Renting vs. buying real estate

[SandyCheeks]

We bought our 3 bedroom 2 bath "starter" home in '98 before the bubble. We're in the LA area with an extremely good school district (not LAUSD). 3 kids later in a cramped 1400sq ft home I really really want to move to a bigger home but that won't happen here, it'll cost an easy 1 million for an entry level 4 bedroom which would need work and the thought of that makes me ill. We've since paid off our house, I don't want a crazy mortgage/plus property tax. I want to stay here at least until my last one if out of HS or home prices fall dramatically. If we were in the market now we would rent for sure. It's nutty out there.

 

[movie zombie]

renting in this economy is the way to go. keeps your cash freed up and you can move to where the jobs may be...... there will be more foreclosures in 2012 and housing will further reduce in value. keep on renting if you haven't bought.

 

[Laila619]

We rent a house in a nice neighborhood for a pretty reasonable cost. We love it! It allows me to be a stay-at-home mom and we can get by comfortably on DH's salary. We even have extra money for bling.

We almost bought a lovely home this year, but we changed our minds when we saw how much the mortgage, property taxes, and homeowners insurance would be. And this was with a huge down payment even (35%). Yikes! It was more house than we were ready for I think.

We hope to own some day, but right now we love renting.

 

[Dancing Fire]

Yeah, I'm not sure owning is all it's cracked up to be either (although I totally understand the pride one has at owning property). We're definitely not getting anything out of it (our tenant's rent doesn't cover our total mortgage payment). Financially, it would make much more sense for us to move back there but I think my husband and I would kill each other living in such a small space now. Not that our current condo is much bigger, but the extra 400 sq. ft. we have here really does help!

We wanted to get into the housing market but we bought high, which wasn't the best move. If we had to do it all over again, we would have rented for a while. I had just begun a new job closer to my hometown, and my husband (then boyfriend) agreed to relocate with me from the part of our state we lived in (separately). I suppose we hurried into buying but it didn't feel like it at the time (it never does, does it?). We weren't irresponsible but we'd do things differently this time around.

true!..we bought our house in 1987 for $147K and after adding up the interest paid to the bank, property tax, insurance,new roof,etc...we probably broke even after 24 yrs or maybe just a little ahead.

 

[Jennifer W]

While our system is predicated on long term secure renting, I own my property and that was the right choice for me, 100%. It's a mind-clean thing. It's my property, I don't owe any money on it and whatever happens with my job, or whatever unforeseen things take place, I'll always have somewhere to live (even if it's falling down around me). It's held in Trust, so it would be next to impossible to take it from me if I was sequestrated, or sell it and force me into a care home against my will one day.

I won't be moving. It's a sort of mid-level home, not too small and not too big, so whether I get really rich or really poor it will suit me fine. It's in the central belt, so I can find work in the two main cities and a lot of smaller towns around. I think that's one of the benefits to living in a small country. It has space, and no immediate neighbours - I could look for the rest of my life and not find one that suits me better, and it wasn't up for rent so buying was the only choice.

I think it's different in other places though, Where I live, renting comes into two categories: social rented housing and private lets.
SRH gets you a tenancy so secure that you may as well own the house, including succession rights, but a lot of restrictions as to what you can do with the property. Quality is very variable, and you don't get free choice as to which property you'll live in. SRH properties can be owned by housing associations (likely to be fairly new properties, nicely designed by talented architects like my husband and probably very nice as well as tightly managed) or by the local authority....variable! Private lets in Scotland are either so expensive you might as well buy the property or are just too grim to describe. There were very few owner occupiers in Scotland until my parents' generation and there is still a LOT of SRH.

If I had a secure tenancy, I'd be happy enough renting, but I'm too picky to take what I'm allocated, and also I can afford to buy, meaning it might be inappropriate to take a social rental from someone else. It's a very different system here.

 

[mrscushion]

I really like the idea of owning a property outright, no debt, no monthly payments -- however, from my limited experience (parents' home, in-laws' home, DH's former condo) it seems that many homes eat up maintenance costs that can rival rent. That would defeat the purpose for me.

In any case, I think it will be a long time before DH and I own (again). We enjoy our flexibility. We are a "bi-continental" couple so we don't even know for sure yet where we want to settle down or start having kids.

