Renting vs. Buying a home

[dosekies]

You do, however, when we bought the house 20 years ago, property taxes were under $5000, they are now over $12,000 and increase every year.

Yep! We are just outside of Chicago so I know some of the suburbs around here can be pretty high, too.

 

[North of Mouse]

The disadvantages to me are maintenance costs, and lack of mobility. Yes, you are paying for maintenance in your monthly rent but you don't have a $10,000 bill when you need a room, $2000 when you need to replace your garage doors and openers, or $1,000 because your tree fell in a storm. Your rent is still your rent and if your lease is up and the rent is raised you can leave.

If you are looking at a job out of state you also have to deal with selling your house which isn't a concern if you rent. You may have to break your lease and pay a fee but you don't have to worry about pulling the equity out of your house for the move.

I own my home so these are not enough of a deterrent but they are disadvantages.

ETA: I forgot about depreciation as a subsequent poster mentioned. If an area you live in goes to crap for one reason or another you can move without penalty if you rent once your lease is up. If you own you are eating the losses.

Not sure what you mean by 'needing a room $10K'?? But, for the other things you mentioned, we did our homework - built in a watershed, 2-5 acre plots, not much that could bring the prices down - even in this last 'downturn', prices remained mostly steady in this area. No desire, or plans to leave area. In fact, nothing we've ever experienced would make us think renting would have been better. Definitely hasn't been any depreciation, things have just gone up. We would not have purchased in an 'iffy' area, or in a neighborhood with older homes showing signs of going downhill.

But, it's to each their own, so I respect the decisions of others.

One of the biggest ones can be a downturn in the market leaving you owing more than your home is worth or your house now being worth less than you paid for it. This could come from a housing bubble, economic downturn in the area (think Detroit), a major construction project right next to where you live, such as a highway going through your housing development, etc. Also, deterioration of the neighborhood. I know of one neighborhood in a former place I lived that was the "best neighborhood" to live in when I was growing up. The way the area has grown, however, has now made it one of the less desirable neighborhoods and it's hard to sell home there. During this time you've paid interest, taxes, insurance and maintenance.

Another can be high property taxes/insurance - sometimes higher than the cost of rent (such as where we live).

None of these issues have come close to applying to us - we definitely did our homework.
Again, to each their own!!

 

[dosekies]

Are you close on paying off your car? I know when we were getting pre-approved and getting the mortgage loan if the car loan was going to be paid off in 6 months or less time frame they didn't include it on the debt to income ratio. Unfortunately at that time my husband had more than 6 months so it counted against us.

Unfortunately not. Luckily my car is pretty new and paid off, but his was just bought this past summer.

 

[mnrose]

We've owned homes since our mid-20's. It was different then because the housing market was booming, and we knew (in California) that we would almost certainly double the value in a few years (we did). In today's market, the math isn't quite the same. Plus, homeownership comes with significant expenses that renters do not have. We are landlords, and one of our rentals is undergoing some repairs that will cost us $12000-$15000. Gulp. Some people don't feel comfortable with those kind of expenses. It costs our tenant nothing. And, with homeownership, it's ALWAYS something. Maybe the dryer dies. Maybe the furnace goes. Maybe you need a new roof or siding. Maybe a window breaks. This is a big reason that people rent, besides the fact that it is more flexible.

 

[LSUmiss]

What are the disadvantages to owning your own home? We've been home owners for 50 years - different states - and have never seen any disadvantages.

When you rent, what you pay has a 'built in' maintenance amount in your monthly bill. No,it isn't stated like that, but it is. When the home needs appliances, new roof, etc. a smart landlord has $$'s put away (from your rent) that he uses for repairs, taxes etc. Trust me, they all know exactly what rents should be - with maintenance, taxes figured in. So, renters are not getting by without paying for these things, just don't have the 'bother' of them, but neither are you building any equity.

As for HOA, lived in one ONCE and done!!! Never again, with nit picking every spring on every tiny thing - and I mean tiny. We have certain covenants that prohibit unsightly things, but that's enough for us. We don't have to 'ask' if we can paint, change our landscapings, etc. They're protective, only.

If the house doesn’t appreciate in value. We bought our first house 10 mos after Katrina in an area of Louisiana where many ppl had evacuated to from NOLA. They prices were inflated b/c ppl with insurance & other $ were buying houses with cash & there was a shortage of housing in the area. We thought we planned to stay there longer. But, my husband got transferred back to NOLA about 5 years later. At that point, a lot of ppl were selling. We ended up having to sell the house for what we paid for it 5 years earlier. So, basically after 5 years we lost all we had paid into. Would have been no different for us to pay that as rent.

