I saw a post which said this a day or so ago and didn't get around to asking the question until now. Isn't it usually better to buy than rent?

It depends. If you own a company then leasing would be better for you can

depreciate your cras over a 3 year term then lease new cars for another 3

years. That way you can have new vehicles every 3 years and deduct them

from your taxes as well.


If your just a regular person wanting to buy then

that's better than leasing for you cannot deduct the expense from your

taxes. You also have to be careful to not go over the milage limits or you

will be fined allot of money. Buying is better for single car owners.

Interest.

It depends. If you own a company then leasing would be better for you can

depreciate your cras over a 3 year term then lease new cars for another 3

years. That way you can have new vehicles every 3 years and deduct them

from your taxes as well.


If your just a regular person wanting to buy then

that's better than leasing for you cannot deduct the expense from your

taxes. You also have to be careful to not go over the milage limits or you

will be fined allot of money. Buying is better for single car owners.

I think he means residences, not automobiles. He did put 'rent' in the title, not lease.
OP, can you verify that?

I think he means residences, not automobiles. He did put 'rent' in the title, not lease.
OP, can you verify that?

Right, I meant residences.

Buying is better because you will accrue equity in a bought house where no

equity will be had when you rent. Sorry I thought you ment cars.

The homily goes, "If it depreciates, rent/lease it. If it appreciates, buy it." I'm still not convinced that leasing a car is a good deal for the average citizen, but I am totally convinced that renting a home is not.

If the U.S. actually starts to decline into a former world power, our economy goes downhill, and property values begin to go downward permanently, then of course things will be different. But if you predict that, housing is the least of your concerns. You should be putting yourself in a good position to emigrate, not worrying about buying a house. :)

Thanks guys.

Rent may be cheaper in the short term, but it's money that you will never see again. I repeat, you will never see any return on that money whatsoever.
If you buy, you will get that money back, and most likely more should you ever decide to sell the house; as houses almost invariably appreciate in value.
The biggest advantage to rent, other that being slightly less expensive, is that any repairs/maintenace needed on the residence is the landlord's responsibility.

Though property has proved to be an excellent and somewhat 'safe' investment, there is a school of thought that says rent and put your (mortgage) money into other higher earning investments, which is all well and good if you're a real savvy investor, but not so easy for the rest of us; there's also a far greater risk of losing your money, with higher yielding investment instruments.

One of the greatest benefits for UK home owners is that there is no capital gains tax to pay on your main residence. Whatsmore, is that many business people have laundered their black money by buying older properties and modernising them with their secret horde thereby creating value that they benefit from legally when they sell.

The only time that renting makes sense is if you are very mobile and do not plan on staying in one area very long. There's a number of people, primarily younger ones just starting out that fit that profile because at that stage their jobs often require them to transfer between locations fairly often.

But once they settle down, renting is a complete waste of money.

Owning is almost always better than renting. Until the past 5 years when WAY too many people with lousy credit and no money got homes and are now losing them. :(

It's a great time to buy now. The market will come back and people will make millions. They always do.

Well hell yes it is better to own(outright) say a $400000 house than to say pay some asshole rent.

Let me ask you this though. You live in Sanfran(I hear houses are outrageously priced). You get a 700000 mortgage,(even putting 70000 down - probably some of it line of credit knowing people nowdays).

So then say interest rates go to 12% in 3 years. Guess what...good luck making that payment, good luck being able to sell, even if you do, you probably still owe money, because you haven't even tickled the principal yet.

So the answer is, like anything else. It depends.

Let me ask you this though. You live in Sanfran(I hear houses are outrageously priced). You get a 700000 mortgage,(even putting 70000 down - probably some of it line of credit knowing people nowdays).

So then say interest rates go to 12% in 3 years. Guess what...good luck making that payment, good luck being able to sell, even if you do, you probably still owe money, because you haven't even tickled the principal yet.

Well, that situation isn't very representative. Basically, that person has gotten in over their head, and so gotten burned. The usual way to buy a house is to come in with a larger down payment (more like 20%) and to get a fixed-rate loan (so there's not going to be a sudden jump in your interest rates). I doubt you'd find a bank willing to go in for the type of loan you describe these days, after so many of them have gotten burned on the subprime mess.

Though property has proved to be an excellent and somewhat 'safe' investment, there is a school of thought that says rent and put your (mortgage) money into other higher earning investments, which is all well and good if you're a real savvy investor, but not so easy for the rest of us; there's also a far greater risk of losing your money, with higher yielding investment instruments.