 

[April20]

I've owned three houses and I've been very, very lucky with timing. House 1 I bought outside Seattle right before prices zoomed up. I owned it for three years and sold it just before the bubble started to pop. I made an obscene profit for a house so small and owning it for so little time. I rolled most of that into house 2 in Atlanta. I only owned that for two years. I sold it for more than I paid, but lost about 9k after fees, but it was okay. It was too small and we needed out and we sold just before the market tanked. Had we waited six months to sell, we might have never sold or lost a TON of money. The current house we own is rented out. We got it for a song amd will get at least double what we invested in it when we sell.

Owning has been very good to me and I do prefer it over renting, BUT.... We are currently at a place in our life where we need extreme flexibility as it relates to location. We've decided that when our tenants leave, we will sell the house. I love this house and neighborhood, but we just can't be tied down right now. We won't buy again until we know we will be staying put for the long haul.

 

[zoebartlett]

I am on the same page with you regarding being a landlord. Don't do it! I know of so many horror stories involving being a landlord. But of course, as with everything, it depends on the specific circumstances. I just know that it can be a huge headache unless you get lucky and have great tenants for as long as you are a landlord and that's just not a chance I would want to take. Though I know of some people who swear by it as a great way of making money. I'll leave that to experts because no way no how do I have the temperament to be a landlord.

That's why my husband refuses to let go of our property management company (even though we've had communication issues with them at times). When we moved out of state for a year, it would have been impossible for us to be landlords for our place here. We needed someone to find a tenant first, draw up a lease, and oversee the condo in our absence. It was the right choice for us at the time. Now that we're back and the property is close by, there's really no need for us (in my mind) to pay a company 10% of our rental income to oversee the condo. My husband and I are at a standstill. He said if I want to take it on on my own, I can, but that's something I see us needing to work together on. We've tried finding another company but no one wants to take on one individual unit because it's not worth it to them.

 

[zoebartlett]

Guess I am in the minority because I love being a home owner. DH is in real estate so we have never bought "retail." Maybe that contributes to my satisfaction because we got a *GOOD* deal regardless of the housing market. We could sell tomorrow and make a profit (we bought in 2006). There are headaches like a bathroom leak we are dealing with or termites we had to have treated during the summer. However, I LOVE feeling rooted. I am not a free spirit and love knowing I can do ANYTHING to this house without permission. I can paint, retile, change light fixtures, anything. I love to image what I would do if I won the lottery I love paying off MY mortgage instead of someone else's. I love not hearing neighbors or worse, smelling their dinners. I just love having a home instead of living in someone else's house.

You do have a great house! The bolded sentence is pretty much why we bought our condo. We loved the thought of paying off something that belonged to US, not to our landlord.

 

[zoebartlett]

D and I rented one apartment, one condo and three single family homes over a span of ten years, all in different towns, before we finally bought our house in 2010. For me, the goal was to spend as little as I could on rent while saving for a home. There are things I absolutely miss about renting, but all in all, I'm glad we bought.

The main reason I'm glad we bought is because we were ready to start a family. To rent a single family home in the area where we live (in a good school district) would have cost us more than I'd be comfortable spending in rent.

That being said, I sometimes wonder if we bit off more than we could chew.

Like Haven, I hate debt. We put 30% down, but I still feel the weight of the mortgage on my shoulders all the time. Before we bought the house, we had no debt. And now we have more debt than assets, which makes me uncomfortable.

I never saw buying this house as an investment--I wanted a home we could grow into. A home we could pay off ASAP. A home that we could stay in for many years. For those reasons, we bought a house thinking we would need room for 2 - 3 kids. Logical, right? I thought so, too. We bought a pretty typical 4-bedroom house one about an acre and a half. And now? It just feels like a lot to take care of. Now we have a landscaper ($$) and I'm looking into a housekeeper ($$) and the house is over 200 years old and goes through a tank of oil a month in the winter ($$$!). And there are the taxes. And buying furniture. And right now it just feels like SUCH a drain.

Anyway, Zoe, I feel like if you guys are happy renting, there is no need to feel like you should buy. You have your condo, so you are building some equity in a place even if you're not living in it. And with just you and your husband, it's not like you need a ton of space.

