Rent or buy?

Discussion in 'Teacher Time Out' started by myKroom, May 25, 2014.

  1. SF_Giants66

    SF_Giants66 Cohort

    Joined:
    Dec 22, 2012
    Messages:
    635
    Likes Received:
    0

    May 26, 2014

    Also, rent is always going to cost more than owning, unless of course you get foreclosed upon. You have absolutely no equity in a rental, and you don't increase your net worth at all. Even if your equity in a home is negative at the present time, each mortgage payment you make increases the equity and adds to your net worth. If the equity is positive, you can qualify for home equity loans, and if your home sells for more than what you owe on it, and you have some cash left over after paying commissions and title fees, you made money. Renting never gives that option.

    However, based on reading upon your situation, I would rent for two years and see how you like the area, but more importantly put money in the bank. More money for a down payment gives you a much better chance of qualifying for a loan.
     
  2. a2z

    a2z Maven

    Joined:
    Sep 16, 2010
    Messages:
    5,599
    Likes Received:
    1,485

    May 26, 2014

    I'd be careful with this statement because it doesn't give the whole picture. While rent may be cheaper than a mortgage, additional costs of owning a home can escalate your costs quickly. Broken furnace, needing new windows, breaking appliances, and general maintenance costs quickly add up.
     
  3. giraffe326

    giraffe326 Virtuoso

    Joined:
    Jan 2, 2006
    Messages:
    7,075
    Likes Received:
    14

    May 26, 2014

    I agree!
     
  4. kpa1b2

    kpa1b2 Aficionado

    Joined:
    Mar 27, 2002
    Messages:
    3,274
    Likes Received:
    38

    May 26, 2014

    When I rented I couldn't decide to paint a room any color I wanted or hang anything that needed something bigger then a picture nail. I don't want to think about the money we've spent since Labor Day: We've painted every room, minus the closets & my son's room. This has also required new window coverings & some new wall decorations.

    That's only the painting. I need to redo my floors & other maintenance.
     
  5. scmom

    scmom Enthusiast

    Joined:
    Aug 25, 2007
    Messages:
    2,188
    Likes Received:
    0

    May 26, 2014

    I have seen a lot of young families rush into buying and then regret it because of all the costs of home ownership. I have also seen a lot of hearts broken when they lost their houses the last few years due to weird loans that went up and not enough equity to make it worth keeping. Whatever you do, stay on the cautious side.
     
  6. SF_Giants66

    SF_Giants66 Cohort

    Joined:
    Dec 22, 2012
    Messages:
    635
    Likes Received:
    0

    May 26, 2014

    I haven't been a home owner before, but I would hope that major renovations and repairs are far and few between generally. Remodeling kitchens, finishing basements, new siding, and new roofs are generally repairs that aren't frequent expenses.

    I would hope that over the long term, those would be less than the cost to rent a similar sized residence.
     
  7. TeacherNY

    TeacherNY Phenom

    Joined:
    Apr 29, 2008
    Messages:
    4,167
    Likes Received:
    843

    May 26, 2014

    If you are not a handy person in general then try renting for a year (or 2 like someone suggested). I own a home and about 90% of repairs/upgrades are done by my husband. My sister's husband can barely hammer in a nail to hang a picture so when they need repairs for their home they have to call someone. It adds up really quickly when you have to pay for labor and materials instead of just the materials. Just don't rush into anything and good luck!
     
  8. SF_Giants66

    SF_Giants66 Cohort

    Joined:
    Dec 22, 2012
    Messages:
    635
    Likes Received:
    0

    May 26, 2014

    The issue with repairs is definitely labor. Again, as I said, it would vary by location. There are some locations I wouldn't want to buy unless I had a huge down payment because of all the property taxes and other expenses, and if I needed out within five years, I would be stuck.
     
  9. Caesar753

    Caesar753 Multitudinous

    Joined:
    Jun 10, 2007
    Messages:
    14,471
    Likes Received:
    2,488

    May 26, 2014

    Renovations are usually optional, whereas repairs are not.

    If your A/C goes out and you live in the desert, for example, you're going to be shelling out at least $3,000 on the spot for a critical repair. If your pipes burst or your toilet backs up and there is flooding, that's going to be a critical repair that could cost thousands.

    Labor is a factor for minor, do-it-yourself repairs. For the big stuff, though, most people probably can't do those sorts of repairs and need to hire out someone else's services. Whether you're paying mostly for labor or for the parts themselves, you could definitely find yourself in a very expensive situation. Homeowners need to be prepared for those sorts of expenses.
     
