I read somewhere (how’s that for a cite) that only a tiny minority of people ever actually save a 20% downpayment. For most it usually includes gifts from parents or other family or inheritances, and for many people those just aren’t options. And of course a lot of people, especially during the subprime heyday, started life as homeowners with 80/20 mortgages (1st mortgage for 80%/2nd mortgage for 20%) and went underwater at the first minor wave.
I only own a home because I took over the payments on my mother’s house when she died, and she only had a home because she drew her Social Security while still working and accumulated a nice nest egg and there were actually banks willing to give a 30 year mortgage to a 65 year old single woman (which made me say :dubious: at the time and still does- I personally knew my mother was good for it while she was alive, but I also knew there was no way she was going to live to be 95).
Houses only need repairs occasionally. And for almost all mortgages taxes and insurance are part of the mortgage payment. Utilities have to paid whether you rent or own. Apart from a fleabag former motel I lived in for a while in college, I’ve never been in a rental that the rent included utilities.
My house payment is about $200 dollars a month less than a comparable house rents for in my area. Even some one bedroom apartments are higher. If I disregarded the part that goes to taxes and insurance, the part that actually goes toward principal and interest is less than a quarter of what rent would be. The occasional repair is a drop in a bucket compared to what we’ve saved. If I rented I’d still be responsible for snow removal and lawn care.
There are plenty of reasons it makes sense for some people to rent. But money isn’t one of them unless you’re moving every year or two. If rent didn’t bring in significantly more than the total cost of ownership there would be no rental property.
This might be just something that varies with location. I’ve never rented a place that didn’t include some utility or other. Water and trash are very common, some places include more. My buddy who owns the condo has his electricity included (paid for en masse by condo fees) because they didn’t wire the units with individual meters. If you rent out a place like that, you pretty much have to include the utility in the rent. There’s no way to independently measure and charge for it.
That’s awesome. Is that because you bought when prices were lower and rents have climbed, or did it start out that way? I’d happily buy a place if I could get a lower payment (or expect to break even renting it out). Currently, my rent for a small 1-bedroom house is $1250/mo. Zillow claims that the house I rent is worth well over a half-million dollars. Personally, I think that’s crazy (and Zillow’s probably overestimating). My rent wouldn’t even come close to covering an interest-only mortgage on this place, let alone property taxes, the opportunity cost of pulling a down payment out of other investments, the roof that got replaced last winter, etc.
Even in the long term I don’t see (and my fairly detailed spreadsheet doesn’t predict) how I’d ever win financially by buying in this kind of market.
I think I made a pretty good point above about how cost of ownership isn’t a constant. In some cases my cost of ownership would be much higher than my landlord’s cost of ownership, which leaves him room to make a profit as a landlord and me room to save money by renting. Idiotic property tax schemes make this very much not a zero-sum game.
In New York City, one of the places where for a variety of reasons, lifetime renting is considered normal behavior, heat and water are almost always included, and gas for the stove is included about 50% of the time.
For heat, most buildings are steam heated using central boilers, you can’t adjust the temperature except by opening windows so it would be practically impossible to charge individually for heat. The landlord is required by law to provide, I think 65 degrees during the day and 55 at night, but in practice they deliver 95 degrees and 85 degrees, respectively. My last place was so overheated we had open windows in every room, all through the snowiest winter in years.
I’m currently preparing to look for an apartment. My previous place included all utilities. At the time I assumed it was because it was low-income housing. Many of the rentals I’ve looked at ads for include something. This is in Southern California.
Not that surprising, as long as she had the income to support the payments. Very few people ever pay of a mortgage - the house is sold and the bank gets a payoff when the new mortgage is written.
iamthewalrus, you make good points, but ultimately your dancing around the fringes just serves to illustrate the general rule (which is that a lifetime renter will on average and in general etc. etc. pay more than a homeowner).
Water and trash being included is not unheard of here, but not the norm except for small studio or one bedroom apartments. Gas and electricity are almost always the tenant’s responsibility. That doesn’t mean added to the rent, it means you order the service turned on in your name, often requiring separate deposits, and the bills come directly to you. When you move, you order the service turned off the day you leave and it’s up to the landlord or next tenant to get it turned on in their name.
It started that way. In fact, that’s the way it’s always been for as long as I’ve been old enough to be aware of housing costs (over 30 years). The roadblock for most people is down payments and closing costs, which is why renting is cheaper for people with mobile lifestyles.
I can’t see how a landlord’s cost of ownership could possibly be less for a single family house. There’s no such thing as a bulk quantity discount for houses, and most municipalities have *higher *tax rates for rental properties. In addition, there’s the occasional dead-beat tenant and excessive wear and tear that’s common with rentals.
I could possibly find an apartment with rent lower than my house payment, but I’d have to give up a lot of my possessions, as well as pets and possibly my daughters. It’s hard to fit 4 people in a 1 bedroom apartment.