That's what I have to keep reminding myself! Thanks for the reminder, NEL!

 

[Pandora II]

Buying 100% - once you have ducks in rows!

Having rented for 11 years in DH's case and 14 in mine, we bought a property in 2004 which has since doubled in value. We rent it out and the rental income is 7 times our mortage payment. We took a calculated risk and bought a 2-bedroom flat in central London in an area that we predicted was going to start to become fashionable (it has). Location can be everything (people are always going to want to live in very central London) and really knowing the market and local area is important so you can act immediately when you find the right place. Despite being ex-local authority - I think in the US it would be called a privately owned unit in a welfare project - where 30% is owned and the rest given out by the government, the property went on the market at midnight, my husband was outside the agent's office at 7am waiting for them to open, got the first viewing, put an offer in on the spot and when he walked out a few minutes later - offer accepted - there were 3 other people already waiting for a viewing.

We spent a considerable amount doing it up: solid wood units in the kitchen, solid granite worktops, top of the range appliances, travertine bathroom, solid wood floors, Farrow & Ball paint - the reasoning being that there is a ceiling on the rental price for any particular type of property but if your property is the nicest of it's type you are more likely to rent, more likely to rent to nicer people who will treat the place with respect and care and less likely to have maintenance issues.

In 2008, we bought a new property a little bit less central but in a more salubrious area and a 100% private development and right next to the river (which no-one can ever build on and thus block light/wreck views etc and always carries a premium). We chose another area which is on the cusp of becoming very popular (I did have a bit of an advantage in that I sat on one of the biggest planning committees in London for 4 years and so knew what the development programme was likely to be over the next 10 years ) We looked at over 40 properties in 2 weeks and were on the books of 6 different agencies (we like looking at houses )This property is our current home and I love living here.

Despite banks offering us vast and ludicrous amounts, we set a very strict and affordable budget and stuck to it. We also have a financial advisor who found us great mortgage deals. We have 70:30 LTVs on both properties that go down every month and with interest rates so low and great deals on the mortgage rates we have managed to weather my husband being out of work for 10 months and have a buffer for interest rate rises.

I would hate to feel that I was paying down someone elses mortgage and I also like feeling free to do what I want to do with the interior of my house. Neither of us are wealthy and our salaries are far from telephone number plus we live in one of the most expensive cities in the world - we have been very fortunate for the stars to align and to find the right property in the right place at the right time at the right price with the right mortgage.

However, I have seen people come very unstuck here - mainly because they have been too obsessed with kerbside appeal and bought at high-price in already popular areas, or they have bought a lovely property but the public transport connections are so bad that it's a 30 minute walk to the nearest station/good bus route, or people who have watched too many 'doing up your property' programmes and believe the ridiculous building costs they seem to manage to have. There is no bargain in buying House A for £700k rather than paying the £800k they are asking for House B across the road when you suddenly realise that it will cost you £200k not £50k to do the loft conversion, nice kitchen and conservatory that House B already has.

 

[rubybeth]

I would love to own a home, but renting has so many advantages that we'll be renting until we can be certain that buying is the way to go. Our financial advisor has said that he doesn't think the bottom has dropped out on housing prices yet, either, so waiting a few more years could mean even bigger bargains. I get MLS listings in our price range, and I've noticed that 3 bed, 2 bath homes are still dropping in price, and there's one that's a favorite of mine that's been on the market 2+ years. Also, my organization is undergoing a restructure, so my job future is moderately uncertain.

One thing that's tough for us is that we rent an apartment that's a 5 minute drive or 15 minute walk to work for each of us. We save on gas, vehicle wear and tear, and if the car won't start, hoofing it is always an option, or one of us giving a lift to the other while still being on time for work when it's cold. We also live within 2 blocks of a beautiful park/lake area. It's a small one-bedroom with no dishwasher, and we can't have pets, but it definitely has its advantages.

Ideally, I want to put down 20% or more on a place where the 15-year mortgage will be 25% or less of our take-home pay. Right now, we pay 14% of our take-home for our rent each month, and the only utilities we pay are electric and internet. Paying 30-35% of our take-home pay just for a place to live... it's just not an option for us. I never want to be a slave to my house.

