Is homeownership truly better than renting?

[steppinthrax]

My wife and I (5 years ago) used to live in a 1br apartment for around 600 a month or so. I now own a house.

Please make a big deal about home ownership, if you own a home you have more freedom, it's supposed to be cheaper in the long run, social standing etc... But, I'm starting to think it's probably about the same, if not, it probably cost more.

In most fixed term mortgages you pay interest, many people don't sit down and calculate the amount of interest they are actually paying v.s. the principle. It's almost like a rip-off. Second, you pay property taxes, improvments to home, and the possiblity of losing equity based on what has happend recently.

 

[sourceninja]

Owning a house for me is way worse then renting.

I've had far more money sunk into this pit, plus the market sunk and I'm basically locked into this house forever (no way to sell it and walk away without about 30k to pay down my mortgage).

If I ever get out from under this house, I'm going to rent.

 

[krylon]

Houses have more room for dead strippers, so yes.

 

[TwiceOver]

I like being able to put holes in my walls without asking.

 

[TruePaige]

I was listening to NPR yesterday and this guy was talking about this very topic.

He said that historically homes have a 1% per year return on investment. If you took that money and put it in a good investment vehicle you can do MUCH better than home ownership.

A caller tried to assert that renting was throwing money away but the guy went into a discussion about how when you own a home you have to pay not only the mortage but upkeep and taxes. Stuff that renters do not have to worry about.

He didn't say home ownership was a bad idea, but that it also limits your ability to pursue other opportunities in life and was perhaps better left as a final place to settle down in if you so choose for when you get older and have a fixed income.

The special was called..I think.. "Is the American Dream of Homeownership Better Leased?"

 

[Joemonkey]

I like being able to put holes in my walls without asking.

nicely put! Just make sure when you do buy a house it is NOT in a homeowner's association, they're worse than landlords

one good thing about our house vs. our last apartment is we can turn up the music/movies/video games as loud as we want and none of our neighbors will complain

 

[2Xtreme21]

Just put an offer in on my first house yesterday. I'm really excited to get out of the "throw $750 into the furnace every month" thing. With a house, even if it's small for the first few years, every dollar I put into it increases the value of it. That is, should the world not END in the next few years, and should I keep up with the house, I should be able to sell the house for more than I paid for it and use the extra money to put a bigger down payment on a nicer house.

If I were to rent for the next 5 years, I would pay $45,000 into the apartment and not see a dime of it in return.

Edit: For those saying I could keep renting and just put a set chunk of money into a high yield savings account, that's still money on top of what I'm spending to live there. Wouldn't you like to see a return on just the money you spend to live somewhere?

 

[PingSpike]

Its way overrated. And most of that stuff like "You're throwing you money away renting" is a lie. And I own a house. About the only really good thing about it is that I don't have to listen to my fucker neighbors anymore, but I probably could have rented a standalone house to achieve that. You can't even do whatever to want to it since the town wants you to get a permit for everything and will probably reclassify your land as a wetland or some shit.

I wouldn't say its awful and it has its upsides, but to hear most people tell it, its like renting is the stupidest thing in the world. I personally think they're mostly justifying their purchase to themselves. I guess when I get old it'll be cheaper since it'll be paid off.

 

[KMc]

- Nobody banging on my walls, ceiling, etc. when I want to play my music or tv loud.
- I have a yard, and a garage and I can do what I want with it.
- It's all mine.
- I can sell it when I want something else and get more than I paid for it. Maybe not this year, but probably in a few years. I don't sell my house every 2 years like people are trying to do these days, so this is not a problem for me.
- Think of your rent as a loan with $0 of principal and $600 of interest. Every year my principle amount goes up and my interest paid goes down. Another reason why people trying to sell their houses after 2 years are screwing themselves.
- There are other reasons, but i'll let everybody else chime in.

Edit:
- I think the 1% return comment is highly aggregated. I'm in my third house and I made 12% and 5% annual returns on the previous 2 houses. It's not rocket science, you just have to use a little brains when investing in a house. If you are going in with the absolute minimum down, you are screwing yourself.

 

[geno]

How much equity can you gain in an apartment? I rest my case We had a current market analysis (CMA) done last month on our home we purchased 9 months ago and it's already worth 15% more than what we bought it for, and it's forecast to go up more. This isn't typical, but it shows that a home can truly be an investment if you're planning on staying put for more than a year at a time.

 

[n yusef]

It depends. Think: the availability of rental units implies that it's cheaper for the landlord to own.

