Lifetime renters

[kushiel]

If Quasi is still living in the same area he was teaching music, there’s no threat of a bad economy or a housing crash. Prices have been going up every year for, what, 15 years? I wish I was 2-3 years older just so I could have bought something before the housing boom. I’m not going to be able to own anything unless I have a partner or the bubble bursts.

Sometimes I wonder if it isn’t so bad though. What happens if the oil runs out in 15 years? Then everyone will leave and housing will become affordable again. I wouldn’t want to buy property now and then run the risk of it being worthless 20 years down the road if it’s just a temporary resource boom.

I know I’m enjoying the 0.6 vacancy rate here! grumble

[phreesh]

I heard a standup say something about how because he doesn’t own, he doesn’t go to Home Depot, he goes to Apartment Depot.

It’s just a big, empty building 'cause he don’t have to fix shit!

If you’re a disciplined renter and put the ‘mortgage payement’ into a decent mutual fund, you’ll come out even at worst with someone who owns. The key is fighting the temptation to blow the money on stuff. The flexibility of renting should not be undervalued.

There can be significant economic benefit to being flexible in your living arrangements. You can downsize (or upsize) quickly and take advantage of job opportunities much more readily than someone tied to a house.

[Maastricht]

I rented untill I was 38. Then our landlord put both our apartment upstairs and her own downstairs house up for sale. I bought the downstairs, a good friend bought the upstairs.

We’re very happy. Secure in our (neraby) jobs and we love this town. I don’t think it has been a good investment, financially. But I just love this house. And I found I am deeply houseproud and that I love that I can perfect it little by little. I always look forward to the next remodeling or repair/improvement.

A friend of mine is like that: to her, a house is just a place to be. She would be perfectly happy if the only thing she improved in her home was the couch every ten years. She’s far better of renting.

[davekhps]

I’m an homeowner, but I strongly see the appeal of being a renter.

Some of the obvious ones were mentioned above-- flexibility being the most important, but there are a few others:

– Financially, owning a house is more expensive than people tend to think. Not just the mortgage and taxes, but the simple upkeep of the house costs money each and every year. Those costs are not insignificant.

I’ve owned a rather modest duplex built in the 1940s for eight years now and not a single year has passed where I haven’t spent close to (or over) $10,000 each year doing something: fixing HVAC, replacing driveway, fixing a foundation leak, replacing appliances, etc., etc. Yes, I get a mortgage deduction (for now-- I doubt that will survive government tax reforms over the next decade) but even that money doesn’t entirely cover the costs I incur.

– Financially, owning a home is a TERRIBLE investment over time.

Note I said “over time.” If you owned a home for thirty years, there may be boom periods where real estate growth far outpaces inflation and other similar investments. In the D.C. area, for example, plenty of people literally hit the jackpot buying homes for $100-$300K just ten years ago who are now able to sell for $500K-$1 million. Unfortunately, the people who bought at the top of the boom ended up breaking even at best, or going underwater at worst.

There are a number of studies out there that reference this effect that, again, over time, home equity provides approximately 0% return on investment. If you can time a boom cycle just right, you can sell and make money; if you don’t time the cycle right-- or a boom cycle never comes-- you won’t make money if you have to sell. (And, of course, if you sell, you still need someplace to live-- and if you sell at a boom, you’re likely to buy in a boom as well, i.e. you may or may not get ahead unless you move out of the area to a less expensive housing market).

Now, people counter this with an emotional argument: at least I own my home, I’m not just throwing money away! But again, once you total up the true cost of owning a home versus renting, rents and mortgages may be financially comparable, with rents often beating the cost of home ownership. Thus, the disciplined person can rent for less money than a mortgage, and then use the savings to purchase investments that over time will generate a greater return than sinking money into a home.

30 years later, a lifetime renter may not own a home, but they’ll still have equity-- only in other investments. In the meantime, a renter has much the same roof over their head as the homeowner- the difference is, the renter had far more flexibility and (potentially) less frustration than the repair & upgrade-harried homeowner.

[fifty-six]

I understand equity and and to a degree the investment on a home.