The risks are a LOT bigger doing this, because the returns need to be MUCH larger in order for this scheme to work out. This is because you only get to invest the *difference* between the cost of renting and buying. If you can get very cheap rent (living with the parents, say), or buying is for whatever reason MUCH more expensive than renting where you live, then it can make sense. And as you say, even then you need to be a savvy investor. For the other 99% of people, there's no point...

I know, personally, four people who lost serious money buying a house - who would have been better off, financially, renting.

I have never had enough money to buy a house, and have never lived in a dwelling owned by its occupant. Whenever I made the calculation, it always turned out that the money lost on the house - taxes, repairs, interest, etc - would be greater than the rent I was paying.

I did try to buy once, and lost about 5 thousand dollars when the deal fell through.

But I never included appreciation at significantly greater than inflation rates into the calculation. That is how everyone I know who made out buying made out. But that is just an investment gamble, like any other. The recent bubble made geniuses out of a lot of people, but not me. And not the four I mentioned.

The payoff in buying is control of certain aspects of ones life - married and with a family, buying would have been an important step, regardless of cost. I don't think the calculated payoff, in other words, is the main consideration.

edit in: a couple of years ago I ran across an interesting number, which was that as of that year the total owned equity in primary residences in the US had been dropping in absolute dollars since about the early eighties. In other words, actual house ownership - equiity as an owned asset - had been dropping. I don't know if that trend has continued since.

In light of that, the arguemnts in favor of "ownership" as an investment we've been hearing for years might be essentially hollow. The government is now beginning to consider various ways of bailing out what appear to have been badly misguided investments, amde on such a large scale that - like big banks - they cannot be allowed to fail en masse. So with various tax breaks and government bailouts the investments may turn out OK. But the argument that owning a house gets you in line for government handouts is not the usual one.

Well, that situation isn't very representative. Basically, that person has gotten in over their head, and so gotten burned. The usual way to buy a house is to come in with a larger down payment (more like 20%) and to get a fixed-rate loan (so there's not going to be a sudden jump in your interest rates). I doubt you'd find a bank willing to go in for the type of loan you describe these days, after so many of them have gotten burned on the subprime mess.

Considering you know quite a lot about economics, I am surprised you think that situation is not representative. Here in Toronto Canada 5% down is common.(first home buyer plan)

Not sure if you can do that in the states. considering you guys can right off interest payments in your taxes...aggressive property buying is even more exaggerated down there...hense the "housing bubble".

Banks willing to do high risk loans - lmao. I personally find every single conversation I have with a banker these days, ends with "Hey can I interest you in a low rate HUGE line of credit" and i'm like "fuck off".

I know, personally, four people who lost serious money buying a house - who would have been better off, financially, renting.

I have never had enough money to buy a house, and have never lived in a dwelling owned by its occupant. Whenever I made the calculation, it always turned out that the money lost on the house - taxes, repairs, interest, etc - would be greater than the rent I was paying.
Please explain to me where you would be 'losing' money on repairs, taxes, etc.? If you owned a business, wouldn't you be responsible for repairs of all your buildings and equipment? How is it any different with a house?
You do know (at least here in the U.S.), all the interest and tax you pay on the house is tax deductible, don't you? So if you had to make any repairs to your house during that year, you will get part of that money back in your return.

I did try to buy once, and lost about 5 thousand dollars when the deal fell through.
How did you lose 5 large? It sounds like you didn't have all your bases covered when you and your realtor wrote up the contract.
Was that 5 large part of your closing costs or was it earnest money?

You do have to watch realtors(and sellers/.buyers themselves) these days, I've heard of a lot of people getting screwed on trying to close or after and moving into a pigpen.

How did you lose 5 large? It sounds like you didn't have all your bases covered when you and your realtor wrote up the contract I covered the bases as far as what normal house buying involves - inspections, insurance, codework, etc, all done to the letter (and at my expense). Never mind the long story - let's just say the laws are complex and recently changed regarding methamphetamine production, and suing people who have no money is a waste of time.
Please explain to me where you would be 'losing' money on repairs, taxes, etc.? The money I would have been paying out every year that would not go into equity was greater than my current rent payments. I don't get that money back, selling the house or any other time. Thererfore I count it as "lost", in the same way rent monies are "lost".

At my income levels, tax deductions don't mean much - but I figured them in.

Again, if the house appreciates a lot, that helps in the long run. If you can count on that, figure it in.

You have appreciation, depreciation, tax write-offs, etc. I cannot fathom how anyone cannot make money in real estate unless they buy foolishly, bought at the top of the market, or are trying to sell in a down market. Real estate has always been a very good investment. It's time-proven.

