Buy a house or rent (1 Viewer)

[ghostguy123]

Ok, let me first start off my saying it is OBVIOUSLY dependent on the entire situation. Location, kind of house you want, your income, savings, credit, blah blah blah.

Given the unsteady market and the difficulty in selling if you need to, while balancing rent costs vs taxes/interest/repairs..........................which seems better?

I currently rent, but am looking for a house likely next summer.

Looking at this from a strictly financial standpoint, I would imagine it's best to buy a house if you were to pay cash straight up. If you are barely putting any money down, I can see it being a poor decision to purshase unless you know you will be there for like 20 years........which is impossible to KNOW.

I am somewhere in the middle depending on how pricey we decide to go.

I had a thought to just rent for about 9 more years till our daughter leaves for college or whatever, then buy a smaller house at that time. Wifey wants to by something nice next year.

There are some very nice rental homes in this area, so being able to rent a nice place isn't a problem. There were a few better than where we are now, and the house I have now is pretty nice.

Thoughts from the peanut gallery?

 

[Binky The Doormat]

Interest rates are still comparatively low. You are kind of paying yourself - I would always go with the buy option these days. but that is just me.

There are plenty of calculators out there - but you gotta count on the assumptions being good for what your money can earn otherwise.

 

[ghostguy123]

Well thing is, it seems in order to be a good investment a lot of things need to go your way.........or at least things need to not go south on you.

Some unforseen huge repair, job change and you have to move...............something along those lines.

Sure if everything goes exactly accoring to plan then buying seems good. Not the best assumption to be making.

And I am referring to people taking out a sizeable loan, not paying straight cash.

 

[jon_mx]

My rule of thumb. If you certain to be there at least 3 years (even better if 5 years), and you expect the house to appreciate at least 4% per year, you will come out ahead buying. Anyone that buys and knows they will be moving in a couple years will usually lose money, sometimes quite a bit.

 

[ghostguy123]

I guess maybe I should ask...............

Do any of you have a cutoff point where you would advise someone to rent vs. buy?

Factoring in interest rate, price of home, money put down, property taxes vs risk of unforseen issues.

 

[ghostguy123]

My rule of thumb. If you certain to be there at least 3 years (even better if 5 years), and you expect the house to appreciate at least 4%, you will come out ahead buying. Anyone that buys and knows they will be moving in a couple years will usually lose money, sometimes quite a bit.

But are you referring to buying the house straight cash, or taking out a loan?

 

[Brony]

Situations where I'd advocate renting:

less than 25 yo.

you can't drum up 15% of the house you are thinking about buying

don't plan to be in the property for at least 3 years

you like the freedom of not being responsible for your dwelling

 

[jon_mx]

My rule of thumb. If you certain to be there at least 3 years (even better if 5 years), and you expect the house to appreciate at least 4%, you will come out ahead buying. Anyone that buys and knows they will be moving in a couple years will usually lose money, sometimes quite a bit.

But are you referring to buying the house straight cash, or taking out a loan?

Loan, even with minimal downpayment.

 

[Cjw_55106]

If you want to buy a house in nine years, why not buy one now that you can afford to pay off in ten years? Let's say you buy a house for 100k and in ten years you only can get 75k for it. To me, you made 75k, not lost 25k as the whole lot would have been gone if you were renting.

 

[ghostguy123]

If you want to buy a house in nine years, why not buy one now that you can afford to pay off in ten years? Let's say you buy a house for 100k and in ten years you only can get 75k for it. To me, you made 75k, not lost 25k as the whole lot would have been gone if you were renting.

How would you have made 75 k? Did you not have property taxes, interest, and repairs?

 

[eaganwildcats]

probably looking to buy in the next couple months myself.

 

[mr roboto]

I guess maybe I should ask...............

Do any of you have a cutoff point where you would advise someone to rent vs. buy?

Factoring in interest rate, price of home, money put down, property taxes vs risk of unforseen issues.

No. It's not a financial decision. It's a life choice. You can't predict the future. It's not an investment. Get those thoughts out of your head and it makes it easier to decide.

 

[ghostguy123]

My rule of thumb. If you certain to be there at least 3 years (even better if 5 years), and you expect the house to appreciate at least 4%, you will come out ahead buying. Anyone that buys and knows they will be moving in a couple years will usually lose money, sometimes quite a bit.