 

[nerp]

I can buy a forcelosed property right now with historically low rates. In a few year I will be able to sell it at a large profit. I've factored in maintenence and upkeep (any smart home buyer should do this, duhhhhh) and my mortgage is signficantly lower than equivalent rents. The money I save every month goes into savings and high yield investments.

Renting doesn't make sense for me, not in this market.

 

[sourceninja]

Just put an offer in on my first house yesterday. I'm really excited to get out of the "throw $750 into the furnace every month" thing. With a house, even if it's small for the first few years, every dollar I put into it increases the value of it. That is, should the world not END in the next few years, and should I keep up with the house, I should be able to sell the house for more than I paid for it and use the extra money to put a bigger down payment on a nicer house.

If I were to rent for the next 5 years, I would pay $45,000 into the apartment and not see a dime of it in return.

Edit: For those saying I could keep renting and just put a set chunk of money into a high yield savings account, that's still money on top of what I'm spending to live there. Wouldn't you like to see a return on just the money you spend to live somewhere?

Or be like me. I have spent thousands a year on my house and watched it steadily lose value.

We bought it at 130k when it appraised at 165k. We refinanced and took out another 15k to side, roof, gutter, floors, carpet, paint, remodel kitchen, etc. Now our house appraises at 115k. Houses were selling my my area around 200k, a huge 2 story down the street just went for 120k.

WOoo...go home ownership.

 

[SacrosanctFiend]

It depends. My fiancee and I are putting down 50% on our new house, and have a 15-yr loan that we will, barring any financial hardships, pay off in 4 years (I hate debt of any kind). That will equate to approximately $16K in interest. After that, I will have only a property tax and homeowner's insurance bill to pay through escrow ever month. That should be around $220/mo.

I know that there will be extra expenses (though I hope few and far between). However, I am comfortable with that if it means owning my residence outright. In addition, I'll have a nice yard for my garden, dog, and child.

 

[2Xtreme21]

Or be like me. I have spent thousands a year on my house and watched it steadily lose value.

We bought it at 130k when it appraised at 165k. We refinanced and took out another 15k to side, roof, gutter, floors, carpet, paint, remodel kitchen, etc. Now our house appraises at 115k. Houses were selling my my area around 200k, a huge 2 story down the street just went for 120k.

WOoo...go home ownership.

Bad market conditions. No one could have expected it. The up-side is, it'll regain its value. You're not planning on selling it NOW, are you?

 

[theeedude]

If home ownership was such a good deal, it wouldn't need a tax subsidy.

 

[hanoverphist]

I was listening to NPR yesterday and this guy was talking about this very topic.

He said that historically homes have a 1% per year return on investment. If you took that money and put it in a good investment vehicle you can do MUCH better than home ownership.

you cant live in a good investment vehicle tho.

while i think its a wash either way (rent is higher than my payment, i still have repair/ upkeep costs) my house gives me a place to call home that i can sell when im done with it. if i die first, its an asset to my kids. if i lived in a rental, my kids would have to pay off my lease instead of having a house to either live in or sell off. my ex rents a condo the same size (pretty much) as my house, yet she pays almost 300 more than me. she also has to ask about putting pictures up on the walls, has to wait for someone else to fix broken gates/ windows and such.

id still prefer to own

 

[seepy83]

If I were to rent for the next 5 years, I would pay $45,000 into the apartment and not see a dime of it in return.

Edit: For those saying I could keep renting and just put a set chunk of money into a high yield savings account, that's still money on top of what I'm spending to live there. Wouldn't you like to see a return on just the money you spend to live somewhere?

EXACTLY - While you are paying your mortgage, you are building equity.

I bought my first home last January, and I often find myself frustrated that I pay so much money for Mortage, Taxes, Utilities, Maintenance, Insurance, etc...but it doesn't take me long to remind myself that owning a home is a privilege that not all people can enjoy. I hate doing yard work...possibly more than I hate paying thousands of dollars a month in bills. But I can put a smile on my face while I mow my lawn or trim my bushes because I know that the property is mine.

 

[lokiju]

For me it's more about having a place that is all my own that I can do whatever I want to and not have to every wonder/worry in the back of my mind of the person I'm renting from is going to get foreclosed on or whatever and then leave me left looking for a new place.

Yeah there are a lot of cons also to owning but IMO they're balanced out by the pro's.

I've been a home owner for going on 3 years now and do not in the slightest way miss being a renter.

And this is even factoring in my AC in the attic over flowing 2 times and destroying the ceiling in my guest room twice, my AC dying, and all the other little fixes and improvements I've made to date.

