Renting vs. Buying a home

[arminnie]

One does not always get money out of a house. I lost hundreds of thousands of dollars in real estate in Texas in the 80s. Wish I'd rented back then. I was so burnt out that I swore I would never buy again. The house I lost the most money on was in University Park (Dallas area) a place where almost no one ever loses money.

I rented in California for five years. But then I did finally buy again. But even in the Silicon Valley area it was years before I would have been able to break even if I'd sold. (1990s)

I now again own 3 homes like I did before. But I NEVER count on getting money out of real estate. Sometimes one is lucky not have to bring tens of thousands of dollars to the closing when the selling price is way below the mortgage amount. Just ask all the people who got caught with that in 2008 especially in Florida.

I would have SO much more money in my retirement accounts if I'd never bought in Texas. I had to cash in decades of retirement (and pay huge penalties and taxes) in my 40s to pay shortfalls in selling my Texas real estate.

 

[LilyWDW]

I could have bought when I moved to where I am but I am so glad I didn't. One of the biggest reasons is because my health has declined and there is no way I could keep up with the maintenance of a home. There are weekends I can barely do the basics like laundry and dishes. There is no way on those weekends I would also be able to mow the yard or replace a gutter or a number of other tasks. Being able to just call someone for help is awesome and the complex I live in has been great.

 

[Mackenzie Click-Mickelson]

One does not always get money out of a house. I lost hundreds of thousands of dollars in real estate in Texas in the 80s. Wish I'd rented back then. I was so burnt out that I swore I would never buy again. The house I lost the most money on was in University Park (Dallas area) a place where almost no one ever loses money.

I rented in California for five years. But then I did finally buy again. But even in the Silicon Valley area it was years before I would have been able to break even if I'd sold. (1990s)

I now again own 3 homes like I did before. But I NEVER count on getting money out of real estate. Sometimes one is lucky not have to bring tens of thousands of dollars to the closing when the selling price is way below the mortgage amount. Just ask all the people who got caught with that in 2008 especially in Florida.

I would have SO much more money in my retirement accounts if I'd never bought in Texas. I had to cash in decades of retirement (and pay huge penalties and taxes) in my 40s to pay shortfalls in selling my Texas real estate.

I don't think people are under the illusion that it's guaranteed to get more money out of your home than you owe in fact I believe we've all said the opposite.

 

[mnrose]

In estate sales, value of the property is set at the value at the time of the death of the owner. That was my cost basis, determined by the appraisals I got immediately after my mother's death, which became the listing price. The offer I accepted was only 4% below listing/appraised price. Not my idea, my CPA pointed out in settling the estate that it was a normal, legal deduction. Just like if someone sells a house for less than they paid, that loss is fully deductible....unless it is a short sale, because then the lender is basically making the amount they forgive a gift to you.

Maybe there has been a change, but this is not correct. The loss on the sale of a personal residence is NOT deductible. The exception is homes held for investment purposes.

 

[tvguy]

Maybe there has been a change, but this is not correct. The loss on the sale of a personal residence is NOT deductible. The exception is homes held for investment purposes.

This was 2013. House was in a trust. I did not live there. Well, I hadn't lived there since I moved out 31 years earlier.
It's on my tax return as "Long Term Capitol Loss". I did have a couple of IRS inquiries about other issues related to my mom's estate, so someone at the IRS looked at my return, and had no issue with this write off, which really had little impact on my taxes.

 

[mnrose]

This was 2013. House was in a trust. I did not live there. Well, I hadn't lived there since I moved out 31 years earlier.
It's on my tax return as "Long Term Capitol Loss". I did have a couple of IRS inquiries about other issues related to my mom's estate, so someone at the IRS looked at my return, and had no issue with this write off, which really had little impact on my taxes.