 

[Skippy123]

We bought our house in 1984 and paid it off several years ago when I got an inheritance. I loving having a completely paid for house. We were never under water and never traded up for a bigger house. My brother did the same thing, and when he was laid off in this economy, having a paid-for house meant a lot less stress and also meant that his family could make it on unemployment.

The best advice is to not get a bigger house than you can afford. Right now, in this crazy market, renting makes a lot of sense, particularly if you might have to move in a few years.

This is what I think about often so we are staying put. The economy IS nutty.

Two years. That's our mantra - just two more years. I have a 30 year note, but if everything pans out, this house will be paid off in 15. As a single I would have had a devil of a time doing that - and I took out a 30 year with that in mind; it has stood me in good stead - that making sure that I was never cash strapped, and has seen me able to weather one layoff already. But since I've married, we can see the light at the end of the mortgage tunnel. We should be done by the time I'm 51. Yay!

congrats Ksinger & flygirl, that is great!

eta: I love how handy my hubby is too, like Tacori's; it helps since he fixes most things around here

 

[chemgirl]

I'm the dissenting opinion here. I have owned, but now I'm renting because I had to move to a new city for my job. I HATE renting. I miss owning so much! I hate calling a landlord whenever something breaks. I spent almost a month looking at rental properties and 75% of them had been trashed in some way. We're talking $350 000+ houses in new subdivisions filled with smoke, with damaged flooring and with holes in the walls. There were very few properties for rent that I would have been willing to live in. The one we finally selected needed a lot of work, but the landlord promised us (and wrote it in to the lease) that he would accomodate the fixes. This included painting, fixing the water softener, fixing the garage door, fixing a hole punched in to the wall, fixing the carpets, cleaning, installing a washing machine, and fixing a toilet. This was seriously one of the best properties we saw and there are so many problems. We've been here for a month and I'm still doing my laundry at a laundrymat because the owner can't afford a new washing machine right now. The toilet in my master bathroom still doesn't flush. If this was my house, the problems would have been dealt with immediately. I wouldn't be forced to spend my Sunday doing laundry at a public laundry place. Now the landlord is mad at me because I removed broken blinds and put up curtains at my expense. There's no winning. He is in violation of the lease, so in theory we could break it and move, but we would lose our deposit and have to pay movers again. I don't want to pay an additional $2000 because the landlord doesn't do his job.

So I would buy in a heartbeat just do cut out the middleman. I'm looking to buy in about a year once I'm settled in to my new job. I don't care if its a bad investment, it beats dealing with a landlord, fixing a neglected property (and most of them here are neglected), and feeling like the house I'm paying top dollar for isn't my home because I have to ok every little design change.

I know I wouldn't feel this way if I had a good landlord, but I think renting is a risky business on both sides. The landlord doesn't want to put money in to the property because he's expecting it to get trashed. We don't want to pay for large fixes because we don't own it. In the end the property suffers and there is frustration on both sides.

 

[ame]

*IF* we can ever sell this crapshack, we will *NEVER* buy again, only rent. Houses are money pits, and it's not worth the upkeep. I'd rather pay each month to make that someone else's problem and leave when I am tired of the location or place itself.

 

[Dancing Fire]

Haven, I love Dharma (it was called Dharma and Greg). She's so free and happy. The word Worry is not in her vocabulary. I wish I could be more like this sometimes.
No apology necessary- I do find it difficult at times not knowing if I might have offended someone because posting is not the same as having a real time/real life conversation so I would rather err on the side of being too careful than being insensitive and offending someone.


I am on the same page with you regarding being a landlord. Don't do it! I know of so many horror stories involving being a landlord. But of course, as with everything, it depends on the specific circumstances. I just know that it can be a huge headache unless you get lucky and have great tenants for as long as you are a landlord and that's just not a chance I would want to take. Though I know of some people who swear by it as a great way of making money. I'll leave that to experts because no way no how do I have the temperament to be a landlord.

yup,ain't no way i want to be a landlord. i have friends saying they do rather leave their property empty than to rent it out again after the headaches going through the court system to evict their tenants for not paying rent for 6 months.

 

[Laila619]

*IF* we can ever sell this crapshack, we will *NEVER* buy again, only rent. Houses are money pits, and it's not worth the upkeep. I'd rather pay each month to make that someone else's problem and leave when I am tired of the location or place itself.