If your rent is $1000/month you have nothing at the end of the year.:(

If your home payment is $1000, and $700 of that is interest, that whole $700 is a write-off. If $200 is taxes, that's a write-off too. That's an almost $11,000/yr tax write-off. Subtract that from a $40,000 income and that's pretty darn good. You're then only paying taxes on $29k instead of $40k.

Real estate is one of the best investments out there. I personally know hundreds of people who have made a lot of money in it.:)

You do have to watch realtors(and sellers/.buyers themselves) these days, I've heard of a lot of people getting screwed on trying to close or after and moving into a pigpen.

Yes you do. Luckily I had a good realtor that went over every detail of my contract with me. Any questions I had about covering my behind were explained to me in detail and were shown to me on the contract.
I made sure my contract incuded a clause that allowed me to terminate any deal if the house didn't meet standards, including refunding any earnest money. In fact, I had to do that with the first house I had a contract on because we found two huge vertical cracks in the foundation.

The money I would have been paying out every year that would not go into equity was greater than my current rent payments. I don't get that money back, selling the house or any other time. Thererfore I count it as "lost", in the same way rent monies are "lost".

I can easily believe that buying would increase your monthly "lost" expenses, as you transition from renting. The thing about this is that these expenses are more-or-less fixed throughout the life of the mortgage (well, maybe not repairs), whereas your rent is going to continue to rise. Over the short term, say 5 years or less, it can definitely be a losing proposition if there isn't significant appreciation. But in the long run, 20 years down the road, the lost expenses associated with the house will end up being less than rent. Rent control or other extenuating factors excluded, of course...

Considering you know quite a lot about economics, I am surprised you think that situation is not representative. Here in Toronto Canada 5% down is common.(first home buyer plan)

I thought the first-time home buyer plan had to do with borrowing money from your retirement accounts? I.e., you go to the bank with a 25% down payment (and so receive a low interest rate), but only 5% of that is out-of-pocket money. The other 20% is borrowed interest-free from your retirement account. No?

You can surely get loans for 5% down payment in the USA, although the rates are terrible. I never hear anyone talking about going in with less than 10%, and people seem to prefer to put down 20% if they can afford to.

You can surely get loans for 5% down payment in the USA, although the rates are terrible. I never hear anyone talking about going in with less than 10%, and people seem to prefer to put down 20% if they can afford to. My guess is that most homes in the US bought by first time buyers in the past five years were bought with much less than 10% down.

A large fraction of first time buyers of late even borrowed their closing costs.

Many in hot markets set up the payments to cover the interest only, counting on appreciation to build equity.

And the rates weren't that bad - adjustable, of course.

That's who I was competing with, when I went house shopping - people willing to sign up for deals like that, with house prices adjusted accordingly.
The thing about this is that these expenses are more-or-less fixed throughout the life of the mortgage (well, maybe not repairs), whereas your rent is going to continue to rise. Over the short term, say 5 years or less, it can definitely be a losing proposition if there isn't significant appreciation. But in the long run, 20 years down the road, the lost expenses associated with the house will end up being less than rent. But the loss comes first, and taxes, insurance, etc, do rise (never mind the insanity of an adjustable mortgage). The breakeven is not when the curves cross, but when the total gain matches the total appreciated loss of years ago.

That's quite a few years, given good luck with repairs.

Again, I don't recommend renting if you don't want to or don't have to. I'm saving now for another try at buying. But the argument is not financial. Lots of investments have as good or better track records than house buying. They even have bubbles and such, if the quick buck is what you're looking for.

Well, that situation isn't very representative. Basically, that person has gotten in over their head, and so gotten burned. The usual way to buy a house is to come in with a larger down payment (more like 20%) and to get a fixed-rate loan (so there's not going to be a sudden jump in your interest rates). I doubt you'd find a bank willing to go in for the type of loan you describe these days, after so many of them have gotten burned on the subprime mess.
In the city I live in, that usually means around $100,000 in down payment. Sounds doable! :D :rolleyes:

I know, personally, four people who lost serious money buying a house - who would have been better off, financially, renting.

I have never had enough money to buy a house, and have never lived in a dwelling owned by its occupant. Whenever I made the calculation, it always turned out that the money lost on the house - taxes, repairs, interest, etc - would be greater than the rent I was paying.

I did try to buy once, and lost about 5 thousand dollars when the deal fell through.

But I never included appreciation at significantly greater than inflation rates into the calculation. That is how everyone I know who made out buying made out. But that is just an investment gamble, like any other. The recent bubble made geniuses out of a lot of people, but not me. And not the four I mentioned.

The payoff in buying is control of certain aspects of ones life - married and with a family, buying would have been an important step, regardless of cost. I don't think the calculated payoff, in other words, is the main consideration.

edit in: a couple of years ago I ran across an interesting number, which was that as of that year the total owned equity in primary residences in the US had been dropping in absolute dollars since about the early eighties. In other words, actual house ownership - equiity as an owned asset - had been dropping. I don't know if that trend has continued since.