But are you referring to buying the house straight cash, or taking out a loan?

Loan, even with minimal downpayment.

Gonna run the numbers on that later, but I can't see it being a good investment to buy a house and then move in 5 years if you only put down a little bit. Taxes, interest, repairs, cost of selling....................also can't EXPECT that kind of appreciation nowadays, can we?

But still, worth looking at the numbers later on. Will assume about a $150,000 house in my area and add up those costs and see how it compares to about $1,100 in rent for those five years.

 

[ghostguy123]

I guess maybe I should ask...............

Do any of you have a cutoff point where you would advise someone to rent vs. buy?

Factoring in interest rate, price of home, money put down, property taxes vs risk of unforseen issues.

No. It's not a financial decision. It's a life choice. You can't predict the future. It's not an investment. Get those thoughts out of your head and it makes it easier to decide.

I am aware that certain "wants" are worth the money. Just not what I am talking about here.

 

[mr roboto]

I guess maybe I should ask...............

Do any of you have a cutoff point where you would advise someone to rent vs. buy?

Factoring in interest rate, price of home, money put down, property taxes vs risk of unforseen issues.

No. It's not a financial decision. It's a life choice. You can't predict the future. It's not an investment. Get those thoughts out of your head and it makes it easier to decide.

I am aware that certain "wants" are worth the money. Just not what I am talking about here.

Ok. I get that. It's still not a clear cut formula. When we bought (05) we knew we'd be here for 5-10 years (it's been 9). We bought on the lower end of our price point (210k) and bought a small, cheapest house in the area. 6% interest. Made a ton of sense.

We've had to replace the following:

Windows- 6k

Roof - 2k

Main sewer line - 1k

Water well pump - 4k

Waterproof the basement - 1k

We've decided to do the following:

Hardwood floors - 4k

Upgrade the panel - 2k

Remodel a few things - 2k

We would be lucky to get our money out of it. 3 years ago we would have taken a pounding.

I still wouldn't have done it differently. Sure, we've both said 'I wish we would have rented until 2010 then bought.' But that's no different than someone saying 'I wish I'd put all my money into the NYSE in 2009.' That's hindsight.

You already know the 'principles.' But it's not a financial formula that you can truly predict which is preferable.

 

[ghostguy123]

You already know the 'principles.' But it's not a financial formula that you can truly predict which is preferable.

If there was a specific formula for success here, I wouldn't have posted anything to beging with , lol.

But I think it is BOTH a life choice and a financial decision. Maybe equal parts of both, maybe more so a financial choice for me considering I am perfectly happy with rental HOUSES in this area. Definitely never doing an apartment or anythig like that again unless for some reason I had no choice.

 

[mr roboto]

The financial factors...

Mortgage + Prop Tax + Home Ins are your carrying costs. Mtg interest and prop taxes are deductible. With 20% down and today's rates, this number will probably be similar or a little smaller than renting same house.

Standard is not to exceed 30-35% of monthly income to housing needs (excluding utilities).

Just about any minor repair will cost 100-200, most major repairs cost 1k+. Then there's 'updating' like kitchen, baths etc. Thisis what most people fail to consider. Even if the fridge doesn't break, you are more tempted to buy a new one then buy matching appliances while you are at it. And hell, since you are doing that, redo the kitchen.

For me, then next home we buy will be (hopefully) our long-term home. The home the kids remember, 20 year home. That's gonna be a purchase, regardless of financial decisions. I want to build a home around a property. That's a lifestyle choice.

 

[GoFishTN]

Know pole?

 

[Nugget]

The financial factors...

Mortgage + Prop Tax + Home Ins are your carrying costs. Mtg interest and prop taxes are deductible. With 20% down and today's rates, this number will probably be similar or a little smaller than renting same house.

Standard is not to exceed 30-35% of monthly income to housing needs (excluding utilities).

Just about any minor repair will cost 100-200, most major repairs cost 1k+. Then there's 'updating' like kitchen, baths etc. Thisis what most people fail to consider. Even if the fridge doesn't break, you are more tempted to buy a new one then buy matching appliances while you are at it. And hell, since you are doing that, redo the kitchen.

For me, then next home we buy will be (hopefully) our long-term home. The home the kids remember, 20 year home. That's gonna be a purchase, regardless of financial decisions. I want to build a home around a property. That's a lifestyle choice.