Yes, it is nice having the landlord pay to fix all the issues that come up! In the past two years at our rental, our landlord has put in new carpet in the living/dining room, a new roof, a new bathroom vanity cabinet, and a new furnace all on his dime. That is a nice perk of renting. I don't even want to know how much all that cost. Yikes!

Hope you can sell soon, Ame!

 

[Dancing Fire]

it is nice to own a home w/o any mortgage.we pay off our mortgage in 2005 and now our house only cost us about $450 per month (property tax + insurance) to live here.

IMO...it is nice to own a home but don't think i wanna be a landlord. i don't wanna be in jail for murdering a tenant...

 

[Dancing Fire]

We are continuing to look for a house whilst renting.

I dunno. I was really keen to buy, but now I'm beginning to think should rent until my husband gets his partnership.

That way, we will be stable and can buy a house based on his income only. It would also mean we could save enough to put a bigger deposit down (not sure that I want to take on such a big mortgage though)

But I can't shake the idea of renting being a case of throwing money down the drain.

I'm all confused on WHEN to buy, but we do want to be homeowners at some point. This thread is making me think that we shouldn't rush into it. Haven you make a really good point about basing it on one income only. Trouble is, a mortgage of 750k doesn't get you much around here, so we probably will need to add mine on too (this makes us feel so uncomfortable!) Decisions decisions.....

depends,timing is everything...for those who bought during the housing bubble may never see their house at that level again for the rest of their lives.

 

[movie zombie]

[depends,timing is everything...for those who bought during the housing bubble may never see their house at that level again for the rest of their lives.

this is so very true.

we bought in 2004 and will have our home paid off in 2013....the latest 2014. like another poster above, i want to be out of debt [this is our only debt] and not have some banker above me. luckily, i read the market right and sold our rental in 2008 just before the drop happened and we made $ on that one.

 

[Porridge]

I'm still in the young, single, and renting with friends category, but I have NEVER had a desire to buy a house. I think I'm very much like Haven in that respect. The thought of being tied down to a property makes my chest tighten. Maybe my viewpoint will change as I get older but I don't know. I like change too much. I think I may be a lifelong renter.

 

[missy]

I tend to think that if you hold onto your home/apt long enough you will be OK. It's only the people that need the money from their home purchase sooner rather than later and need to sell now that really will run into trouble.

We sold our beach home in March 2011 (bought it in February 2000) and we put an extra few hundred thousand into it with renovating etc. over the years we owned it. We did not sell at a profit (basically broke even when including the renovations we had done) but it did allow us to buy our dream home so it was a means to an end. Had we been renting that whole time there would have been no equity built up that would have allowed us to purchase our dream home. All that money we would have spent on rent would be gone with nothing to show for it.

However, I sold my first apt in 2004 at 4x what I purchased it for in 1995. That was way more than I made in the stock market/bonds etc over the same time period. That allowed us to put a down payment on our current co-op which we purchased the same day in 2004. If we were to sell our apt now I have no doubt we would not take a loss but we probably wouldn't make a ton either. However, if we hold onto it for at least another 5 years I am willing to bet that we will make a sizeable profit. It all comes down to timing/patience and location.

If you purchase a home in a desirable location you will be OK as long as you don't need to sell too soon. There are no sure bets in life (except death and taxes) but if you make calculated smart decisions you should be OK. But I must emphasize, if you cannot purchase a home without it being a major financial hardship don't do it. You need peace of mind to be able to sleep at night and if you are putting all your finances at risk it simply is not worth it.

Also, do your due diligence. Make sure you have the home inspected thoroughly so you do *not* end up with a money pit. That shouldn't even be an option!

 

[Dancing Fire]

[depends,timing is everything...for those who bought during the housing bubble may never see their house at that level again for the rest of their lives.

this is so very true.

we bought in 2004 and will have our home paid off in 2013....the latest 2014. like another poster above, i want to be out of debt [this is our only debt] and not have some banker above me. luckily, i read the market right and sold our rental in 2008 just before the drop happened and we made $ on that one.

WOW!! good for you... i advice my daughter to buy a house now if she found one that she really likes.

