Posted on 11/12/2015 11:23:52 PM PST by Up Yours Marxists
OWNING your own house is as much the Australian dream as the American dream, and it's one that feels increasingly out of reach for many.
But when one user on Quora pondered whether it was ultimately better to rent or own your own home, blogger and investor James Altucher penned this highly controversial response:
I am sick of me writing about this. Do you ever get sick of yourself? I am sick of me.
But every day I see more propaganda about the American Dream of owning the home.
I see codewords a $15 trillion dollar industry uses to hypnotise its religious adherents to BELIEVE.
Lay down your money, your hard work, your lives and loves and debt, and BELIEVE!
But I will qualify: if someone wants to own a home, own one. There should never be a judgment. I'm the last to judge. I've owned two homes. And lost two homes.
If were to write an autobiography called: "My life - 10 miserable moments" owning a home would be two of them.
(Excerpt) Read more at news.com.au ...
“you’re probably making money on the loan.”
Maybe so.
You’re also obligated to make that payment _every_month_ (in some states, one day late and the bank can repossess), and are otherwise beholden to the mortgage lender on assorted issues (remember that was a THICK pile of paperwork signed to get the mortgage).
Basically: if you’re going to play the “make money off the loan” game, make sure you’ve got the price of the house already in savings.
Be careful. Read the part in my comments about my elderly mom. I told her to stay in an owned home rather than downsize to a rented apartment as my dumb sisters advised her, by telling her that rents continually rise, often beyond the capability to pay the rent. Another example: one of my daughters and her family rented an apartment in San Francisco for about 4 years until a couple years ago when her 2nd child was coming. They needed a larger apartment. They moved down the peninsula to a cheaper town. They rented the SF apt for $1600. When they moved out, the landlord boosted the rent to the new tenants to $3500. That's more than 200 percent increase within 4 years. Although they rent here, they do own a home in the midwest that they're currently renovating. Her husband is handy and doing all the work by often traveling there to renovate. When it's done, they'll move there. They got a good deal by buying in a redevelopment district and don't have to pay property taxes for 10 years. That home is now worth 5 times what they paid 5 years ago.
I'm also handy with a hammer, and do all my maintenance and remodeling. If one can't maintain a property, they're better off owning a condo or renting. We owned our 1st home ten years, and I did a lot of improvements and we got profit in the 6 figures selling it. We kept it for a couple years after buying our 2nd home, and got rental income on it, selling within 2 years to use a rollover exemption and not pay taxes on the profits. Over a couple decades I've done a lot of improvements to our existing home while our kids grew up, and now we enjoy babysitting our grandkids in it. That would not be the case if we rented. I taught another daughter carpentry, and she used those skills to buy and sell a home for profit after remodeling it. Owning land and property is still beneficial, because demand is outpacing supply.
I still recommend that young people get their foot in the door of ownership somehow, but do it in a way where they won't go bankrupt. Like in the case of my eldest buying in a redevelopment district in a large midwest city. A whole neighborhood went upscale with new owners improving the area.
For elders, it's best if relatives can step in and help manage affairs. Seen plenty cases where elderly get dementia and need help. Don't think you can just hang around for 20 years and rent, when you may need assisted living care. Either hold a house as a piggy bank for the equity value, or put the sales profit in an investment that can go towards paying assisted living care.
What you do and what you taught your children in the best solution, to be able to maintain and improve housing with a minimum of outside help.
I’m an elderly woman.
I sold my large home and bought a delightful apartment/condo.
A common solution among my group of friends..
.
I totally agree. I am currently renting for $1100.00 for a 2 bedroom and 1 bath plus I’m paying for a storage rental for $124.00 a month. Total comes to $1,224.00 a month. I am thinking that large amount I rather see it go to a home then some apartment that will be condemn in the future.
I also want to ask what is your thoughts on FHA Loans. I recall my childhood home, my parents got the home back then in the 60’s thru FHA. Every month, they sent in a coupon with the payment which also included taxes and insurance along with the principal.
I'm glad it worked out great for you! The things I said are all true, about getting older and the possibility of needing assisted care. When my mom was thinking about downsizing and getting an apartment, I talked her into getting another home with my sister and her family. Worked out good for both of them. Especially later when my mom got dementia and needed help. Then later we placed her in assisted living and I footed the costs until she had a stroke and passed away.
My wife's mom started to get dementia a few years back, so we took her in to help care for her. Meanwhile we began renovating her house as it was in disrepair. Unfortunately, my wife has cancer and treatments weakened her, so we placed her mom in assisted living for dementia. It's getting progressively worse for her mom, and costs are going up. We know of several friends in similar situations with their elderly parents (and of some friends our age mid-sixties) having problems.
I hope I can keep my health into my later years and live carefree in my home or an apartment, but I'm realistic to know that isn't the case for many people. I hope I don't go down the path of my mom as her mind wasted away. The good thing is that I have family and funds available.