I guess what I do not understand is how it helps. What the hell does it matter if your home is worth 2 thousand or 2 million? Or if it has gone up in value. You live in it. What are you gonna do sell it and rent something cheaper. You have to live somewhere.

I know that eventually you can pay it off retire sell it and move into something smaller or give it to your children to sell. Or even trade up I guess, if the markets are all right. But in my view that is money that is really locked up tight.
I like renting it suits me. Ownership seems a bit of a burden.

40 y/o

[msmith537]

@fifty-six

I understand equity and and to a degree the investment on a home.

I guess what I do not understand is how it helps. What the hell does it matter if your home is worth 2 thousand or 2 million? Or if it has gone up in value. You live in it. What are you gonna do sell it and rent something cheaper. You have to live somewhere.

You can borrow against it. This can become useful as you get older and find yourself short on cash but are sitting on a $500,000+ asset you’ve paid off. Or if you need to take out a loan to fix up the place.

But in general, the whole idea of owning is based on the concept that you are building equity for yourself instead of building it for some landlord. But when you take into account stuff like maintenance costs, condo fees, mortgage interest, taxes (which I understand can be written off somehow so at best it’s a wash), and the general hassle and inflexibility of owning a home, it’s often not that great of a deal compared to renting.

Indeed sometimes I feel the whole idea of “home ownership” is a throwback to (or a middle class emulation of) inhereted aristocracies based off of feudalistic aggrarian societies. It makes sense to build a permenant estate in a society where you can reliably plan on generations living there. But what is the point in spending your lifetime working to own a piece of property you probably won’t keep once you reach a certain age and your children will likely not want to live in anyway? If it is purely financial, there are other investments that may be better over the long term.

[Trom]

@davekhps

I’m an homeowner, but I strongly see the appeal of being a renter.

Some of the obvious ones were mentioned above-- flexibility being the most important, but there are a few others:

– Financially, owning a house is more expensive than people tend to think. Not just the mortgage and taxes, but the simple upkeep of the house costs money each and every year. Those costs are not insignificant.

I’ve owned a rather modest duplex built in the 1940s for eight years now and not a single year has passed where I haven’t spent close to (or over) $10,000 each year doing something: fixing HVAC, replacing driveway, fixing a foundation leak, replacing appliances, etc., etc. Yes, I get a mortgage deduction (for now-- I doubt that will survive government tax reforms over the next decade) but even that money doesn’t entirely cover the costs I incur.

– Financially, owning a home is a TERRIBLE investment over time.

Note I said “over time.” If you owned a home for thirty years, there may be boom periods where real estate growth far outpaces inflation and other similar investments. In the D.C. area, for example, plenty of people literally hit the jackpot buying homes for $100-$300K just ten years ago who are now able to sell for $500K-$1 million. Unfortunately, the people who bought at the top of the boom ended up breaking even at best, or going underwater at worst.

There are a number of studies out there that reference this effect that, again, over time, home equity provides approximately 0% return on investment. If you can time a boom cycle just right, you can sell and make money; if you don’t time the cycle right-- or a boom cycle never comes-- you won’t make money if you have to sell. (And, of course, if you sell, you still need someplace to live-- and if you sell at a boom, you’re likely to buy in a boom as well, i.e. you may or may not get ahead unless you move out of the area to a less expensive housing market).

Now, people counter this with an emotional argument: at least I own my home, I’m not just throwing money away! But again, once you total up the true cost of owning a home versus renting, rents and mortgages may be financially comparable, with rents often beating the cost of home ownership. Thus, the disciplined person can rent for less money than a mortgage, and then use the savings to purchase investments that over time will generate a greater return than sinking money into a home.

30 years later, a lifetime renter may not own a home, but they’ll still have equity-- only in other investments. In the meantime, a renter has much the same roof over their head as the homeowner- the difference is, the renter had far more flexibility and (potentially) less frustration than the repair & upgrade-harried homeowner.

Very well said. I’m 28 and have no plans to buy a home soon, if ever. However, I have exposure to real estate through other investments.

[jz78817]

@phreesh

I heard a standup say something about how because he doesn’t own, he doesn’t go to Home Depot, he goes to Apartment Depot.