Your mortgage interest needs to be greater than your standard deductions to claim it. Buying a 150K house at today's interest will not create enough to outweigh the standard deduction. Unless you are already itemizing your taxes.

Think the wife and I are getting ready for the long term home as well. It is making it harder to be cheap on the front side. We will know for sure in a few months.

 

[ghostguy123]

Not a real good poll question given that there are a million different scenarios rather than just buy vs rent.

So no, know pole.

And I am far less worried about having a long term "home" that is just one house, and more interested in just making sure we stay in the same area/school system. So I am willing to look at it more from a financial perspective. If the right thing pops up then I could see looking at it less from the financial side.

 

[ghostguy123]

Your mortgage interest needs to be greater than your standard deductions to claim it. Buying a 150K house at today's interest will not create enough to outweigh the standard deduction. Unless you are already itemizing your taxes.Think the wife and I are getting ready for the long term home as well. It is making it harder to be cheap on the front side. We will know for sure in a few months.

I was just going to say this also. Even though the interest/tax is deductible, it won't change your refund all that much given the standard deduction for a lot of people (including myself). Definitely a factor that could change things up if you are buying a 150k home as opposed to a 600k home.

 

[mr roboto]

Not a real good poll question given that there are a million different scenarios rather than just buy vs rent.

So no, know pole.

And I am far less worried about having a long term "home" that is just one house, and more interested in just making sure we stay in the same area/school system. So I am willing to look at it more from a financial perspective. If the right thing pops up then I could see looking at it less from the financial side.

You honestly don't sound like you really want to buy. It's only cheaper in the long run with appreciation. So if you're not sold on the idea, I don't think it's wise. Unless you need to make your wife happy. Then it's probably a very wise idea.

 

[belljr]

I wish my lot was bigger but been in this house 11 years, great neighborhood, great schools. Plan is about 15 more years then get out of dodge

 

[ghostguy123]

Not a real good poll question given that there are a million different scenarios rather than just buy vs rent.

So no, know pole.

And I am far less worried about having a long term "home" that is just one house, and more interested in just making sure we stay in the same area/school system. So I am willing to look at it more from a financial perspective. If the right thing pops up then I could see looking at it less from the financial side.

You honestly don't sound like you really want to buy. It's only cheaper in the long run with appreciation. So if you're not sold on the idea, I don't think it's wise. Unless you need to make your wife happy. Then it's probably a very wise idea.

I want to buy, I just don't want to pay a bunch of interest doing it.

I would prefer to rent a while THEN buy when I know I can buy a house cash, no loan. Would prefer to rent a larger home like I am now, then in about 9 years buy a smaller home when the kid is out of the house.

Since I know I would be taking out a loan now if we bought, and I am pretty sure we would move in about 9 years, seems renting is the better financial choice.

Running a few numbers though, lets say my rent is $1,100.

Lets say I bought a house here cash for 150k.

Property tax around $3,500

insurance is what these days, 600-800 a year??

Average annual home repairs, wow, could be all over the place.

That number is almost approaching the monthly rent. Add interest on top of that if you put say 50k or 75k down, and it seems to be approaching the rent.

Then even if the house appreciates, the cost to sell it cuts deeply into that equity.

I guess just the recent change up that you cant expect your house to appreciate in value is a big favtor these days.

 

[belljr]

Loans are like 4% interest is a non factor

 

[Mr Capicollo]

I don't mind renting but if you live in an area where a comparable house is hundreds of dollars more than your mortgage would be, then it's worth it to buy. You have to stay in the house a few years, but you're likely better off buying in most cases. Where I live, it was a no-brainer.

 

[ghostguy123]

Loans are like 4% interest is a non factor

It's not a non factor unless you put like 75% down

 

[Binky The Doormat]

Loans are like 4% interest is a non factor

Nice example of a 3% loan - $19K interest over 10 years for a $120K loan.

http://www.amortization-calc.com/mortgage-calculator/

 

[belljr]

I don't mind renting but if you live in an area where a comparable house is hundreds of dollars more than your mortgage would be, then it's worth it to buy. You have to stay in the house a few years, but you're likely better off buying in most cases. Where I live, it was a no-brainer.

this is a good point. My sister in law just moved into our town and is renting a house that is smaller than ours by a little. Her rent is more than my mortgage payment. Obviously I have taxes and I'm sure my insurance is higher than her renters insurance but I was blown away that her payment was that high

 

[ghostguy123]

Then we have the ol "what is my savings doing for me right now" part of this whole thing. Also a factor.

