I INSIST, Renting is Better then Buying

Or that's what you want those "suckers" to believe, eh?

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Because then, you can make 10% off their house when they sell their house for the same value they bought it!!!!!

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Do YOU own a house, btw? Or you rent your own house and sell a whole bunch? Well, you would probably be able to afford owning one. But would you sell your house for a "profit" and then go live in the street?

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So.... why do you guys think the US has a $9 trillion dollar consumer debt?

Oh, let me guess... Because americans love buying imaginative rainbows up in the sky.

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Nope because the greedy, dumbass lending companies thought that they could make more money by offering subprime loans to people with bad credit. Those people have bad credit for a reason, yet the mortgage companies lended them money to buy houses, which are in a foreclosure status, anyway.

 

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I own two houses at the moment. One to live in, and one to sell.

Regardless, you've still never really proved your point. Renting is almost always the best option when you're talking short-term, because of closing costs and other things associated with buying that take time to recoup. However, if you plan to live in a house for more than say, five years, you would most certainly be better off to buy it, in the large majority of situations. (assuming historical averages are in play.)

And I need a source for this 80 year mortgage you brought up, because frankly, I don't believe it exists. I think you made that up.

 

Which one is making you money?

Houses appreciate at the rate of inflation. Normally, the real value of the house doesn't change much by the end of the mortgage. Do you ever do present value and future value calculations?

Well, I can't find any source for any mortgage right now. But, really, there is no limit for the mortgage you can get. The longer it is, the smaller will your payments be.

 

Maybe here, for calculations....
http://www.forsalebyownercenter.com/tools/

 

Theoretically, both of them are making money, but only once that gain is realized of course.

I would contend that real estate has appreciated faster than the rate of inflation for the past 17 years, if not longer. The only time I can remember when that probably wasn't true was from approximately 1979-1982, and certainly that short period of time was more of an abberation than the norm.

With regards to the limits on a mortgage, I don't know where you plan to borrow, but most traditional and credible borrowers do have limits on the terms of the loans they make.

As far as doing NPV calculations, I don't sit around doing things like that for kicks, if that's what you mean. I've got the sheepskin on the wall that proves I knew how to do them backwards and forwards in 1995, but when you don't use them for work, those formulas tend to leave you rather quickly, as I suspect it is with many disciplines. If you're trying to say that when you run NPV calculations on a house, and discount for interest, that you never make money on property, then I would suggest you find somewhere to demonstrate this in the present economy, outside of the third world. Property just ain't gettin cheaper TS. Cause they ain't making any more of it.

 

Then you have a large pile of cash that you got from selling the house, unlike the renter who has nothing. Do you seriously not understand this?

It doesn't matter how much your house depreciates. At least you can recoup some of the money that you've been paying for shelter.

If I had a choice between renting a computer for $100/month for 12 months or buying a computer for $1200, of course I would rather buy the computer. After 12 months I will be able to sell it and get some of my month back. The person who rented the computer will not be able to get any of his money back.

 

You only get a pile of cash equivalent to the equity, which is practically zero until you've been there for somewhere between 5 and 10 years. Meanwhile, the renter has the money (s)he saved by having lower monthly expenses, or whatever else (s)he bought with it instead, including returns on other investments if (s)he chose to use it that way.

 

YEEEEEHHHH!!! Someone with a good brain!!! Finally I don't feel so lonely anymore! Thank you Delvo, and welcome!!!

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This is the only way that renting can ever beat buying in the long run. However, the investments must pay off at a much higher rate than the real estate, because you'll be investing much less per month (since you still have to pay rent). This means, among other things, that the investments will necessarily carry more risk than real estate (which itself consistently appreciates faster than inflation, despite your unsubstantiated claims to the contrary).

Moreover, even if it is theoretically possible, most people don't have the time or inclination to do that kind of investing. They're too busy with their jobs, which are providing all this income in the first place. Buying a house kills two birds with one stone by turning your housing expenses into an investment, and comitting you to a long-term savings schedule. Most people, if they rented instead of bought, would consume most of the difference in income, or not work as hard (and so not have as much income). Thus, a mortgage is a financialy prudent decision for most people.

There's no such thing as a savings acount with 5% a month compound interest. Something like 1% per *year* is typical. You can get returns around 5% per year in CD or money market accounts, but these require tying up your money for various periods of time, and so you incur opportunity costs almost as bad as buying a house. An investment that returned 5% per month would work out to almost 80% per year. This is an order of magnitude better than you can expect any investment to do, even over short time scales. You might as well spend the money on lottery tickets.

You'd have a big pile of money, which you could use to buy or rent a place to live. If you rent instead, you end up with a smaller pile of money *and* no place to live. Logic doesn't get much clearer than that.

There is no such thing as an 80 year mortgage. No lender is going to agree to terms that exceed your life expectancy. 40 years is the longest I've ever heard of, and that's rare. Increased housing prices require increased income, not longer mortgages.

