Renting vs Buying

In relation to my other thread, I have some questions about buying property? What does dopeland think?

  1. How long generally do you think it’s advisable to live in one place to make a profit on property? 3 years at least I would think. Is it worth it?

  2. How long did you rent for? How old were you when you purchased property?

  3. Is there a certain age you should consider buying a house?

I still rent, but to your first question: have you noticed the gigantic recession going on? The answer will be totally different now than it was even 3 years ago.

Honestly, you couldn’t pay me to buy property where I am (Detroit) because there is NO way I’m locking myself into this dead-end state.

  1. Conventional wisdom says 3 years to break even in a normal market, what with realtors’ fees and so on. However, as zweisamkeit noted, we are not in a normal market. I wouldn’t even think about turning a profit right now. In fact what with the economy and people going through bankruptcy/foreclosing/short-selling and the ending of the tax credit and the ever-growing possibility of interest rates going up and the failure of loan modifications leading to more short sales, I wouldn’t be surprised if prices went down at least 10% next year, and I also wouldn’t be surprised if it took >5 years to break even, maybe longer (heck, in Detroit, maybe 25 years :slight_smile: ). That is, housing is still pretty volatile and buying trying to make profit in the short term (<10 years) is just crazy, in my opinion.

  2. Rented for 10 years. This is how long it took us to save up a down payment which meant we could pay off the mortgage with a single income (let’s just say, that down payment was somewhat more than 20%… we live in a pretty expensive place).

  3. We bought the house because we’re expecting a kid, would have been moving to a larger place anyway, and we really, really, really, really hate moving. And we also plan to stay in the house for >5 years (knock on wood). And with kids it’s nice to have a lawn and a garage and stuff like that. So with all that we were willing to take that 10% haircut we both think is going to happen next year on house prices and go ahead and buy now. I don’t think there’s an “age” to consider buying a house, though. I know one family with five kids that still rents… a 60-yr-old co-worker who sold his house and now rents. It’s just what your personal priorities and preferences are.

For question 1, the answers you’ve already have gotten sound good to me.

We did it an odd way. We bought about a year after we got married, when my wife was working and I was still in grad school. The house cost only $40,000 (nice neighborhood, 3 bedrooms.) My wife really wanted to do it. We sold it about two years later - twice - and wound up financing the second buyer because of the giant increase in interest rates at the time. We wound up making money on the deal, but we were lucky.

We then rented for 6 years, and decided to buy again when interest rates went down and the buyer got another loan and sent us our money. This was also triggered by a second kid on the way and a promotion for me. Ages - 27 first house, 34 second.

There is more to renting vs buying than just the finances. It is also having control of your destiny. if you rent you trade off no upside and having to wait for the landlord to fix things for not having to mow the lawn (and pay for repairs directly.) I’ll happily rent again when I get old and feeble, but now I’m glad I own.

How much you enjoy yardwork and home repairs should factor into the decision, too. I love working in my yard; I spend hours out there every week in nice weather. Other people would consider that a burden. If you decide you want to buy but don’t enjoy yardwork or home repairs, a condo/townhouse could be the compromise for you.

Also, don’t fall into the mindset that Owning is Good, Renting is Bad. There is nothing intrinsically wrong with renting. There are good points and bad points to both but you’re not a failure if you just keep renting if that’s what you want to do. Sure, with renting you’re not building equity (but neither are a hell of a lot of homeowners right now) and you have to wait for the landlord to do repairs often, but if you get a job in another area or hate the neighborhood you’re in, you don’t have to worry about trying to sell a house. You can just wait till your current lease is up (or break your lease) and off you go.
Kind of like having kids: have them if you want them, but don’t have kids because “it’s what you do” when you get all growed up.

I’m 38, and have always rented. About six years ago I got fed up with apartments and started renting townhouses.

Maybe things are different in Canada, but around here (a) if you own a condo you are still responsible for your own repairs (within the unit), and (b) if you own a townhouse you are still responsible for your own repairs and yardwork. Even as a renter, being in a townhouse is no guarantee of being absolved of yardwork/repairs: it depends on the lease/homeowner’s association (HOA) terms.

I’m on my third townhouse rental, and the yardwork has always been my responsibility. There was one HOA that took care of the front yard (and the gutters, which was awesome!), but I’m currently responsible for all of my grounds – and I have an end unit, which means a side yard. I’m also expected to take care of minor home repairs myself.

I think it’s a difference in terminology - what I meant was any co-operative kind of housing where the units are all owned by individuals, yet they all pool their money (in a homeowner’s association or condo board) to pay for repairs and maintenance like grass mowing, fence painting, siding, etc. You make a good point, though, to check into what is covered with your condo fees.

Maybe things are different in your next of the woods, but in Michigan, “townhouse” is automatically a condominium. In my experience living in the Toronto area, the same thing seems to be the general rule there, too.

I just bought my first house. Factors that convinced me to buy included the first time home owners buyers incentive, the housing market and the price of rent around here for what I wanted. I wouldn’t have been able to rent something for what I’m paying for my monthly mortgage and plus I’ll get a tax credit. I’ll be moving in three years but I’m going to rent it out as I only have 7 years until retirement and I love the house and the area.

