eventually need replacement? How is the HVAC? Is it from the late 60's... Roof? shit like that. Learn to ask the right questions to either the agent or the inspector.

McCheese · Jun 25, 2013

joeboo_sl said:
If you live in the Midwest(other than chicago) $2500 a month take home is easily comfortable. My wife and I have a modest, but comfortable home, 1500sq feet + finished basement(maybe another 700?), good school district in the 'burbs, big yard, etc, and our house payment is $870 a month(that includes taxes and insurance, it was only a $150,000 house, and she put 20% down). That leaves plenty left over out of that hypothetical $2500 even for a car payment, utilities, etc. Now, you're going to be hurting if you have tons of credit card debt or student loans or something, but as far as covering the basic necessities, $2500 would be plenty with some to spare. Of course, throw kids into the mix and that all goes out the window, but a single person could easily live on that.

Thanks for the example. That's exactly the point I was trying to get across: compare the situation you described to the situation I described and it's clear that it's way easier to save up for "the American dream" when you don't live in overpriced areas of the country.

The Ancient_sl · Jun 25, 2013

Elurin_sl said:
That's precisely the reason I thought about buying recently (and the historically low interest rates). People buy houses with equity. It's a fact in the modern market. No one can afford a >$500,000 house, unless you're making high 6 figures or better. But people CAN ride their increases in equity and use that as a "downpayment" on an upgrade. Whether that holds true for the future, I'm not sure, since a lot of that was predicated on the housing bubble. But since houses are coming back up again, it either means everything is overvalued or the system is going to keep grinding on.

So if you can get into a $100,000 house, go for it and hope it appreciates $50,000 over the next few years. Use that to upgrade. Keep doing that over 20-30 years and you'll have a decent house. Otherwise, there's just no fucking way you're going to afford what the housing market currently has.

The only reason I didn't go ahead and buy is because I'll likely be moving in 2-3 years.

I think your math is wrong. You don't need to be making high 6 figures to afford a 500k home, unless your definition of high six figures is upwards of 150k.

Joeboo · Jun 25, 2013

I think the problem with young people buying homes is that many expect to get out of school and then buy a house on par with the one they just moved out of from their parents home. Except their parents are 40-50+ years old and have probably owned and upgraded across multiple homes in the previous 15-20 years of raising a family. Not to mention that for most middle-class people, your parents are making WAY more money at their age in their 40s and 50s than you will be fresh out of school in your 20s, or probably even in your 30s.

A lot of kids/young adults nowadays don't want to have to pay their dues and work their way up in life, they want everything that they've seen their parents have right off the bat, and it just generally doesn't work that way, especially with the condition of the economy right now. Some people can pull that off, most can't. Don't expect some huge 4 or 5 bedroom home that is completely upgraded with lavish amenities as your first starter home. It takes most people years to work up to that.

Falstaff · Jun 25, 2013

We bought our first house this year and certainly considered it a "starter house". If all goes well, we have no intention of living in it beyond 10 years (aka more than 2 kids if it happens)

Cutlery · Jun 25, 2013

Fuck this starter house nonsense, and fuck that "don't pay off your house, it's a bad investment" shit.

You know what I see? I see every single retired person with a housing payment being fucked. Straight up, no lube fucked. Rent? Fucked. God help you mortgage? Fucked. You can't afford to be paying that on a fixed income. Retired people with shitloads of cash? People who have owned their house their entire life, never "upgraded" to keep paying the same fucking payment for 50 fucking years, they all have more money than they know what to do with. There is a gigantic financial difference between my mom's mother who is still paying a mortgage payment with her SS check, and my dad's father who lived in the house he fucking built in 1950 or some nonsense and hands out $100 bills to every relative he sees every time he sees them.

Put all that "financial wisdom" aside and look around at the people in their 60's and 70's. Take a real good look at the situation they're in. It should be fairly obvious why you don't want to have a mortgage payment as quickly as possible. My parents paid off their house the year after I moved out (so 17 years on that mortgage total), and they've got more money than they can spend every month because they don't have to fork out over a grand a month to live where they live.

Alex · Jun 25, 2013

Cutlery is always good for an agreeable, non-abrasive opinion.

Things aren't like they were in the 50s, dude. Buying a house sounds like such an alien idea to me at this point.

Cutlery · Jun 25, 2013

Alex_sl said:
Cutlery is always good for an agreeable, non-abrasive opinion.

Things aren't like they were in the 50s, dude. Buying a house sounds like such an alien idea to me at this point.

I'm not saying rent or buy, I'm saying get rid of the debt asap. You never know what life throws your way, when you're gonna lose that pension or whatever. Why be saddled with the debt longer than you have to?

It's the same thing with everyone upgrading homes 13 times so they've always got a payment they can just barely afford. You're asking for fucking trouble.

The Ancient_sl · Jun 25, 2013

I understand that it's a question of discipline, but the intent is instead of paying down debt that costs you 3.5% you earn 6.5% with your money. 30 years from now when the shit hits the fan as you say, you'll still have that money + the 3% difference you earned.

That's what they are explaining.

Joeboo · Jun 25, 2013

Cutlery_sl said:
Retired people with shitloads of cash? People who have owned their house their entire life, never "upgraded" to keep paying the same fucking payment for 50 fucking years, they all have more money than they know what to do with.

I've definitely witnessed that first hand. My aunt and uncle were both public school teachers for 40 years, so they obviously weren't getting rich. They bought their first house when they got married in 1970 for $8000. They lived in it until the day they retired a couple years ago. Sold it and bought a badass $750,000 condo with their insane savings, and now travel the world 6-7 months of the year. You can save a hell of a lot of money when you go 30+ years without a house payment.

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Rent Vs. Buy housing

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Cad

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The Ancient_sl

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Alex

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