Finally someone speaks for renters

[Scullery]

http://realestate.yahoo.com/promo/5-...5nLWJ1eWluZw--

[choli]

Great article! I roll my eyes every time I see someone posting about wanting to buy a house and stop "throwing money away on rent". Sometimes it makes sense to buy, but just as often it makes more sense to rent.

People need to wake up and stop parroting the lines they've been fed for the past 10 years by the real estate industry. Buying a house is not a foolproof way to make money or "build equity". That equity is purely theoretical until you sell the house and there are no guarantees that it will exist.

Yes, I do own a home. However, that is what it is - a home, not a sure fire investment to fund my retirement.

[Village Mama]

We are harassed all of the time to get into the market and told that we are foolish for not doing so. I am so glad that we did not buy 5 years ago when we had the chance to. Our rent is now 1/2 of what rents are going for in our area. Half of what a mortgage would run for this same hous if we bought it now as well. The house we are in is 120 years old, has no foundation and we could easily pour 100 grand into it to bring it up to code and make it decent. The amount of basic work that has gone into this house to meet basic renter needs ( legal requirements that are minimal) would have been huge stressors for us.
We are happy renters! There are days that I would love to have my own space to work on , but most of the time I am thankful to be where I am

[cristeen]

The main argument I have with that article is his assumption that "rent is cheap". I happen to live in an area where even with the current economic problems, rent is far from cheap. The mortgage payment for our 4 bedroom house is less than we would pay in rent for a 2 bedroom apt. And rent has been steadily increasing over the last 5 years (although I believe it's holding steady at the moment). If we hadn't bought this house, there's no way we would be able to afford to live here at this point, it's just too expensive.

So while yes, he has some valid points, the assumption that renting is always going to be cheaper is a tad on the ridiculous side.

[kmeyrick]

Originally Posted by cristeen

The main argument I have with that article is his assumption that "rent is cheap". I happen to live in an area where even with the current economic problems, rent is far from cheap. The mortgage payment for our 4 bedroom house is less than we would pay in rent for a 2 bedroom apt. And rent has been steadily increasing over the last 5 years (although I believe it's holding steady at the moment). If we hadn't bought this house, there's no way we would be able to afford to live here at this point, it's just too expensive.

So while yes, he has some valid points, the assumption that renting is always going to be cheaper is a tad on the ridiculous side.

Yeah, and my mortgage (granted, I got an amazing deal) is still way cheaper than the rent.

Rent vs. ownership is a very case by case basis with me.

[Collinsky]

Renting makes so much more sense for us right now, and I feel more secure in these uncertain times because of it. Which is the opposite of what renting is supposed to feel like, I guess. Buying a home = stability and security, we're told. But not in our situation. Things may change over time; when they do, I'll be happy to buy. Right now, I'm delighted to be a renter.

[Sk8ermaiden]

Originally Posted by cristeen

The main argument I have with that article is his assumption that "rent is cheap". I happen to live in an area where even with the current economic problems, rent is far from cheap. The mortgage payment for our 4 bedroom house is less than we would pay in rent for a 2 bedroom apt.

Yes. Our nice big house in a nice neighborhood is $100 less per month for mortgage+interest+insurance+taxes than our rent for a 2 bedroom apartment in a borderline neighborhood was. And our mortgage payment does not go up without fail every year like our rent did.

I totally agree it is smarter for some people to rent. I did think a lot of his reasons were a total reach though.

[Tradd]

I have to say that I'm biting my tongue to keep from saying "I told you so" to a lot of folks right now. There are folks who kept at me to buy, but I knew I'd be house poor, so I said no. Plus I like to move around every few years in my area, depending on work, etc. These folks are screwed beyond belief - for some, it's not their fault (such as job loss). Others, though, took ARMs or now owe much more than their house is worth - and they can't sell. No one's buying.

[RoundAbout]

I totally agree with the article and I encourage people to look at the one he wrote years ago - it was much more detailed with the analysis.

We are renters mostly because we are a military family that moves every 2-3 years. I'm sure we've lived some places where a mortage payment is cheaper than rent, but its not worth the loss of flexibility for us. We have no desire to try to sell a place on short notice or become long distance landlords if we get orders to move. I think more people should look not just at the payment, but at how secure their jobs are and the volatility of a region.

I've found that buyers often:

a) Buy a bigger/nicer place than they would rent. If you're going to buy a "permanent" home most people buy space considering future use. A couple buying today and not planning on children for 3 years pays for those extra bedrooms the whole time, whether they need it or not - and for the associated heating/electricity. We have been able to move from 1 bedroom to 2 bedroom to 3 bedroom places as our family and need expands. Especially before having kids the extra money generated from renting a small cheap apartment can be invested for retirement and work hard in the stock market for a really long time.

b) Many only look at the value of their home and discount both the cost of the borrowing and the maintenance. My mother-in-law brags that her home is now worth 4 times what she paid. However that was 20 years ago and she's paid a ton in interest, repair, and remodel which she conveniently forgets to subtract from her return on investment.