In light of that, the arguemnts in favor of "ownership" as an investment we've been hearing for years might be essentially hollow. The government is now beginning to consider various ways of bailing out what appear to have been badly misguided investments, amde on such a large scale that - like big banks - they cannot be allowed to fail en masse. So with various tax breaks and government bailouts the investments may turn out OK. But the argument that owning a house gets you in line for government handouts is not the usual one.
Most people are not as smart as you are. I wonder if that's why the market in the US is nearly completely destroyed... :rolleyes:

In the city I live in, that usually means around $100,000 in down payment. Sounds doable! :D :rolleyes:

Yeah, it's about the same where I live. What sustains these prices is the constant influx of people who already own houses elsewhere, and so can buy with much, much larger down payments.

My guess is that most homes in the US bought by first time buyers in the past five years were bought with much less than 10% down.

A large fraction of first time buyers of late even borrowed their closing costs.

Many in hot markets set up the payments to cover the interest only, counting on appreciation to build equity.

And the rates weren't that bad - adjustable, of course.
Of course. Subprime rates marketed to people who couldn't really afford buying a house. Out of a sudden, the "american dream" is attainable by all! WOHOOOO!!! No, seriously, that was dumb as hell... :bugeye:

Yeah, it's about the same where I live. What sustains these prices is the constant influx of people who already own houses elsewhere, and so can buy with much, much larger down payments.
No. That $100,000 is the 20% downpayment! :eek:

My guess is that most homes in the US bought by first time buyers in the past five years were bought with much less than 10% down.

A large fraction of first time buyers of late even borrowed their closing costs.

True, although that was unprecedented at the time, and probably won't be repeated.

That's who I was competing with, when I went house shopping - people willing to sign up for deals like that, with house prices adjusted accordingly.
But the loss comes first, and taxes, insurance, etc, do rise (never mind the insanity of an adjustable mortgage). The breakeven is not when the curves cross, but when the total gain matches the total appreciated loss of years ago.

That's quite a few years, given good luck with repairs.

All true; it only works as advertized in the long run. It's part of a retirement nest egg, not a short-term investment that's going to pay off any time soon.

Lots of investments have as good or better track records than house buying.

True, but only houses allow you to redirect your housing expenses into the investments. That won't always make it work out, but that's the reason people tend to opt for it.

No. That $100,000 is the 20% downpayment! :eek:

Yeah, I know.

Yeah, I know.
Wow! Really? Where do you live!?

Most people are not as smart as you are. I wonder if that's why the market in the US is nearly completely destroyed... :rolleyes:

No. It's not. There are a few (hellhole) areas in AZ, NV, and FL that are really bad. The rest are pretty much ok.

And W is going to bail out the morons who got homes they should have NEVER had. :mad: I say make them pay. They were the stupid ones who bought WAY over their heads.

WTF>? did Sandy just bitch about Dubya?

Ohhh! Dubya's in trouble, He's lost Sandy's vote!

I DESPISE W's immigration weakness. Americans have spoken. We do NOT want criminal aliens here. :mad:

Tell 'em Sandy!

No. It's not. There are a few (hellhole) areas in AZ, NV, and FL that are really bad. The rest are pretty much ok.
Well, let's see.... over $10 trillion in consumer debt, nearly $10 trillion national debt, over $30,000 of debt per capita (and that's just with the national one).... huummm... yup, looks like you're screwed.... :D

Wow! Really? Where do you live!?

California. Vancouver's housing prices may be extreme by Canadian standards, but there are a slew of more-expensive cities in the United States. We have 10 times as many people, and much more desirable real-estate. I would guess that the number of Americans living in areas with median home prices higher than those in Vancouver easily exceeds the entire population of Canada.

California. Vancouver's housing prices may be extreme by Canadian standards, but there are a slew of more-expensive cities in the United States. We have 10 times as many people, and much more desirable real-estate. I would guess that the number of Americans living in areas with median home prices higher than those in Vancouver easily exceeds the entire population of Canada.
That makes sense because as a general rule of thumb your median income is higher then ours. Hence why so many americans move to Vancouver. It's easy to produce a higher median income when you have such a large population. How much... 10 times bigger population? But your middle class seems to be shrinking, so watch out! :D

In fact, the ONLY reason why Vancouver's real estate market prices are so high is because americans are constantly moving in. With the two currencies at par, that trend might slow down considerably and our housing bubble is likely to burst. So I must be prepared to enter the housing market when that happens.... :D