Rent vs. Mortgage: Which one should I pick?

[Gunslinger08]

I'm basically in the same situation (20 something, no debt, single). I'm buying a house even though it's a little less financially sensible. I like the idea of being a homeowner, being able to change anything I want, and owning it in 15 years or so. I also like not having to worry about my lease being forcefully terminated or sold.

 

[edro]

Rent.

I got a house a few years ago, and even though it has been a perfect situation (I have roommates), the benefits don't really outweigh the cost / stress.

Even though you CAN afford it, it still puts a large stress on your income.
All those things that you could do for your house (paint, fix up, new furniture, lawn care, landscaping, etc) add up quickly.

In an apartment, you don't have to pay for anything but rent and utilities.

 

[Dr. Detroit]

Looking at buying a house in a financial sort of way is incorrect. 95% of the time it will not make sense to buy as renting lets you keep that $20K you are putting down inthe financial markets. Of course throwing money at interest & propety taxes is also a no win situation.

If you want to become a howmeowner than become a homeowner and with it will come financial sacrifices because you OWN your home and can do whatever the hell you want like having loud music, 6-cars, a garage full of storage and countless number of animals.

If you are looking at this from a finance side, then don;t buy. If a home makes you happy, its hard to place a value on happiness, and you can afford it, then buy a house.

Yes you may lose money but you lose money every time you go on vacation or everytime you eat a steak insted of eating ramen. There is a value to your own happiness and only you can decide what that value is.

The question should have been: Can I afford this home. The answer is, yes you can, so long as you are happy with your decision.

 

[Saulbadguy]

I was in your exact situation 6 years ago. I chose to buy a condo, rather than a house. I didn't want to continue throwing my money away renting, but I did not want to be burdened with repair costs normally associated with a house.

One of the major cons associated with renting (IMO) is normally, you are around other renters, and renters are sometimes not the best of people, and you can get a lot of rif raf. Homeowners are generally more responsible people. This has just been my experience.

 

[imported_Lothar]

Rent.

Housing prices will still be going down for at least a year more.

 

[Turin39789]

I'm still renting, but I've always rented houses with others. No common wall with strangers, and more freedom with the place(Garden in back, etc)

 

[StageLeft]

How many renters fail to realize all the costs involved in a house?

In any case, I'd not rush into a house yet. Wait until the desperate sellers have a come to jesus and realize they STILL are asking too much. Then you buy. Assuming the banks will still lend any money, that is.

 

[PandaBear]

Unless you make too much and have to pay a lot of tax (I doubt since you are young and work for the govt), renting is a better choice for you right now.

The housing price will continue to drop, and if for any reason you have to sell in a short period of time, you are going to lose a lot more than your rent. The risk/reward is just not there. Don't forget the agent's cut when you sell, the property tax, the utilities, the insurance, the toys/stuffs that you may buy for the house, etc. I didn't realize how much extra it cost me until a few months after I start owning it.

Save the cash and look for a good investment opportunity when the market bottom out, or when you get married, or etc.

 

[SludgeFactory]

I'm not exactly sure where you are, if it's east Texas/north Louisiana, there never really was any housing bubble, from what I've seen anyway. I wouldn't make that a big factor, you'll end up waiting around for a price drop that isn't going to happen.

I think first you need to *really* figure out what city you want to live in for the next few years.

 

[alkemyst]

Originally posted by: LegendKiller
Rent.

you see he is only paying $1000 vs $550 in rent right?



I'd say JUMP ALL OVER THAT...fuck just piece of mind at $450 a month of not having anyone with a key to my place would be worth that...bonus for more than one bedroom and bath.

I tend to improve whereever I live. Even if I had to walk away from a house in a few years owing a little it'd be worth it at that price.

To buy a home here vs rent it was $600 vs $2200.

 

[alkemyst]

Originally posted by: spacejamz

Originally posted by: Ns1
don't forget repair & maintenance on your house vs free.

plus other expenses for furniture, applicances, lawn equipment...the list goes on and on...

not having to put with neighbors w/ common wall is a big plus in my book though...

You need furniture and appliances in any place. Lawn gear can be had for $100 if you don't need the greatest self-propelled.