I guess I just wish the damn property taxes werent so high here. Some of the houses I looked at in the 150-175k range were over 4 grand.

 

[ghostguy123]

And sorry if I at times am sounding like I am disagreeing with everything or that "I know all", just try to create as much discussion on it as I can.

I did buy a house back in 2004. Miserable failure. I had just got my full time job like 3 months before that and had stars and bright shiny lights in my eyes with dreams of owning the world.

They approved me for a loan that pretty much was not affordable unless I rode a bicycle and ate Ramen noodles every day for 30 years. I didn't take the max they offered me, but fairly close. Barely anything down. And this was at the tip of the housing bubble that burst in my face.

So I am a bit gun shy to buy again, obviously.

One side of my brain is running the numbers and it shows I SHOULD buy a house next year since I am putting at least half down.

The other side of my brain is remembering the problems I ran into last time, and other potential problems that throw those numbers out of whack.

 

[belljr]

Loans are like 4% interest is a non factor

It's not a non factor unless you put like 75% down

if the 19k over 10 years is your hangup then obviously you already made up your mind. I had 18 years left on my house and started over at 30. With a 3% rate and took 40k out in equity. You'll never get that rate. My point is if interest really bothers you pay more per month and you will pay less. I'm a big buy advocate but nothing wrong with renting but if you are trying to get this down to the penny you aren't ready to buy

 

[Zegras11]

Loans are like 4% interest is a non factor

Nice example of a 3% loan - $19K interest over 10 years for a $120K loan.

http://www.amortization-calc.com/mortgage-calculator/

100% equity build up if the entire loan is 10 years. How much equity build up does one get renting?

 

[ghostguy123]

Loans are like 4% interest is a non factor

It's not a non factor unless you put like 75% down

if the 19k over 10 years is your hangup then obviously you already made up your mind. I had 18 years left on my house and started over at 30. With a 3% rate and took 40k out in equity. You'll never get that rate. My point is if interest really bothers you pay more per month and you will pay less. I'm a big buy advocate but nothing wrong with renting but if you are trying to get this down to the penny you aren't ready to buy

Yes that is only 19k, but you aren't going to get anything by writing off that 19k, so it's a full 19k.

Just part of it. And are rates 4% right now??

 

[belljr]

And sorry if I at times am sounding like I am disagreeing with everything or that "I know all", just try to create as much discussion on it as I can.

I did buy a house back in 2004. Miserable failure. I had just got my full time job like 3 months before that and had stars and bright shiny lights in my eyes with dreams of owning the world.

They approved me for a loan that pretty much was not affordable unless I rode a bicycle and ate Ramen noodles every day for 30 years. I didn't take the max they offered me, but fairly close. Barely anything down. And this was at the tip of the housing bubble that burst in my face.

So I am a bit gun shy to buy again, obviously.

One side of my brain is running the numbers and it shows I SHOULD buy a house next year since I am putting at least half down.

The other side of my brain is remembering the problems I ran into last time, and other potential problems that throw those numbers out of whack.

there is your problem... not sounding like a jerk but you bought into the crap the banks were feeding you. I'm not saying you are solely to blame but if the bank says you can afford 300k and you "fool yourself" into thinking that it is a no win. You have to be realistic. We bought our house in 2003 and the bank said we would be approved for a 500k loan. I literally laughed at the guy. I politely asked him if he was crazy.

 

[belljr]

Loans are like 4% interest is a non factor

It's not a non factor unless you put like 75% down

if the 19k over 10 years is your hangup then obviously you already made up your mind. I had 18 years left on my house and started over at 30. With a 3% rate and took 40k out in equity. You'll never get that rate. My point is if interest really bothers you pay more per month and you will pay less. I'm a big buy advocate but nothing wrong with renting but if you are trying to get this down to the penny you aren't ready to buy

Yes that is only 19k, but you aren't going to get anything by writing off that 19k, so it's a full 19k.

Just part of it. And are rates 4% right now??