I think you may have gotten lucky. It's not a long term capital loss. You didn't buy the property. You didn't hold the property. I have no clue how you got away with that. You CAN declare a long term capital loss if you are a real estate investor, and hold the house long enough. The IRS is quite clear that simple losses on real estate are not deductible losses. Glad it worked for you, but didn't want others to think this was a handy deduction.


https://www.irs.gov/publications/p523#en_US_2017_publink100011671

 

[tvguy]

I think you may have gotten lucky. It's not a long term capital loss. You didn't buy the property. You didn't hold the property. I have no clue how you got away with that. You CAN declare a long term capital loss if you are a real estate investor, and hold the house long enough. The IRS is quite clear that simple losses on real estate are not deductible losses. Glad it worked for you, but didn't want others to think this was a handy deduction.


https://www.irs.gov/publications/p523#en_US_2017_publink100011671

I'll keep all the paper work for 7 years just in case. The loss, spread over 5 years, has an amazingly small impact on my taxes due. Tax advice and tax law are very interesting. I know people......who at least claim, since I haven't seen their tax returns........to take some pretty outrageous deductions. Like people in my industry writing off $130 a month for cable or satellite to watch the station they work at, when it not only isn't a job requirement, but when a $9 rabbit ear antenna will allow you to received the station.

 

[holden]

We bought out house in 1998 for $260,000. We've done many improvements over the years. It's now worth in the $600,000 range. We paid off our mortgage about 7 years ago, so we own our house outright. I'm happy that we own and do not rent.

 

[Fldisneyfamily4321]

We have built and owned 3 homes since the age of 21 , the last home ( 4 br / 2 bath on 1 1/2 acres) cost us 160,000 in 2005 .. sold in 2017 for 210,000 . When we built the one we are in now in a gated neighborhood we had 60,000 to put down so we pay 75.00 more now then what we paid in a smaller and older home . We also built a green home that is gov certified as a green home and saves tons on utilities.
I live in a college town and the rents here are almost triple what you can pay in a mortgage so for us it was a no brainer .. my dh will retire in 6 yrs at 47 yrs old ( first responder high risk retirement) and our home we built in 2017 should be paid for by then .

 

[bethwc101]

When we first moved to AZ we were paying $1050 / month for renting a tiny 700 sq ft apartment. We said, screw this. Bought a house a little further from the center of town (now we have 30-40 min commute) and our mortgage including insurance is $1100 / month with 1300 sq ft and a nice backyard. Totally worth it. But we agreed when we bought this house, we would be there for at least 5 years.

 

[china mom]

Between renting and buying, there is no "right" answer, only an answer that is right for each person in their own circumstance.

A big factor in determining if homeownership is right for you is how long you expect to be in the home. It tasks several years to recoup your end of closing cots when you but and you will have more costs when you sell. I have hear that it takes about five years to get to the break even point in a stable but increasing market.

Another factor is, of course, can you afford the other costs that go along with homeownership such as yard maintenance and house repairs.

On the other side, there are plenty of reasons to purchase such as appreciation and security. If you have a fixed mortgage, You know roughly what your mortgage payment will be forever (adjusted slightly for changes in property taxes and insurance changes)

And, if you will be in the home long hauls, you can reasonably expect an annual 3.7% gain ( long term).

I was renting a room in a house (ala college style) and when it came time to move out, buying my first home was the only option I considered.

At age 20, I bought my town house for $95,000
Sold it 10 years later for $105. I had a a $6,000 profit (after all closing expenses). I did NOT see a good return on my investment BUT I would have spent the same amount on rent as I did on mortgage so I was ahead.

My husband, on the other hand, had bought at the height of the market and sold at the low so we used my $6,000 gain to pay to sell his house.

We bought our next house (together) for $150,000 and sold it eleven years later for $400,000 so we were the big winners on that one.

We rolled our profits into our $430,00 house but when we went to sell that one about 10 years later, it sat on the market for $265,000.

It is now our rental and rents for $2400, month (our mortgage is around $1600/mo)

Even after the big loss on the rental, we have at least $180,000 in equity in the house, probably more since home prices have gone up in our area since I last tried to sell it. And, we are generating income.