 

[Ns1]

Originally posted by: Saulbadguy
I was in your exact situation 6 years ago. I chose to buy a condo, rather than a house. I didn't want to continue throwing my money away renting, but I did not want to be burdened with repair costs normally associated with a house.

One of the major cons associated with renting (IMO) is normally, you are around other renters, and renters are sometimes not the best of people, and you can get a lot of rif raf. Homeowners are generally more responsible people. This has just been my experience.

I want to live in a condo, but I can't fathom paying HOA fees. That is truly pissing money away.

I likened it to pissing in the wind. During a snowstorm. And then falling on a patch of ice with your pants down and pissing all over yourself again.

 

[Gunslinger08]

Originally posted by: Ns1

Originally posted by: Saulbadguy
I was in your exact situation 6 years ago. I chose to buy a condo, rather than a house. I didn't want to continue throwing my money away renting, but I did not want to be burdened with repair costs normally associated with a house.

One of the major cons associated with renting (IMO) is normally, you are around other renters, and renters are sometimes not the best of people, and you can get a lot of rif raf. Homeowners are generally more responsible people. This has just been my experience.

I want to live in a condo, but I can't fathom paying HOA fees. That is truly pissing money away.

I likened it to pissing in the wind. During a snowstorm. And then falling on a patch of ice with your pants down and pissing all over yourself again.

Good luck finding a community built in the last 10 years without an HOA.

 

[alkemyst]

Originally posted by: Ns1

Originally posted by: Saulbadguy
I was in your exact situation 6 years ago. I chose to buy a condo, rather than a house. I didn't want to continue throwing my money away renting, but I did not want to be burdened with repair costs normally associated with a house.

One of the major cons associated with renting (IMO) is normally, you are around other renters, and renters are sometimes not the best of people, and you can get a lot of rif raf. Homeowners are generally more responsible people. This has just been my experience.

I want to live in a condo, but I can't fathom paying HOA fees. That is truly pissing money away.

I likened it to pissing in the wind. During a snowstorm. And then falling on a patch of ice with your pants down and pissing all over yourself again.

Don't know how you figure that, COA fees are generally just pass-throughs. If you pick the condo level to cater to your lifestyle chances are you'd be paying the same each month on insurance/maintenance/grounds.

 

[Svnla]

Hummm, look like the votes are about 60-40 with the favor in rent.

Thanks for everyone's inputs.

 

[Svnla]

Originally posted by: SludgeFactory
I'm not exactly sure where you are, if it's east Texas/north Louisiana, there never really was any housing bubble, from what I've seen anyway. I wouldn't make that a big factor, you'll end up waiting around for a price drop that isn't going to happen.

I think first you need to *really* figure out what city you want to live in for the next few years.

Winnaaarrr!!!.... I am in the area with border in 3 states (Texas, Louisiana, and Arkansas)...It is call Ark-La-Tex. The housing prices around here are stable, not in a bubble at all.

I am still deciding of where I will settle down for good.

 

[Injury]

Originally posted by: Marlin1975
Get a cheaper house, not to hard in this market depending on where you are at, and/or ask for a lower price on what you are looking at now.

If you buy a house get a well checked out roommate and let them pay some bills and stuff them in the small room.

That's my strategy. I want to buy a place before this time next year and I have a friend that is willing to rent a room from me.

The advantage I have on my side is that I don't NEED to buy a house, so I have plenty of time to wait for a good deal or pass up something that I don't really want. In my area there are a lot of ~100 year old houses that have been renovated through the years and many of them are 4+ bedrooms. It's a community of older people and young couples... not many in-betweens. Many of the 2-3 BR homes just sit on the market as the price slowly drops. Being a single guy, I think I'll be able to snag one of the smaller houses and not have to think twice about having enough space... and short of having a shotgun marriage and squeezing some kids out nowhere I think the place will give me a MINIMUM of 10 years, which, by them the housing market should be back on the upswing.