As mentioned above. In 10 years you have equity. Hopefully near and above what you started.

 

[ghostguy123]

there is your problem... not sounding like a jerk but you bought into the crap the banks were feeding you. I'm not saying you are solely to blame but if the bank says you can afford 300k and you "fool yourself" into thinking that it is a now win. You have to be realistic.
We bought our house in 2003 and the bank said we would be approved for a 500k loan. I literally laughed at the guy. I politely asked him if he was crazy.

I was quite young and uninformed at the time. They didnt even feed me anything, I went it looking to get as much as I could. Brilliant.

Thing is, right now I am in a better financial position to buy a house than probably 90% or more of people who own houses. I suppose I have visions of 20k septic bills, 10k basement leaks, new roof, the wife wanting to re-do the kitchen, furnace breaking, sink holes.....................................mayeb a job relocation and needing to sell........................I always hope for the best but prepare for the worst I guess.

 

[belljr]

there is your problem... not sounding like a jerk but you bought into the crap the banks were feeding you. I'm not saying you are solely to blame but if the bank says you can afford 300k and you "fool yourself" into thinking that it is a now win. You have to be realistic.

We bought our house in 2003 and the bank said we would be approved for a 500k loan. I literally laughed at the guy. I politely asked him if he was crazy.

I was quite young and uninformed at the time. They didnt even feed me anything, I went it looking to get as much as I could. Brilliant.

Thing is, right now I am in a better financial position to buy a house than probably 90% or more of people who own houses. I suppose I have visions of 20k septic bills, 10k basement leaks, new roof, the wife wanting to re-do the kitchen, furnace breaking, sink holes.....................................mayeb a job relocation and needing to sell........................I always hope for the best but prepare for the worst I guess.

and that could totally happen .The thing is if you are smart and realistic. Those things won't set you back in the long run. Sure they suck and you have to deal with it. You can't look at a house as will it make me money after 2 years. Sometimes that pay off really isn't until 5 10 years

 

[ghostguy123]

As mentioned above. In 10 years you have equity. Hopefully near and above what you started.

Right, those are the kind of numbers I am trying to figure out.

And after those 10 years, yes, you WILL have equity and be in a better spot than if you rented...................assuming nothing out of the ordinary happens.

I am fairly sure we WILL end up buying something next year. We took a 2 year lease where we are now and have a year left. I said F it, hard to beat a $1,050 rent payment for a 2000 square foot home on a nice street in a nice town on a half acre with a fenced in yard and a pool.

 

[ghostguy123]

and that could totally happen .

Yup...got a couple horror stories from some of my friends. Crazy stuff. And one of them was unforseen ridiculous neighbors. Might rather pay for a broken furnace and get a new roof than have the worst neighbors ever.

 

[belljr]

and that could totally happen .

Yup...got a couple horror stories from some of my friends. Crazy stuff. And one of them was unforseen ridiculous neighbors. Might rather pay for a broken furnace and get a new roof than have the worst neighbors ever.

i edited above. Sometimes it's a crapshoot. You may not see a payoff 5 to 10 years down the line

 

[Zegras11]

As mentioned above. In 10 years you have equity. Hopefully near and above what you started.

Right, those are the kind of numbers I am trying to figure out.

And after those 10 years, yes, you WILL have equity and be in a better spot than if you rented...................assuming nothing out of the ordinary happens.

I am fairly sure we WILL end up buying something next year. We took a 2 year lease where we are now and have a year left. I said F it, hard to beat a $1,050 rent payment for a 2000 square foot home on a nice street in a nice town on a half acre with a fenced in yard and a pool.

more than likely, you can find the same type of house at a lower payment buying a house these days. Not all places, but most.

A $200k loan at 4% over 30 years will have a balance of $157,568 after 10 years. The P&I is $955.

Ten years later balance will be $94,309.

Your payment will be CONSTANT. Rents are rising will continue to rise forever.

 

[ghostguy123]

more than likely, you can find the same type of house at a lower payment buying a house these days. Not all places, but most.

A $200k loan at 4% over 30 years will have a balance of $157,568 after 10 years. The P&I is $955.

Ten years later balance will be $94,309.

Your payment will be CONSTANT. Rents are rising will continue to rise forever.

Rents dont seem to be rising much here, and like I said I have a nice rent payment given the property I am in.