Our plan: we are saving diligently and when my husband retires from the military we will pay cash for a small house in a place with a low cost of living. Well, either that or we'll just live on a sailboat

[RoundAbout]

Just wanted to also say that the mortgage interest deduction seems grossly unfair to me. Choosing to buy a house is a lifestyle choice and I don't see why its rewarded by the goverment over any other choice. I believe it is also responsible for some of this mess and for the lack of decent affordable rentals in some area (ie. any one who *can* buy does to get the tax-break and only people with really marginal finances rent, which means no one builds or invests in rental properties).

[claddaghmom]

I can't wait to buy a house.

But I think the whole line of a house being an investment is BS.

It's a purchase. You go into debt to own it.

It's a liability. A good. Investment smestment.


I bought a used car for $2800 and I'm selling it for $3200 does that make it an investment?

[Amys1st]

I agree and disagree w the article.

One- where I live rent is not cheap. When we bought our first home in 1997, our mortrgage monthly was about $700. Add taxes etc, it ended up being $1000 or so a month. This was a nice size lot, 3 bed 2 ba home in a good neighborhood for a starter home. A 1 bedroom apt would have been at the time $900-1200 a month. In the city in a desireable location $1300-1500 at the time. And over the years that price just kept climbing.

We remodeled it to our liking but it didnt need to be done. We sold the home 11 years later and we added up (DH saves receipts in project folders) all we bought, taxes paid, interest paid and deducted and subtracted that from the profit we earned outright meaning not paying off the mortgage. So we took the selling price, subtracted the mortgage payoff, subtracted taxes paid etc, what we paid to remodel etc. Then we took that amount and divided it by how many months we lived there. The amount per month basically said we lived rent free for each and every month plus $200 more each month. So basically we earned $200 a month to live in our home for 11 years and it was a nice down payment to put on the next house for a small mortgage. The down payment was more than what we paid for the house when we first bought it. We sold as the market was falling too.

But not everyone has the knowledge, experience to do what we did. We also like doing things like that so it made sense for us.

Also to agree, home ownership is not for everyone. I think whomever sold our culture that everyone can or should own is wrong. There are times when the home owns you. Such as when the roof leaks and that is your weekend fixing it or working to pay for someone to fix it.

My BIL is renting right now since he recently relocated to another part of the country, is single again, and works 80 plus hours weekly. He dosent want to think of home remodel etc plus he wants to get to know his new city first before buying.

I feel that if you want to put down roots, then yes buy away. But if its something that wont be right in a few years, you could loose money or something worse.

[freespirited]

For those of us who bought a house we could afford and put a good down payment down, our mortages are a lot cheaper than rents. I've rented many houses in the past and nothing compares to having your own, but only if you can afford it. I wouldn't pay more for a house than it would rent for. A lot of people did. Dh and I have enjoyed (and not enjoyed) working on our house and transforming it. This year we are finally buying a nice patio arbor and patio set to enjoy our backyard. We wouldn't have done that at a rental house. We also fenced the entire backyard for privacy. I am a very private person. I suppose there are some private rental houses but many are not, as landlords tend not to invest much in their rentals and things like cedar fences are not feasible.

Our interest is tax-deductible which comes in handy next year as this year my husband is set to make more money. I also deducted home office expenses and improvements done last year. I don't expect to profit from my house for some time and I'm not buying into the building-equity thing. It used to be that you had to own your house for 5-7 years to break even. I think we are getting back to that rather than anything approaching the craziness of the earlier 2000s. We bought a house to sell in 3 years and now we have decided to stay here and grow some roots, plant some trees, a veggies garden, sunflowers, and make preps for a long summer spent in our backyard. I have nothing against renters, but I love that houses are getting sold in my neighborhood to people actually living in them and having pride of ownership which often means homes look a lot better and the neighborhood improves. When speculators sitting in offices in California bought all the houses around here sight unseen, the neighborhood deteriorated, so I do hope more people buy houses and I hope they keep the rates low. Then it can be about people having homes they own instead of about using homes as a way to make a quick, undeserved buck at the expense of those trying to afford homes.

[llamalluv]

Originally Posted by cristeen

The main argument I have with that article is his assumption that "rent is cheap". I happen to live in an area where even with the current economic problems, rent is far from cheap. The mortgage payment for our 4 bedroom house is less than we would pay in rent for a 2 bedroom apt. And rent has been steadily increasing over the last 5 years (although I believe it's holding steady at the moment). If we hadn't bought this house, there's no way we would be able to afford to live here at this point, it's just too expensive.

So while yes, he has some valid points, the assumption that renting is always going to be cheaper is a tad on the ridiculous side.

Yeah. The author is paying $1100 a month in rent. In all but about 2 or 3 US cities, that's not "cheap". My husband and I pay about that, and we acknowledge we could rent for much much less, and build up our savings faster, but we choose to have a nicer place to live, with a garage, while we save up our down payment and pay off our debt.