IMHO, the difference between renting and buying is equity. Sure, you have to pay for repairs... costs might be a little higher, but when you DO decide it's time to leave you have put money into something that will RETURN the money. Again, this is just my opinion, but unless you plan to rent for your entire life you should buy when you are first able to. Real estate is something that CAN pay off in the short term, but long term it makes plenty of sense. The value of Real Estate often increases with inflation, unlike other forms of investment that must fight against it. The key word to all of this is "Investment". I am sort of wet behind the ears on this though, so would appreciate if someone could clarify anything I'm misstating and point me in the right direction.

 

[Saulbadguy]

Originally posted by: Ns1

Originally posted by: Saulbadguy
I was in your exact situation 6 years ago. I chose to buy a condo, rather than a house. I didn't want to continue throwing my money away renting, but I did not want to be burdened with repair costs normally associated with a house.

One of the major cons associated with renting (IMO) is normally, you are around other renters, and renters are sometimes not the best of people, and you can get a lot of rif raf. Homeowners are generally more responsible people. This has just been my experience.

I want to live in a condo, but I can't fathom paying HOA fees. That is truly pissing money away.

I likened it to pissing in the wind. During a snowstorm. And then falling on a patch of ice with your pants down and pissing all over yourself again.

You really have to look around and compare HOA fees. They are not pissing money away. I pay $45 a month for all lawn care and snow removal (they do an excellent job of this). It is very much well worth it IMO.

At my old place I paid more, but it included cable, water, trash, homeowners insurance, roof, exterior maintain., lawn care, and snow removal.

 

[Special K]

Originally posted by: Injury

Originally posted by: Marlin1975
Get a cheaper house, not to hard in this market depending on where you are at, and/or ask for a lower price on what you are looking at now.

If you buy a house get a well checked out roommate and let them pay some bills and stuff them in the small room.

That's my strategy. I want to buy a place before this time next year and I have a friend that is willing to rent a room from me.

The advantage I have on my side is that I don't NEED to buy a house, so I have plenty of time to wait for a good deal or pass up something that I don't really want. In my area there are a lot of ~100 year old houses that have been renovated through the years and many of them are 4+ bedrooms. It's a community of older people and young couples... not many in-betweens. Many of the 2-3 BR homes just sit on the market as the price slowly drops. Being a single guy, I think I'll be able to snag one of the smaller houses and not have to think twice about having enough space... and short of having a shotgun marriage and squeezing some kids out nowhere I think the place will give me a MINIMUM of 10 years, which, by them the housing market should be back on the upswing.



IMHO, the difference between renting and buying is equity. Sure, you have to pay for repairs... costs might be a little higher, but when you DO decide it's time to leave you have put money into something that will RETURN the money. Again, this is just my opinion, but unless you plan to rent for your entire life you should buy when you are first able to. Real estate is something that CAN pay off in the short term, but long term it makes plenty of sense. The value of Real Estate often increases with inflation, unlike other forms of investment that must fight against it. The key word to all of this is "Investment". I am sort of wet behind the ears on this though, so would appreciate if someone could clarify anything I'm misstating and point me in the right direction.

Don't houses only return ~1% over inflation in the long term? Once you subtract out all maintenance, insurance, property taxes, etc. I don't see how you could come out ahead financially by owning a house vs. renting and investing the difference into some low-cost mutual funds.

It seems like the decision to buy a house should be based on something other than what will ultimately result in a higher net worth.

 

[Capt Caveman]

Originally posted by: Special K

Originally posted by: Injury

Originally posted by: Marlin1975
Get a cheaper house, not to hard in this market depending on where you are at, and/or ask for a lower price on what you are looking at now.

If you buy a house get a well checked out roommate and let them pay some bills and stuff them in the small room.

That's my strategy. I want to buy a place before this time next year and I have a friend that is willing to rent a room from me.

The advantage I have on my side is that I don't NEED to buy a house, so I have plenty of time to wait for a good deal or pass up something that I don't really want. In my area there are a lot of ~100 year old houses that have been renovated through the years and many of them are 4+ bedrooms. It's a community of older people and young couples... not many in-betweens. Many of the 2-3 BR homes just sit on the market as the price slowly drops. Being a single guy, I think I'll be able to snag one of the smaller houses and not have to think twice about having enough space... and short of having a shotgun marriage and squeezing some kids out nowhere I think the place will give me a MINIMUM of 10 years, which, by them the housing market should be back on the upswing.