And while rents rise, so will property taxes and insurance.............plus the cost of fixing things.

 

[comfortably numb]

Seems like you don't wanna spend a nickel more than you have to. Whether on interest, upgrades or repairs.

Renting allows you to never spend more then the monthly amount you are due your landlord.

You seem to like that. Whether because you just don't want to spend more money than you have to or the difficult time you had in the past purchase.

You obviously can afford a home if you are throwing out talk about buying a home cash.

Nothing wrong with renting but your wife probably wants a house for the same reasons most people do. Make it their own. Do whatever they want to the house without asking permission, not worry about a landlord not renewing a lease or fixing something in time.

good/bad both ways.

You seem really caught up on the financial aspect, and it seem a bit selfish of you to want to wait 9 YEARS before buying a home when your wife would want to buy one now.

There isn't a wrong choice here, just the choice of what you and your wife both can agree is best for your family.

 

[ghostguy123]

It's not selfish of me to WANT to wait. It doesn't mean I am GOING to wait. Not like I am forbidding the purchase of a house for my family.

And hell yeah I have some reservations about purchasing.

I have a feeling this same conversation was had back in 2004.............................that went pretty poorly for a pretty good chunk of people who bought a house and then had to move anytime after. If they are still living in their house then they are probably arpproaching a break even point if they were to move, depending on their interest rates. I remember them being about 5.5-6% back then.

I just don't see it to be the great investment that it was thought to be 10-20 years ago. It's better NOW after a huge housing collapse, I realize that, but after looking at all the numbers just from a strictly financial thought process it seems to make sense mostly when you put a VERY large amount down.......though I WILL be putting a large down payment down when we buy.

I wish I could talk my wife into a fixer upper. She wants to buy a house that has everything already done. So that is something we have been going back and forth on. I asked her if she would rather buy a house for 150k that is worth a 150k, or buy a house for 100k and put 30k into it, and it will be worth 150k............................she chooses to buy the 150k house...

 

[mr roboto]

ITS NOT AN INVESTMENT. ITS A PLACE TO LIVE.

 

[ghostguy123]

ITS NOT AN INVESTMENT. ITS A PLACE TO LIVE.

Thats what I thought 11 years ago when I jacked up my finances.

Lots of nice places to live that are not purchases

 

[mr roboto]

ITS NOT AN INVESTMENT. ITS A PLACE TO LIVE.

Thats what I thought 11 years ago when I jacked up my finances.

Lots of nice places to live that are not purchases

And how much money have you lost over time in rent? At least it's slow, incremental and predictable though, right?

 

[Dragons]

The financial factors...

Mortgage + Prop Tax + Home Ins are your carrying costs. Mtg interest and prop taxes are deductible. With 20% down and today's rates, this number will probably be similar or a little smaller than renting same house.

Standard is not to exceed 30-35% of monthly income to housing needs (excluding utilities).

Just about any minor repair will cost 100-200, most major repairs cost 1k+. Then there's 'updating' like kitchen, baths etc. Thisis what most people fail to consider. Even if the fridge doesn't break, you are more tempted to buy a new one then buy matching appliances while you are at it. And hell, since you are doing that, redo the kitchen.

For me, then next home we buy will be (hopefully) our long-term home. The home the kids remember, 20 year home. That's gonna be a purchase, regardless of financial decisions. I want to build a home around a property. That's a lifestyle choice.

Your mortgage interest needs to be greater than your standard deductions to claim it. Buying a 150K house at today's interest will not create enough to outweigh the standard deduction. Unless you are already itemizing your taxes.Think the wife and I are getting ready for the long term home as well. It is making it harder to be cheap on the front side. We will know for sure in a few months.

Don't forget property taxes and state income taxes. But many people overlook the standard deduction.

 

[ghostguy123]

ITS NOT AN INVESTMENT. ITS A PLACE TO LIVE.

Thats what I thought 11 years ago when I jacked up my finances.

Lots of nice places to live that are not purchases

And how much money have you lost over time in rent? At least it's slow, incremental and predictable though, right?

I have only been renting for a few years now. For a couple years it was 750, now its 1050.

In that time I have built up a lot in savings and my 403b.

Dont think I have lost anything at all since 4 years ago I would have only been able to put down a small amount. Pretty sure it's the exact opposite.