 

[missy]

I'm still in the young, single, and renting with friends category, but I have NEVER had a desire to buy a house. I think I'm very much like Haven in that respect. The thought of being tied down to a property makes my chest tighten. Maybe my viewpoint will change as I get older but I don't know. I like change too much. I think I may be a lifelong renter.

There is nothing wrong with that. It's good to know *what* you want and not be pressured to purchase unless you are sure. Owning your own home is a big responsibility and you need to be ready for it. It is also a huge privilege IMO and if more people treated it as such and didn't rush into buying we might not be in the mess we are in today. The banks never should have given the loans they did to people who just couldn't afford them and the individuals who fell for this should have done their due diligence before accepting. It is a sad situation and it will be a long time before the nation recovers. My heart goes out to all the people who are in foreclosure and in danger of losing their homes. No one deserves this. It is a terrible thing to lose one's home.

Take your time Porridge and while you feel like this renting is the best option for you. Having a home does tie you down. I think of it as a good thing but I can see where it is not a good thing for others.

 

[Laila619]

Also, do your due diligence. Make sure you have the home inspected thoroughly so you do *not* end up with a money pit. That shouldn't even be an option!

True missy. But aren't all houses essentially money pits? Whether they're brand new or old, they require a lot of upkeep and one thing or another always breaks or goes kaput or needs updating. Our rental is a solid but small brick home built in 1961 and there are always issues. Meanwhile, my parents live in a gorgeous 'showcase' home built in 1999 and there are always issues.

 

[missy]

Also, do your due diligence. Make sure you have the home inspected thoroughly so you do *not* end up with a money pit. That shouldn't even be an option!

True missy. But aren't all houses essentially money pits? Whether they're brand new or old, they require a lot of upkeep and one thing or another always breaks or goes kaput or needs updating. Our rental is a solid but small brick home built in 1961 and there are always issues. Meanwhile, my parents live in a gorgeous 'showcase' home built in 1999 and there are always issues.

No, I wouldn't say all homes are money pits. All homes *do* require maintenance though but so does everything in life. If you are renting and there are a lot of issues with the home you are renting believe you me you will end up paying for it one way or another.

And as another poster wrote- when you are renting you are at the mercy of the landlord as to when the issue will be addressed. When I rented my first apt the refrigerator broke down after about a year or so. Mind you I was renting from a lovely couple. Well, wouldn't you know it took forever to get it fixed. I was so frustrated because you really need a fridge and it wasn't pleasant. I kept calling the owner's wife and she kept saying they would take care of it but of course I wasn't their priority. They finally did get it fixed but not with what I call efficient speed if you KWIM. And there was nothing I could do because had I taken it upon myself to get it fixed I would not have been reimbursed by them. It's funny how lovely people become less so when there is money involved.

So no I don't think all homes are money pits unless your definition is different than mine and in that case almost everything in life is a money pit LOL.

 

[Tacori E-ring]

Thanks Zoe. There are things I love and things I would love to change. Haha.

DF, I would NEVER Want to own a rental in CA. They have crazy tenant laws out there. In my state we can evict MUCH sooner (30 days and the Sheriff will come remove them).

 

[zoebartlett]

I tend to think that if you hold onto your home/apt long enough you will be OK.

Missy -- That's what my parents keep telling us. We're not in a hurry to sell our place, meaning, we don't NEED to sell it any time soon. We're not in a position to buy another home until we do sell it though. Some days I want to get rid of the darn thing and start over, and other days I want to hang onto it long enough to make a profit. For now, we're hanging on and seeing what happens with the market. It looks like our renter will get her wish and remain a very long-term tenant.

 

[Dancing Fire]

Thanks Zoe. There are things I love and things I would love to change. Haha.

DF, I would NEVER Want to own a rental in CA. They have crazy tenant laws out there. In my state we can evict MUCH sooner (30 days and the Sheriff will come remove them).

and hope that they don't 'jack up" your property before they leave...

 

[Tacori E-ring]

Thanks Zoe. There are things I love and things I would love to change. Haha.

DF, I would NEVER Want to own a rental in CA. They have crazy tenant laws out there. In my state we can evict MUCH sooner (30 days and the Sheriff will come remove them).

and hope that they don't 'jack up" your property before they leave...

We get a full month's rent for security deposit and haven't had any issues of damage greater than that. Screening tenants is vital.