Honestly, in Phoenix, $1100 a month can get you a luxury 2 bedroom apartment. See here Less than $1000 a month, and you get a freaking gym and heated pool. (Heated pool is nice in the winter in Phoenix) I don't know what we could get for less than what we are paying now, because we are very happy with our landlords.

If we were the type to move every few years, we would rent cheap and save and invest, but we are looking to buy and put down roots and stay put. Possibly until we die or go into a nursing home.

[lolar2]

It's city-by-city whether rent is cheaper than a mortgage+maintenance. I figured where he lived it must be or he wouldn't have said it. In our city rent is slightly cheaper than mortgage+maintenance.

[Sk8ermaiden]

Originally Posted by RoundAbout

I've found that buyers often:

a) Buy a bigger/nicer place than they would rent. If you're going to buy a "permanent" home most people buy space considering future use. A couple buying today and not planning on children for 3 years pays for those extra bedrooms the whole time, whether they need it or not - and for the associated heating/electricity. We have been able to move from 1 bedroom to 2 bedroom to 3 bedroom places as our family and need expands. Especially before having kids the extra money generated from renting a small cheap apartment can be invested for retirement and work hard in the stock market for a really long time.

I find it interesting that you find this to be a bad thing. My DH and I rented a tiny two bedroom. When we bought a house the idea was to buy one we could "grow into" and stay in for a looong time. It was still less $$ than the apartment. We have 1,000 sq.ft upstairs that is basically storage - we don't go up there except to work out.

Now, with the market tanked and having our first, we are viewing this decision as the best we have made financially...ever? Had we bought just what we needed at that very moment, we would be stuck in a house that will be rapidly getting too small in a down market and have to take a loss to sell it and move up. We can stay here comfortably until the market recovers, or you know, forever - without the increases in rent that come from moving into a bigger apartment or you know, just because it's a new year.

As for the heating/electricity, you can always close the vents in rooms you don't use and you also don't use electricity in spaces you don't use. Our A/C only went up $15 or so when we moved into a place over twice the size. And this is Houston - our A/C runs 24/7/300

Just another take on it.

[RoundAbout]

Originally Posted by Sk8ermaiden

I find it interesting that you find this to be a bad thing. My DH and I rented a tiny two bedroom. When we bought a house the idea was to buy one we could "grow into" and stay in for a looong time. It was still less $$ than the apartment. We have 1,000 sq.ft upstairs that is basically storage - we don't go up there except to work out.

I don't consider it a bad thing and you are definitely getting more for your money. If it's cheaper for you to buy a 3-4 bedroom house than rent a 1 bedroom apt then thats great. I just think people should compare what they would actually rent and actually buy which is hard because they don't make a lot of 1 or 2 bedroom houses so its hard to make that comparison.

I'm actually surprised if there are a lot of places where buying is cheaper - I guess I have lived mostly in urban areas. When we started out married life in San Diego this was not the case - our one bedroom was significantly cheaper than the monthly payment for buying a house. Where I live now in Hawaii -there is probably at least a $1000/month difference between renting a 2 bedroom apartment and buying a 3 bedroom house. The speculation and future value of real estate is so built in to the home prices here that people are willing to hold their property and just break even or lose on the rent.


As for heating and cooling - I don't need either here but my mother-in-law has insane heating bills for her 3 story PA home (like enough to pay for a nice apartment in a low cost of living area).

ETA - I don't think anyone should buy just what they need now, but they definitely should rent just what they need now. That's where the savings comes from IMHO.

[the_lissa]

I am in an urban area, and rent is definitely more than mortgages here because people who rent out houses have to charge enough rent to at least cover the mortgage. We rented a two bedroom house for about 200 more a month than what we pay for mortgage and taxes.

[Sk8ermaiden]

Yeah, Houston is pretty urban too, I think. : I think what comes into play more is availibility of space? Like Hawaii, there just is not that much room to build, I think the same with a lot of smaller states, land is at a premium and a home is much more of a luxury. But in Texas land is so cheap and there is just SO much of it.

But I see what you're saying. If a mortgage was more expensive than renting, it would probably have been a better decision to wait until we HAD a baby to buy a house. Why pay extra money out every month when we didn't need to?

[~PurityLake~]

Here is my perspective, as a non home owner. I live in a mobile home that I bought and we rent the lot.
~Eta: lot rent has regularly increased every single year and I've lived here since July 1, 2005. The lot rent increases, but the landlord changes nothing for the better. So I pay more for the exact same thing, year after year.~

I think some people were at a point in their lives when they were able to buy a house and so they did. At that time, perhaps mortgage was more than monthly rent. But now, rent is higher than mortgage and it would be unwise to sell the house they have owned to pay rent.

Then there are those people who have never owned a house and comparing current rent (which is higher perhaps now than a few years ago) to potentially high mortgage payments if they were to buy now, it wouldn't be feasible to buy now.

I think there are just so very many factors involved including location, length of home ownership/vs buying now, having kids vs not having kids, previous home ownership and not owning now, etc.