It’s just a big, empty building 'cause he don’t have to fix shit!

Mitch Hedberg. I love using that line.

I rent, and I likely will continue to do so. As much as I would like to have a basement/work area or garage, the “I ain’t gotta fix shit” angle offsets most of that. add to that not having to worry about selling a house should I need to relocate.

[spankthecrumpet]

The problem with lifetime renting is that usually buying is so much more tax efficient that the only people who rent for life are pathetic retards who can’t get their shit together.

It’s a shame because if the financial system weren’t set up that way - and it isn’t setup that way in most non-anglo saxon coutnries - including france actually! - then families could make choices based on financial sense. In which case no “typicla family” with sense would buy housing, at least not at these prices…

[BrotherCadfael]

@Pai325

I’m not, but my in-laws were and were very happy. They lived on the south side of Chicago, and it wasn’t uncommon.

The baddest part of town, no doubt.

Someone upthread claimed not having to pay real estate taxes as a benefit of renting. Right. :rolleyes:

[Broomstick]

@spankthecrumpet

The problem with lifetime renting is that usually buying is so much more tax efficient that the only people who rent for life are pathetic retards who can’t get their shit together.

In my state renters get a type of tax credit that somewhat offsets that disadvantage. Not all the way, but it sure helps.

And, uh, thanks for calling me a loser. :rolleyes:

[Trom]

@spankthecrumpet

The problem with lifetime renting is that usually buying is so much more tax efficient that the only people who rent for life are pathetic retards who can’t get their shit together.

It’s a shame because if the financial system weren’t set up that way - and it isn’t setup that way in most non-anglo saxon coutnries - including france actually! - then families could make choices based on financial sense. In which case no “typicla family” with sense would buy housing, at least not at these prices…

Other than calling people names, do you actually have an argument against the stuff davekhps said?

[iamthewalrus_3]

@spankthecrumpet

The problem with lifetime renting is that usually buying is so much more tax efficient that the only people who rent for life are pathetic retards who can’t get their shit together.

Is there any reason to believe that the tax deductions associated with mortgage interest aren’t priced into the housing market?

I’m 30, have always rented, and am likely to continue to do so for some time. Maybe forever. I have a spreadsheet that shows that unless the housing market or the stock market deviates from historical norms, renting is by far the better financial option in Santa Barbara at this point, even discounting the added flexibility and lack of hassles that come with renting. I rent the tiniest, cheapest house in a fantastic neighborhood. I’m within walking distance to work and downtown, and I have an ocean view. I don’t want to live in this house for another decade, but it’s great for right now. Buying a house in this neighborhood is out of my price range. Buying one where I could afford it means I’d have to live somewhere less desirable and have a higher mortgage than I’m paying in rent. I invest the difference in a diversified portfolio and my spreadsheet says I’ll come out ahead. I’ve certainly come out ahead over the last 7 years, since housing has gone down in that time period.

I have a few friends who bought in Santa Barbara. One of them bought a condo a few years ago, then a house just recently. Last I heard, he was still trying to find a buyer for his condo at a 10% loss. The other one recently bought a house. It’s too soon to say whether it’ll be a good long-term investment, but in the near term, his housing costs have gone way up and, in my impression, he now spends way more time working on his house, and way less on things that sound fun. I think he enjoys working on his house, so it’s not necessarily a bad lifestyle choice for him. But it’s not how I want to spend my time.

If I were to have a sudden (large) windfall, I might buy. At that point I’d accept that I was paying more for housing, but I’d have more stable and predictable housing costs over the long term, and I wouldn’t have to give up living where I want to live.

[Dusty_Rose]

I’m 45 and don’t have anything saved toward retirement. I bought a fixer-upper on a beautiful lot in a good area. My actual mortgage payment (including taxes and insurance) is just a hair more than I was paying for rent to live in a much smaller house.

The house will be paid for before I retire and at that point I’ll either be able to live here at a very low cost; or I can sell it and use that money toward living expenses. For me, it’s my best bet.

I don’t think there’s a hard and fast rule that works for everybody. For some, renting is better and for others, buying is best.