 

[hanoverphist]

Or be like me. I have spent thousands a year on my house and watched it steadily lose value.

We bought it at 130k when it appraised at 165k. We refinanced and took out another 15k to side, roof, gutter, floors, carpet, paint, remodel kitchen, etc. Now our house appraises at 115k. Houses were selling my my area around 200k, a huge 2 story down the street just went for 120k.

WOoo...go home ownership.

yup, that happens. happened to me too, the bubble made my house appraise at 3 times what i paid for it. when that popped, it supposedly dropped to what i actually paid for it, but in reality the neighborhood sales are still supporting it being worth twice what i paid for it. in a few years when it settles down and recovers a bit, youll be back up in the black. youre only taking a bath on your house if youre trying to sell it right now.

 

[slackerinabox]

Bought a house in July (2 family, double duplex in Brooklyn, NY) and it has been pretty difficult, mostly because tenants = lots of surprise expenses. We know it'll be a hard 2 years, but here's the math that makes it worthwhile:

Mortgage = $3,400 (which seems huge, but Brooklyn NYC is expensive, and this home is brand new, so I spent only $2,000 for renovations, which was building a fence)
Cost of our old rental (3 bedroom apartment) = $1825
Rent income (2 bedroom) - $1,600

$1,825 + $1600 rent income = $3,425
Tenants pay their own gas/electric/etc so all we pay is water

Now, in the NYC area rent basically goes up every year, recession or not. Our old landlord offered a lease renewal for $1,850 for example. We'll raise the rent on our rental unit to $1,700 (market value, we rented at below market value because there's a glut of new developments on the block asking for $1,700, so we dropped the rent to undersell them).

So, next year: $3400 - $1700 = $1700 for our 3 bedroom duplex.

Now scale that say 5 years. Our share of the mortgage responsibility goes down every year, even if it's by $25 a month, while renters always will be paying more and more.

We also have a basement, and everyone in the neighborhood rents out theres. I'd personally like to eventually renovate it to a bad ass home theater/lounge, but I could technically monetize that for another $500-$800 off of our mortgage. PMI will also be removed from my mortgage eventually, saving me another $300. Taxes are paid into my mortgage automatically, so I don't think about it.

Now, if I chose to move (in say 5 years), I can rent out the 3 bedroom duplex for $1,900 [plus the garage plus the basement] and break even while I raise equity/property value increases.


BUT NONE OF THIS APPLIES TO MOST NON-CITY AREAS.

I have a subway a block away (15 min ride to Manhattan), a police station 5 blocks away, and a fire department a block away - it's an area prime for development..


SO, right now it's pretty difficult but we're managing. A few years down the line it'll get easier and easier, then we can hopefully sell it for xx% more when we plan on retiring

 

[SunnyD]

People have to realize too - renting does not necessarily mean sharing walls with a neighbor or not having a yard/garage. I rent a single family detached with about a 1/2 acre yard, a large storage shed, attic and garage at my disposal.

With that said, I'd prefer to be putting equity into my life, instead of an expense with no chance of ROI. But alas, I do what I have to in the meantime.

 

[hanoverphist]

For me it's more about having a place that is all my own that I can do whatever I want to and not have to every wonder/worry in the back of my mind of the person I'm renting from is going to get foreclosed on or whatever and then leave me left looking for a new place.

i had rented a house long ago by ASU in tempe. was on one ofo the last few 1/4 acre lots, small house with a huge yard. the owner was a douche, wouoldnt fix anything and generally lied about everything. we got out before our lease due to it all, as well as got a few extra bucks for our troubles with him. the next renters ended up buying the house for under 40k (omfg thats nothing for that area and size) when the owner foreclosed. the bank gave the residents first crack at it. i was so friggin pissed i didnt wait out my lease, id have been able to sell it for HUGE profits like they did when the university came and bought up the whole block to build univ housing.

 

[rh71]

if renting a house, I'd have to run numbers... typically it's because the money goes toward nothing (sort of like leasing a car) but since property values have dropped... numbers need to be calculated. Still, I already own so I'm not going to go out and rent at this point.

if renting an apartment, sharing a property with others, I'd rather shoot myself first... way too many horror stories.

 

[spidey07]

I love it. I can play my home theater and ridiculous volume. It's quiet, I have a large deck where I can grill/cook/smoke just relax. Can garden. Tax deductions which I really need otherwise get raped in taxes. If I want to improve something inside or out I can just go do it. Privacy, nobody can enter my home unless I allow them.