 

Make a like for like comparison please. Cost of buying an apartment, vs renting an apartment, or buying a house vs renting a house.

An apartment is no use to me, I have dogs, so I bought a house. You don't get gardens with aparments, which is why they are cheaper. IE, you pay less, because you get less.

So honest comparisons please, and honest maths. Renting for ever is never going to be as cheap as buying in the long term. I'll be mortgage free in eight years. You'll still be paying out.

 

WRONG! The time involved is dependent on any number of things, so to say 5 to 10 years is not only wrong, it's totally unsubtantiated. In hot markets, one can buy and sell within months for a profit; in down markets, it might take a longer. But to say what you've said is absolutely wrong.

Renters, if you want to rent instead of buy, you don't have to use weird economics to "justify" it ..just do it. And if anyone says anything about it to you, just tell them "Fuck off!" It's your decision and yours alone ...but don't try to justify it as being cheaper ...that's more ridiculous than telling people to 'Fuck off!'.

And if you're just dying to justify renting, ask people if they could find a home in downtown where you live in the rental. Ain't many homes in downtown, but there's lots of apartments.

Baron Max

 

K... back to the boring thread...

So you are saying that you are always making money with one, and the other you only have some "gain" in the end?

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Yeah well, why do you think the market is going to crash?
It's like a huge bubble ready to explode.

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Houses are ridiculously overvalued in the states...

Sure. So?

Neither do I. Hence I haven't made any.

Not if you buy foreclosures at least. Btw, foreclosures are rising all over the states. Why do you think that is happening?

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All markets are cyclical. What goes up must sometime come down. If it continues to go up and up all the time, a huge collapse follows. Why do you think after the great depression, Keynes suggested that the government must regulate the economy so that it grows slightly at a time and slowly goes up and down? That's to minimize the falls, correct? Well... the housing market is being badly managed. Why? Because people are taking secondary and tertiary mortgages. They keep writing notes to extend the mortgages. It's debt building on top of debt. That's why the consumer debt in the US is over $9 trillion dollars.

The US right now is functioning as a pure debt economy. The combination of credit cards, mortgages, borrowing on equity and bad monetary policies is piling up into a huge disaster.

Doesn't look like you guys understand macroeconomics....

 

Doesn't matter, as long as the quality is the same.

Your economy is ridiculous.

 

They are ridiculously overvalued in Europe as well. I guarantee you my 1164 sq ft. 3bd, 2ba house with a .25 acre lot would go for WELL OVER what I paid for it ($123,900).

As I mentioned in a previous post; it's because the greedy SOB execs with the mortgage lending companies granted too many subprime loans to people with bad credit. And low and behold, they default and the house gets foreclosed upon, all because some CEO wanted to make another 6 figures that year. People with really bad credit have really bad credit for a reason.

 

As usual, a lot of truth and wisdom in what you say, but it is not an "either / or" (real estate or investing) proposition by necessity, even for people of modest means.

They can do what I did and get rich with some confidence. I.e. buy small farm parcels* in the path of development with purchase money mortgage from seller as banks often will not lend on land. (Most retiring farmers do not need a lot of cash and have big profit in the land, so I found them quite receptive to this - argument that with the land as security they could get income stream and pay less taxes compared to bank financed payment all in one year.) With less money than cost of big house, you can do this after a few years of frugal living in small apartment. I officially keep bees to keep status as a farm for low taxes, divided the land into lots myself etc. IRS will let you lose money on the farm for first 7 years and this reduces your taxes also, permitting more rapid savings from your salary (relatively large, if you were well educated back in my day. - Physics Ph.D.s were in demand - I graduated when USSR's satellites were a real threat.) I also invested in stock market, during period of its great growth, so I was lucky also. (Always helps to be lucky.

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*As the cost of producing the SAME house is lower as technology improves, the house its self almost always decreases in real terms. - If there is real apprecaition, on the average in the long run, it is due entirely to the land - they are not making any more land, but in US at least, they are making more babies and houses for them.

 

It's wonderful to have intelligent people around.

As I said before, if you have a good brain, you can rent and invest the money you saved to get a much higher return then when buying a house and selling it after a couple of decades.

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Why do you think that you can't save money and invest it wisely while still owning a house? Around here, the Dallas area, the payments on a home are often less than renting a decent apartment.

See? The problem is that no one is actually making a real, direct comparison of actual situations. One person throws out one case, then another throws out an opposing case, but neither shows/proves anything!

What bothers me about renting is that no matter how you look at it, all of the money that you've paid out in rent is ......gone! But that's not true with home ownership ...which mostly, usually, you can live "rent free" for all the time you live there, if not make a damned good profit. So ...renting sucks ...UNLESS... you're not going to live there for long or you want to live in downtown areas where there are no homes!

But if y'all want to keep arguing this issue, then, please, please, make a valid COMPARISON of like situations. Don't base your argument on what "Joe" told you or what "Mary" did last year. That's just plain bullshit.

Baron Max