IMHO, the difference between renting and buying is equity. Sure, you have to pay for repairs... costs might be a little higher, but when you DO decide it's time to leave you have put money into something that will RETURN the money. Again, this is just my opinion, but unless you plan to rent for your entire life you should buy when you are first able to. Real estate is something that CAN pay off in the short term, but long term it makes plenty of sense. The value of Real Estate often increases with inflation, unlike other forms of investment that must fight against it. The key word to all of this is "Investment". I am sort of wet behind the ears on this though, so would appreciate if someone could clarify anything I'm misstating and point me in the right direction.

Don't houses only return ~1% over inflation in the long term? Once you subtract out all maintenance, insurance, property taxes, etc. I don't see how you could come out ahead financially by owning a house vs. renting and investing the difference into some low-cost mutual funds.

It seems like the decision to buy a house should be based on something other than what will ultimately result in a higher net worth.

You also need to factor in the tax benefits of owning. The OP should be able to put together a spreadsheet to see how the numbers come out.

 

[alkemyst]

Originally posted by: Special K

Don't houses only return ~1% over inflation in the long term? Once you subtract out all maintenance, insurance, property taxes, etc. I don't see how you could come out ahead financially by owning a house vs. renting and investing the difference into some low-cost mutual funds.

It seems like the decision to buy a house should be based on something other than what will ultimately result in a higher net worth.

There is more to the equation than that. Also that is a VERY low return on real estate, probably a worst case number you found.

 

[Gunslinger08]

Originally posted by: Saulbadguy

Originally posted by: Ns1

Originally posted by: Saulbadguy
I was in your exact situation 6 years ago. I chose to buy a condo, rather than a house. I didn't want to continue throwing my money away renting, but I did not want to be burdened with repair costs normally associated with a house.

One of the major cons associated with renting (IMO) is normally, you are around other renters, and renters are sometimes not the best of people, and you can get a lot of rif raf. Homeowners are generally more responsible people. This has just been my experience.

I want to live in a condo, but I can't fathom paying HOA fees. That is truly pissing money away.

I likened it to pissing in the wind. During a snowstorm. And then falling on a patch of ice with your pants down and pissing all over yourself again.

You really have to look around and compare HOA fees. They are not pissing money away. I pay $45 a month for all lawn care and snow removal (they do an excellent job of this). It is very much well worth it IMO.

At my old place I paid more, but it included cable, water, trash, homeowners insurance, roof, exterior maintain., lawn care, and snow removal.

The place I'm looking at is $75 a month, which is ridiculous for what I'm getting. It helps pay for snow removal and trash pickup (which I'll use), but also pays for a community pool, playground, and park (which I won't use).

 

[Special K]

Originally posted by: alkemyst

Originally posted by: Special K

Don't houses only return ~1% over inflation in the long term? Once you subtract out all maintenance, insurance, property taxes, etc. I don't see how you could come out ahead financially by owning a house vs. renting and investing the difference into some low-cost mutual funds.

It seems like the decision to buy a house should be based on something other than what will ultimately result in a higher net worth.

There is more to the equation than that. Also that is a VERY low return on real estate, probably a worst case number you found.

Well what else am I missing here? What is a reasonable rate of return for real estate?

 

[edro]

Originally posted by: Special K

Originally posted by: alkemyst

Originally posted by: Special K

Don't houses only return ~1% over inflation in the long term? Once you subtract out all maintenance, insurance, property taxes, etc. I don't see how you could come out ahead financially by owning a house vs. renting and investing the difference into some low-cost mutual funds.

It seems like the decision to buy a house should be based on something other than what will ultimately result in a higher net worth.

There is more to the equation than that. Also that is a VERY low return on real estate, probably a worst case number you found.

Well what else am I missing here? What is a reasonable rate of return for real estate?

It obviously depends on location.

 

[alkemyst]

Originally posted by: joshsquall

The place I'm looking at is $75 a month, which is ridiculous for what I'm getting. It helps pay for snow removal and trash pickup (which I'll use), but also pays for a community pool, playground, and park (which I won't use).

You are picking a community, therefore part of it in supporting it whether you use it to the full advantage or not.