And even though there is a chance that I’ll end up having to sell it for less than I paid, I’ll still get back at least some of what I paid in. If I rented I wouldn’t get back any.
I’m a lifetime renter and renting sucks. I have no equity to borrow against and I’d happily pay more money to not share a wall with my douchebag neighbors. Unfortunately, 20% of the average home in my neighborhood is well over $100,000, and if I had that much money saved up to begin with, I’d buy a gently used Ferrari 360 Modena and live inside that.
Last year when the septic system had a clog it was the landlord who had to figure out what the hell was wrong, bail out the toilet, hire a honeywagon, decide to either hire a plumber/septic service or rod it out himself, and best of all, it wan’t me kneeling down in three feet of snow and mud over the [del]gaping maw into the abyss of hell[/del] opening of the septic tank to figure out what the hell was wrong and how to fix it.
It’s at moments like that I’m happy to be renting. It is worth it for many of us to pay someone else to deal with that sort of (literal) shit.
I’ve owned and I’ve rented. I’m a 52 year old single woman, and I’m beginning to lean toward liking renting better than owning. The whole “hey, come fix this” thing is pretty great, as is the “I’m tired of this area I want to move” thing.
Actually, what am I talking about? I own AND I rent right now. When I left Alaska, even Anchorage (which almost never has real estate hiccups), was feeling the recession in a big way. So I had to rent out my place in order to move. It’s always stressful. My first tenant was great, but then he moved to the states like me. My second tenants, a married couple, are pretty good, but they’re often late on rent and they almost broke up (and wanted to move out) so I’m constantly worried that I’ll have to do a frantic tenant search. There are a lot of other good things about them, so I really don’t want to lose these guys!
I’m not even sure I want to stay in WA state, so I don’t think I’ll buy here. The good things about owning are, you can decorate and paint however you want, you can own pets and not pay a non-refundable deposit, and generally when you own where there are a lot of other owners, the behaviour of your neighbors is a bit better (IME) re: loud noise, messiness etc.
I am 57, and I have never owned a house. I make a major move (to a new region of the country) about every 6-7 years, so it would be a big problem to sell the house everytime had to move. Considering that most houses have lost 30-50% of their value in the last 5 years, I do not regret my choice.
Though, often the difference is that you can rent a smaller unit than you can own.
If you’re one of three apartments in a house, and you only need that 700sq ft space, even though the three renters together are living at a loss compared to the cost of the whole house, I am sill living more cheaply than if I had to buy a whole property, and come out ‘ahead’.
I understand. A couple of points though. First, I was responding to people like aanamika, who seems tothink that the fact that the landlord takes care of repairs is just manna from heaven from a financial perspective. You, on the otherhand, fully understand that the renter ultimately pays for repairs. Second, a homeowner can hire someone as well. Of course the homeowner is more responsible for the outcome of the repair than is the renter, but it’s not the case that the homeowner always must get their hands dirty. Third, a homeowner’s control over the repair means that they can see that it gets fixed correctly and on time, whereas a renter is more dependent on the landlord.
We actually own our house free and clear also (bought half of what we could afford, and paid it off with an inheritance). My somewhat poorly worded point was that the bank doesn’t really care if you’re going to live to pay off the mortgage; they just want to (eventually) get their money back with the interest due. Whether that’s a final payment after 30 years, a refinance, or the house being sold, they don’t much care.
I’m 33 and have always rented, but am closing in a few weeks on a house. For me, buying made much more sense than continuing to rent. I’m going to be going from a 1200 square foot apartment with 1 underground parking space to a 2700 square foot house with a 2 car garage. I’m paying cash for the house, so my only ongoing costs will be property taxes and repairs and remodeling, which I would have been paying indirectly to my landlord anyways if I continued to rent. Plus, I’m buying at a low point in the real estate market (hopefully), so if I live there 10 years or so, I should get a nice return on my capital investment. If I moved every 2 or 3 years or was planning to move over the next few, I would have continued to rent, but I plan on staying for at least 5 years, so continuing to rent and turn a profit for someone else just didn’t make sense anymore.
I think you’re right about the long-term averages, I just think long-term averages are not a good thing to base personal housing decisions on. People are too quick to apply a long-term average to a decision made at a specific point in time for a specific person. Seven years ago, when I moved here, I had lots of people telling me to buy, basing their arguments on long-term averages. My parents offered to help with a down payment, etc. I’m pretty glad I ignored the rule of thumb and looked at my spreadsheet.
Also, while I’m still renting housing for one, there were reasonable odds that I’d have a family by now, which means that buying then either would require me to sell in a short period of time for something bigger, or to buy and pay for more house than I need. I think those odds are still pretty good, and that buying something today would require me to predict my future much more reliably than I think I can. On the other hand, for my friend with a wife and two kids (and plans for more), it makes perfect sense to buy that four bedroom today.
I’m quite happy for people who have figured out that they’re better off buying, or even that most people are. I’m frustrated with statements like saying renting is “throwing money away” that suggest there aren’t nuances or individual considerations that override the averages.
