Posted on 12/29/2006 6:45:01 AM PST by Labyrinthos
The housing slump has been painful for millions of people who work in real estate or recently bought a house.
For Patrick Killelea, however, this year has been one long victory lap. Mr. Killelea, a 41-year-old software engineer, has long preached that it makes more economic sense to rent than buy homes. He recalls shouting "Wow!" when he heard about September's 9.7% drop in prices of new homes.
"I didn't want to gloat," he says. "But then again, maybe I did."
For years, Americans who refused to buy real estate at what they considered excessive prices were ribbed for failing to profit from one of the greatest booms in history. "Are You Missing the Real Estate Boom?" needled the title of a 2005 book by David Lereah, chief economist of the National Association of Realtors.
Now, with the housing market in a slump, renters who sat out the boom are finally getting some satisfaction...
(Excerpt) Read more at biz.yahoo.com ...
Sure, but you would have to recapture that depreciation when you sold it and pay tax on any appreciation. A home is one of the few places you can make so much money tax-free. There are millions of people in California who have a $300K or more gain in their personal residence and it will all be tax-free when they decide to realize it. That's about like making $450K taxable income.
Like I said at the beginning of this thread, timing is everything.
Also, you can defer the payment of these capital gains indefinitely on rental properties as long as you roll the gain into something else.
One big advantage of renting that is hard to put a value on is the renter's ability to pack up and leave on short notice if the neighborhood goes into the sh!tter.
This article is just plain stupid! What the hell is so great about paying off some ones else's mortgage? The renters are gloating about pissing money down the drain for a year!?!
I own my own home outright, and the mortgage (a fixed mortgage) was in the same ballpark as what I had been paying to rent an apartment at the time I bought my house.
Over the years, that mortgage stayed the same, and the cost of that apartment has gone up every year. If I'd stayed in the apartment, I'd probably be paying at least 4 times what my mortgage cost me per month.
Except that I don't have a mortgage any more, I just have this house that has increased in value by at least 4 times over the same period.
If buying my home would have been a matter of real estate speculation to me rather than just owning my own home, and especially if I'd recently bought into the hyper-inflated Cali housing market, I'd be crying now too.
But I own my own home, I'm debt free - no mortgage, loans or outstanding credit card debt - and not counting real estate that I own, my 7-figure fortune is in my financial portfolio. And 399 days from today, I'm going to retire and reap the benefits of the modest lifestyle I've lived for the last 30 years.
Happy New Year!
Sounds beautiful. The only problem you might have with your retreat is keeping friends and relatives from over-visiting ;D!
People with no equity shouldn't be gloating about anything.
When the rent on a $300k unit is only $1250/mo and the payments plus taxes are $2650/mo tobuy it if th renter put away the $1400 difference in an interest bearing account they would be way ahead in the long run.
At the end of the first year they would have at least $17000 in the bank.
How much does your property/school taxes cost per month?
Well, let's say that, one year ago, the option that two different people had was to buy a house at an inflated price that they could only afford with an "interest only" loan. ( Approximately 50% of all California home sales use such a loan because that is the only way buyers can afford the price.)
One person said, "Not at that price" and rented. The other person bought at the inflated price.
One year later, the renter has zero equity but can buy such a house at 10% below the price the house sold for one year ago.
One year later, the buyer has zero equity and owes the bank 10% more than his house is currently worth.
This is pure nonsense. ANY asset is only worth what somebody is willing to pay at the time you want to sell. Even if the value changes it is still an asset. Even if nobody else values (or wants to buy) it, an asset can still have value to you. (Even if you can't sell it, you can still live in it.)
I drive an old car that is worth far more to me than I could get if I sold it. Having that car saves me a ton of money on taxes, insurance, and interest. It is an asset.
You're not thinking like a bean-counter. Let's say I buy a house for $200,000 with 5% down. I now have $10,000 in equity, but $190,000 in long term debt. I also have short term recurring debt like real estate taxes, insurance, amd maintenance that could very well exceed the value of my equity on an annual basis. If I rent a place for less that the total cost of owning a home -- which really isn't hard to do in many real estate markets -- then the difference is "equity in the bank," which is worth more than the equity in the real property.
A better statement would be that the money spent on rent builds no equity while mortgage which leads to eventual ownership can build equity assuming the property values continue to appreciate.
If a house appreciates at an annual rate of at least 3%, owning tends to work out better. It really depends on your market and how much appreciation you get. A house is one of the most leveraged investments you can make. When a home appreciates at 5% or more, owners make out like a bandit. Of course in the rare instance it drops, you might get stuck waiting for it to recover or perhaps taking a big loss. There are some locations where people need to be cautious, and I would buy in those places unless it was for the long term.
Gloating is always wrong, but a person with no home equity may still feel accomplished if he has achieved a higher net worth than a similarly situated "homeowner."
Are you really this dumb, or are you just too poor to buy a house of your own?
My "asset" will pay me half a million dollars in the end.
Meanwhile, you will have pi$$ed away your money.
True, but equity is like money in the bank. We know folks who rent for less than the cost of owning a home, but they're not saving and/or investing the difference. And we know folks who pay more in rent than they would to own a home. And they're not saving/investing, either. The only way I'd rent is if I could bank and/or invest the difference.
Nice thing about renting
1.No maintenance costs
2.No real estste taxes
3.No fear of the government getting your land for a park
4.You can move anytime you want on a month to month lease
5.No 50/50 ownership wife if things go bad
6.You can sublet to add to your income
What name calling?
Until you actual sell that "asset," the only ones making money off that appreciation is your tax assessor. The truth is rather odd, now isn't it.
No I can make a lot of money off it before I sell it, but that isn't the definition of an asset. I often use the equity in my house to make money, but that concept is probably beyond you :)
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