[Frank]

@spankthecrumpet

The problem with lifetime renting is that usually buying is so much more tax efficient that the only people who rent for life are pathetic retards who can’t get their shit together.

Is the amount you save in taxes greater than the amount (in both money and time) than I save from not having to maintain the walls and a roof, the yard, appliances, pest control, shoveling the sidewalks and driveway, remodelling the kitchen, and so on and so forth, etc., etc., etc. Frankly, I can’t be bothered; I’d rather rent.

[Pai325]

@BrotherCadfael

The baddest part of town, no doubt.

Someone upthread claimed not having to pay real estate taxes as a benefit of renting. Right. :rolleyes:

The South Side was very nice in the 20s and 30s! And as you are thinking, I have a feeling the owner covers the property taxes in the rent. The renter is paying a portion of them, but not getting a deduction.

[Praline]

I agree with Dusty Rose - everyone’s situation is different. For my family, home ownership has been one of our better investments. We initially bought because we couldn’t find an affordable apartment that took dogs. Buying actually lowered our monthly out of pocket expense. Assuming that one is not investing money that would otherwise be spent on a mortgage, which i suspect is often the case, how can renting possibly be a better investment, as some posters have suggested? Am i missing something here? At the end of 15 or 30 years of homeownership, you have an asset. At the end of the same time period renting, you have… nothing.

[Rand_Rover]

@Praline

I agree with Dusty Rose - everyone’s situation is different. For my family, home ownership has been one of our better investments. We initially bought because we couldn’t find an affordable apartment that took dogs. Buying actually lowered our monthly out of pocket expense. Assuming that one is not investing money that would otherwise be spent on a mortgage, which i suspect is often the case, how can renting possibly be a better investment, as some posters have suggested? Am i missing something here? At the end of 15 or 30 years of homeownership, you have an asset. At the end of the same time period renting, you have… nothing.

Well, a lifetime renter would say they don’t have nothing exactly, they have (i) all the cash they otherwise would have spent on repairs, (ii) the time they would have spent on repairs, (iii) the freedom to move whenever they want, and (iv) other intangible benefits mentioned above.

The lifetime renter would probably not mention that all those repairs they didn’t pay for were actually factored into their rent (so they did effectively pay them–much like the renter effectively pays property tax as well).

Financially, renting v. owning is a bit of a crap shoot either way. However, I think that the assumption should be that owning is generally better overall for most people (the notable exception being those who move a lot). It has to be that way or the market’s out of whack–people who own property and rent it out aren’t running a charity.

[Doug_K]

@Praline

I agree with Dusty Rose - everyone’s situation is different. For my family, home ownership has been one of our better investments. We initially bought because we couldn’t find an affordable apartment that took dogs. Buying actually lowered our monthly out of pocket expense. Assuming that one is not investing money that would otherwise be spent on a mortgage, which i suspect is often the case, how can renting possibly be a better investment, as some posters have suggested? Am i missing something here? At the end of 15 or 30 years of homeownership, you have an asset. At the end of the same time period renting, you have… nothing.

For someone who expects to move frequently, it makes sense to rent, but not if you’re going to stay put for more than 2 or 3 years. After all, why do people buy rentals? To make money. If rents weren’t higher than mortgage payments and upkeep combined, there would be no rentals available.

Where it makes financial sense to rent is if you’re likely to move after a short time. There’s some overhead that will be more than the difference between rent payments and mortgage payments if you don’t stay in the house long enough.

[DianaG]

@Praline

At the end of 15 or 30 years of homeownership, you have an asset. At the end of the same time period renting, you have… nothing.

Maybe you do. On the other hand, you might just have… a house. One that is worth less than you paid for it, and is a pain in the ass to maintain. Me, at the end of 30 years, I have 30 years of weekends that I didn’t spend at Home Depot.

Seriously, is it that hard to understand that I just don’t care about the taxes, or the equity, or blahblahblahfishcakes? There are things that are more important to me, like not having to deal with all the pain-in-the-ass aspects of home ownership, which appeal to me not at all. Money is just money, my time and peace of mind is priceless.