 

[LSUmiss]

Not sure what you mean by 'needing a room $10K'?? But, for the other things you mentioned, we did our homework - built in a watershed, 2-5 acre plots, not much that could bring the prices down - even in this last 'downturn', prices remained mostly steady in this area. No desire, or plans to leave area. In fact, nothing we've ever experienced would make us think renting would have been better. Definitely hasn't been any depreciation, things have just gone up. We would not have purchased in an 'iffy' area, or in a neighborhood with older homes showing signs of going downhill.

But, it's to each their own, so I respect the decisions of others.



None of these issues have come close to applying to us - we definitely did our homework.
Again, to each their own!!

Ours was not an iffy area at all. It was unique situation b/c of Katrina & no one thought the boom in the area would be temporary b/c no one knew so many (including us) would go back to NOLA so soon or at all.

 

[JAMIESMITH]

We bought when we found a steal on a foreclosure. I couldn’t resist!

 

[North of Mouse]

@LSUmiss, I'm sorry that happened to you. My home is Hammond, and we know all about what happened in Katrina. That was truly a very unusual situation. Nothing could have prepared south LA, as well as neighboring states for what happened in that aftermath. But, it was unique, and no where near what happens to the average homeowner - there are exceptions. My db & wife had their home on the market at that time, sold it to someone fleeing NOLA, but did not raise their asking price even though they could have.

 

[LSUmiss]

@LSUmiss, I'm sorry that happened to you. My home is Hammond, and we know all about what happened in Katrina. That was truly a very unusual situation. Nothing could have prepared south LA, as well as neighboring states for what happened in that aftermath. But, it was unique, and no where near what happens to the average homeowner - there are exceptions. My db & wife had their home on the market at that time, sold it to someone fleeing NOLA, but did not raise their asking price even though they could have.

Yeah we had bought in Denham Springs & then when we had to sell we only got what we paid for it .

 

[georgina]

So presumably most families will never pay capital gains. I guess people who inherit a house would however.

Not sure that is true. Depends on how the estate is handled. We haven't inherited a house, but have inherited stocks. Our basis in the stock was the value of the stock at the time of death, not what the person who originally bought it paid for it. So, no capital gains owed if we sold it immediately. In our experience, taxes have been paid by the estate, not those who inherit.

 

[barkley]

I have heard that renting is not a bad deal for senior citizens as they don't have to worry about any maintenance issues.

that's always a consideration but if someone has managed to pay their home off, depending of course on their income later in life they can do as we've done since paying ours off. while we no longer have a mortgage payment we do still of course have property taxes and homeowner's insurance which works out to 3 individual payments per year so upon payoff we calculated a new 'mortgage' for our yearly budget that includes property taxes, homeowner's insurance, a couple of yearly maintenance services/plans we contract out for AND an additional chunk for maintenance/repairs-and pay it to ourselves (specific bank account) on a monthly basis. it's less than half of our former mortgage payment and far less than half of what we could get even a small rental for where we live. if something doesn't come up for months on end the money is building up in the event of a major repair or if we were to choose to do any upgrade/remodeling.

i'm seeing 2 things impact the housing choices of my current and soon to be retiree friends causing them to consider opting for rentals-

downsizing-there's a shortage in many areas of smaller homes b/c of the building styles of the last 20 years. many are not finding houses that would suit their downsized wants and needs b/c so many of the existing homes are of the mcmansion or at the very least 3000 sq ft+ style (and that's what they want to downsize from).

aging parents-so many of us boomers have had to help our parents go from homes into senior or assisted living that we've come to realize there are NICE options out there vs. what we remember as kids (when it was really only nasty nursing homes). I know several couples who want to travel and they see a senior apartment or condo set up as a way they can escape dealing w/repairs and maintenance, travel without concern for their home being monitored AND have prepared meals as inclusive in their rent (add in ones w/weekly wine nights and as one friend sez-'it's land cruising').

 

[North of Mouse]

Yeah we had bought in Denham Springs & then when we had to sell we only got what we paid for it .

Oh, my! Denham Springs had that horrible flood which was devastating. It's amazing you were able to get out with what you paid. I know plenty that lost everything with little/no flood insurance. Hope you are not in a flood area again in NOLA - it's like a bowl, we always looked at it like a disaster waiting to happen.

Hope things look up for you in the house buying department in the future!

 

[LSUmiss]

Oh, my! Denham Springs had that horrible flood which was devastating. It's amazing you were able to get out with what you paid. I know plenty that lost everything with little/no flood insurance. Hope you are not in a flood area again in NOLA - it's like a bowl, we always looked at it like a disaster waiting to happen.

Hope things look up for you in the house buying department in the future!