Another factor in favour of buying - yeah, the market is really depressed right now, but that means it’s a GOOD time to buy (if you feel financially secure enough). One person’s upside down on their mortgage is another person’s golden opportunity (that sounds cold, I know, but it is a financial reality).

This is true, as long as you are pretty sure that:

  • you want to remain in that area (not just general metro area, but in the same city, same neighborhood, same house) for probably 10+ years.
  • you’re not likely to get laid off in this market.

I don’t think that you should count on a profit at all. Not in 3 years, not in 10. Not necessarily. I’m not saying that house prices never go up, or that you might not get one in 3 years or 10, but, historically, house prices have been pretty darn close to flat over the long term (aside from the recent extreme bubble that’s not likely to repeat itself soon).


For those who claim that this is a good time to buy because the market is depressed, I’d suggest that it’s really not. We’re still well above historical averages, which means it’s more likely than not that housing prices will continue to fall for a while. Yes, it’s a better time to buy than it was three years ago, but, since that was pretty much the absolute worst time to buy a house in the history of this country, that’s not saying much.

When you factor in upkeep expenses (houses need new paint and roofs and water heaters on a regular schedule), the profit you’ll make from owning the average house gets pretty close to 0. Now, that’s just the average house. Maybe you have a good eye for an underpriced gem that you can fix up, or maybe you know something about demographics and can predict that there will be an influx of population into the area you live in over the next decade, or you have some other special knowledge that will let you beat the average. But, and I hope you take no offense, the fact that you’re asking about it on a message board in such vague terms does not suggest that you have such specialized knowledge.

Houses can be a good part of an overall investment strategy. They’re an inflation hedge, they’re a forced savings plan, they’re a tax deduction (although the average deduction is generally priced into the market price, this would be a bonus if you pay a higher tax rate than the average person).

But you should not buy a house because you think you’re going to make a significant profit compared to renting. Especially in the short term, because the transaction costs on houses are usually around 6%

The NYTimes had an interesting article on this subject today;
Men Who Jump the Picket Fence

i am not in a financial position to buy, but if i had the wherewithal right now i would. The caveat being, I would try to buy something that needs some remodeling and is undervalued as a result.

The one big mistake I made when buying my house previously was that I bought more house than I could really afford comfortably. On paper it seemed okay - but the reality is that I would have preferred to buy less house and kept more savings so down the road it would not have been so traumatic when I had to switch jobs and my husband lost his.

I’m currently renting in someone’s home. She travels a lot and I watch her cats & plants in exchange for a reduced, all-inclusive rate. It’s been great but I will have been here 2 years in June and am looking forward to moving to my own place this summer so I stop feeling like a paying houseguest.

But i’ll be renting.

For us, we purchased a home when renting one of the size we needed was more expensive than our costs included in owning the home. We still consider the condo fees, taxes, repair costs and mortgage payment as our ‘rent.’

Compare what you want or need in a home in terms of rental cost and purchasing cost (don’t forget to include closing costs). Depending on the area, you may be surprised what you find.

This. I advise picking a house the way you’d pick an apartment. You set a budget for the monthly rent/mortgage, figure out what that translates to in terms of selling prices (I’d trend conservative on estimating the interest rate I could get, too), and that’s your upper price limit. Any profit you make on the house is gravy.

That they do, and you should take this into account when setting your budget. New houses and old houses both seem to have these kinds of issues, so don’t think you can get away from it by picking the right house. You might get lucky for a while, but you shouldn’t count on getting lucky to be able to afford a house, any more than you should count on winning the lottery to pay your other bills.

I think it’s generally advisable to live in one place for as long as you can, but I’m a packrat and hate moving.

No, no, NO, 6.02 * 10[sup]23[/sup] times NO! I think this kind of thinking is what got a lot of people into trouble during the housing bubble. You should buy a house when you want to stay in an area for a while, preferably when at least one of you or your spouse has a fairly steady job (if you’re single, you should have a stable job), and when you can afford a house that you like. Your age should have absolutely nothing to do with that decision.

People set too many arbitrary milestones of “you should do X by the time you’re age Y”. The only one of those that I think makes any sense is “you should have kids by age Y if you’re going to have them”, because of health and fertility issues. All the other milestones of this type are arbitrary and, therefore, silly.

Disclaimer: I am not anything resembling an expert in real estate or mortgage financing. But this advice helped me pick a house in 2007 that we can still afford now.

Don’t leave out interest. Many people take at the price they pay for a house and the price they sell it for some years later, subtract, and say they’ve made that much money. The interest that was paid during that time is in most cases extremely significant.

Which brings me to another tip I learned. If you can afford it, try to pay a little extra toward the principal each month. It’s amazing the effect that can have on what you end up owing.

You have to clearly designate that it’s towards the principal and not the overall loan, cause those sneaky bastages will apply it to the interest first of course.

While I agree with the general statement, YMMV on the second part. We round up our monthly payment a little bit, and with no extra comments needed, the additional money is automatically applied to our principal.