Save up your down payment, look for a house that the total cost does not exceed 28% of your income. I mean home insurance, taxes and mortgage payment are not to exceed 28%.
Start saving money monthly for the next repaint, updating the kitchen or bathroom, new mattress. The higher the deductible on your home and car insurance the lower the cost. Save that deductible and put it away. Good luck
| 50 YEARS, 1 HOME @ 5% APR: | |
| Purchase: | $ 300,000.00 |
| 10% Down: | $ 30,000.00 |
| Closing: | $ 6,000.00 |
| Interest: | $ 300,000.00 |
| Repairs: | $ 50,000.00 |
| Upgrades: | $ 100,000.00 |
| Property Taxes: | $ 120,000.00 |
| Moving (1 time): | $ 5,000.00 |
| Property Tax Deduction: | $ (20,000.00) |
| Interest Deduction: | $ (80,000.00) |
| Storage Fees: | $ - |
| Total: | $ 811,000.00 |
| Avg. Monthly: | $ 1,351.67 |
| 50 YEARS, 10 HOMES RENT @ $2100/month | |
| Monthly Rent @ 3% Annual: | $ 2,842,481.06 |
| Moving (5 times): | $25,000 |
| Storage Fees ($100/mo): | $60,000 |
| Total: | $ 2,927,481.06 |
| Avg. Monthly: | $ 4,879.14 |
A friend of mine lived in a rental for 15 years. Had the house filled with all sorts of stuff that he moved in with, plus accumulated stuff (paperwork and professional magazines mostly).
Last month his landlord gave him thirty days to get out. It took him 40 days - so he had to pay for all of Nov. as well. With all the time spent packing and moving (to a storage place) he is just now figuring out where to live. (Staying with a friend).
Oh - he’s 71!
I have rented an apartment but it was for a short period of time. It was after I got married. I prefer buying over renting any time. Although, with renting you don't have to worry about repairs or improvements.
That’s a major issue. You are generally protected in bankruptcy in the event of an actual hardship. Renting? You’re on the streets.
Renters generally move more often too. If it’s a property value of $5000 worth to move and a renter moves every 3 years, total moving costs adjusted 2% inflation over 50 years is an astounding $130,000. That’s a 25% down payment on a $300,000 home!
The landlord was never considered.
It was meant as renting vs. buying over 30 years. It was
all ballpark estimating of out of pocket expenses.
A very rough draft you could say.
Besides I’m a contractor, I naturally over estimate to cover my a$$ anyway.
The story posted above from a Freeper in Fort Worth is the first time I’ve ever seen an anecdote about a rental cost exceeding the ownership cost for a comparable home. The market rate for rentals will usually be lower than the costs of home ownership for a very simple reason: If landlords charge too much rent, their tenants will leave, and/or they will become homeowners themselves.
Rental rates are based on current market values. Mortgages are based on afixed amortization schedule. The farther into the term, the less the cost is monthly due to inflation. That’s why long term ownership always costs less than renting provided taxes don’t clobber you.
I can tell you that when I rented and from what I know of landlords (cousin, brother, friends) the rentals are not much different than the mortgages. The issue for my wife and me when we were first married was - we knew a lot of people who had mortgages that were at or less than we were paying in rent. The issue was coming up with the money for the down payment and closing costs. And down payments and closing costs are still issues to this day. If landlords charged based on what they bought the home for 20, 30 or even 40 years ago (and what if anything they owed as one person alluded) then when it would be paid off they could just charge the renter for taxes and insurance. They'd be the most popular landlord (and dumbest) in the area.
If you think you “own” your home, try not paying your property tax bill.
Exactly. The longer the term, the more attractive the ownership option gets.
The problem is that for more and more people, they have no way of knowing up front how long they will own their homes. This really hit home in the last few years when you had a lot of people unemployed for long periods of time because: (1) they couldn't find a job near their homes, and (2) they were underwater on their mortgages and couldn't relocate to take a job somewhere else.
The unit for sale is listed at $290,000 while the unit for rent is listed at $2,000 per month. When you add all the costs of the condo for sale, it comes to $2,400 per month. The monthly costs for the two options are very similar ($2,000 vs. $2,025) when the purchase option includes the mortgage payment ($0 down and 4.13% interest), taxes and insurance. The $375/month condo fees push that option up to $2,400.
The duration of ownership is far and away the most important factor. Let's look at the five-year mark in the comparison I described.
The person who buys the $290,000 property ends up making more than $57,000 in interest payments through the first sixty months, yet owns less than $27,000 in equity in the home (for the sake of this discussion I've assumed that the value of the property doesn't increase, but nor do the taxes, condo fees, and insurance costs). Through the first five years of ownership, he would have been better off renting the property and putting the difference between the ownership cost and the rental cost ($400 per month in the first year) in the bank, even at a minimal interest rate.
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