I forgot about that. Yeah we were out of DS by 2011 so we missed that flood. Guess we were lucky we had sold that house even for a loss. We are back in NOLA, but our area has never flooded even for Katrina even though nothing is guaranteed. But, I’m not willing to move out of LA &, with all the recent stuff that’s happened on the north shore & BR area, I think it’s just as good as anywhere else. We have flood insurance just in case & always evacuate for storms to stay safe.

 

[GreatLakes]

Not sure what you mean by 'needing a room $10K'??

That was a typo, meant roof.

 

[North of Mouse]

That was a typo, meant roof.

OK, understand now - but we have owned our home for 16yrs. now and no need for new roof anytime soon - maybe in 5-10 years. But, by that time, averaged out, approx. $500 yr. is not bad at all (this would be our largest expenditure). A new home appliance, here or there, which we haven't needed yet, would, in the scheme of things, be small indeed.

 

[ronandannette]

...aging parents-so many of us boomers have had to help our parents go from homes into senior or assisted living that we've come to realize there are NICE options out there vs. what we remember as kids (when it was really only nasty nursing homes). I know several couples who want to travel and they see a senior apartment or condo set up as a way they can escape dealing w/repairs and maintenance, travel without concern for their home being monitored AND have prepared meals as inclusive in their rent (add in ones w/weekly wine nights and as one friend sez-'it's land cruising').

This is precisely our plan (minus the extensive travel maybe). The minute our mortgage is paid off we will sell our home and live off the proceeds in a place like you describe - God willing. It will be about 17 years from now and DH will be pushing 80; I'll be in my late 60's and I think it will work perfectly. Of course the world spins so fast, 17 years from now we may all just be heads floating in jars hooked up to a mainframe somewhere...

 

[wgeo]

Not an easy decision in my opinion.

We bought our first house 6 months before the bubble burst, had to move due to a job relocation 7 years later and we very much lost money on the house. It was pretty hard pill to swallow. So owning a home isn't always an investment where you can pull equity out of it.

However we did purchase again in our new location, after looking at all the pros/cons for our situation and the crazy high rent in our area we decided we wanted to own again. I don't see my home as an investment, if I was purely investing money I would do it in a different way. I see a home as "security" for retirement, as in I will have somewhere to live and have very low housing costs at that point in my life.

 

[tvguy]

We are landlords, and one of our rentals is undergoing some repairs that will cost us $12000-$15000. Gulp. Some people don't feel comfortable with those kind of expenses. It costs our tenant nothing. And, with homeownership, it's ALWAYS something. Maybe the dryer dies. Maybe the furnace goes. Maybe you need a new roof or siding. Maybe a window breaks. This is a big reason that people rent, besides the fact that it is more flexible.

I respectfully disagree. Of course your tenants will pay for that, you're just fronting the money,. An improved rental brings higher rents, you are just allowing the tenants to pay you back ove rtime.. You'd be bankrupt any other way.

 

[mnrose]

I respectfully disagree. Of course your tenants will pay for that, you're just fronting the money,. An improved rental brings higher rents, you are just allowing the tenants to pay you back ove rtime.. You'd be bankrupt any other way.

Uh no. The tenants are not paying for it. It's not "improving" it one bit, but fixing a problem. The shower needs to be torn out and rebuilt. And, I suppose in one sense, a shower that no longer leaks is an "improvement' over one that does, it adds nothing to the value of the property. Therefore, I cannot charge the tenant one penny more in rent. Moreover, because of the inconvenience of the repair and the time it takes, they get a rent concession. Are you a landlord? There are a ton of expenses that come up that *I* pay, and all it does it reduce my income for the year. I make less. In this case, a LOT less. If the repair never happened, I make MORE money. So, yes, it costs me. The tenant is neutral or even better off. Any other way of looking at it is silly.

 

[smiths02]

Not an easy decision in my opinion.

We bought our first house 6 months before the bubble burst, had to move due to a job relocation 7 years later and we very much lost money on the house. It was pretty hard pill to swallow. So owning a home isn't always an investment where you can pull equity out of it.

However we did purchase again in our new location, after looking at all the pros/cons for our situation and the crazy high rent in our area we decided we wanted to own again. I don't see my home as an investment, if I was purely investing money I would do it in a different way. I see a home as "security" for retirement, as in I will have somewhere to live and have very low housing costs at that point in my life.

That is not exactly, but similar to what happened to us in terms of the house losing value. Houses do not always gain equity. If we had found a place to rent that costs what our mortgage cost and invested the "extra" money we put in the house (new roof, painting, digging up a pipe in the yard, re-paving the driveway, etc.) in our retirement account, we would have so much more.