  10. YoungTeacherGuy

    YoungTeacherGuy Phenom

    Joined:
    Oct 21, 2007
    Messages:
    4,196
    Likes Received:
    1,115

    May 27, 2014

    My mortgage is $150 more than what I paid in rent for a 1bd/1ba apartment. It was a very nice apartment complex, but the better option was for me to purchase a home.

    My home was a foreclosure and I shelled out the down payment.

    I guess my situation is a bit unique, though, since I was born and raised in the town I work in. There was never a question of whether or not I wanted to live/work here (hence, I didn't need a trial period to see if this was the right place for me).
     
  11. bros

    bros Phenom

    Joined:
    Aug 5, 2009
    Messages:
    4,105
    Likes Received:
    68

    May 27, 2014

    With my house, we have very unusual plumbing - the house was built in the 40s.

    The pipes that go to the sewage line on the street are apparently U shaped pipes that curve up a hill, which leads to our pipes getting clogged once every year. It's cheaper to spend $150 to have a plumber/roto rooter come fix it than spend 10 grand redoing the plumbing.
     
  12. Blue

    Blue Aficionado

    Joined:
    Nov 16, 2005
    Messages:
    3,591
    Likes Received:
    3

    May 27, 2014

    Just be sure to have an inspection of the house. We did, and negociated repairs. We got the sellers to lower the price by $80,000 to allow for repairs.
     
  13. bison

    bison Habitué

    Joined:
    Feb 2, 2012
    Messages:
    874
    Likes Received:
    0

    May 27, 2014

    This is a very individual situation and there's no universal right answer. I HIGHLY recommend checking out the NY Times rent vs buy calculator if you are considering buying a home. Someone linked it but it didn't get much attention. Please use this before buying a home! It lets you input all your relevant financial information to see which option leaves you better off financially in the long run. The link is here: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

    For the record, I would also never buy without a down payment and solid emergency fund. What happens if your basement floods or the heater needs replacing or some other major issue that needs immediate fixing? It sounds like it might be a good idea to at least do more research on the costs involved in owning a home before taking on such a huge responsibility.
     
  14. John Lee

    John Lee Groupie

    Joined:
    Dec 4, 2009
    Messages:
    1,462
    Likes Received:
    43

    May 28, 2014

    I've never understood this idea (flushing money down the drain). Can somebody explain? Even if renting is the same as your mortgage (let's exclude cost of utilities, etc. which would be the same too), you still have to take care of repairs, maintenance, home insurance, taxes as a homeowner. And that would be substantial savings for the renter, which could presumably be put to investing/saving. I mean, I understand that living in a home offers an advantage in terms of privacy, and when you pay off your home--you OWN a home. I get that.

    If two couples started two paths: one rented, one bought. Assuming they both stayed in same situation for 25 years, and assuming mortgage comparable to monthly rent. And assuming the other couple invested their (saved) money wisely. At the end of 25 years, Couple #1 owns their home. Couple #2 doesn't own their home, but they have 25 years of investing that they can fall back on. Is it just cause real estate is just more reliable than a conservative investing plan? I would tend to think that Couple #2 could be in a better place. No?
     
  15. Upsadaisy

    Upsadaisy Moderator

    Joined:
    Aug 2, 2002
    Messages:
    18,938
    Likes Received:
    678

    May 28, 2014

    If the mortgage is comparable to rent, why would couple 2 have any extra money to invest? The homeowner can sell the home and make a profit, then renter cannot.
     
  16. DizneeTeachR

    DizneeTeachR Virtuoso

    Joined:
    Mar 10, 2003
    Messages:
    6,810
    Likes Received:
    190

    May 28, 2014

    Exactly... hubby when we first got married...not renting...bought a house did some improvements...sold for profit for land to build house!!!
     
  17. John Lee

    John Lee Groupie

    Joined:
    Dec 4, 2009
    Messages:
    1,462
    Likes Received:
    43

    May 28, 2014

    Home improvements, maintenance, property taxes...

    In my example, (realistically) mortgage and renting aren't going to be the same. And more often than not, quite cheaper (renting). If you add that difference to the extras I mentioned, I'm just wondering whether that is an equally good situation to be in when it comes to financially (and if not, why).
     
  18. SF_Giants66

    SF_Giants66 Cohort

    Joined:
    Dec 22, 2012
    Messages:
    635
    Likes Received:
    0

    May 28, 2014

    The idea is that when you are renting, none of that money your paying is money you're ever going to be getting back.

    When you buy a home, once you pay off the mortgage, everything the house sells for minus commissions and other fees will be yours to keep.

    Of course, there are property taxes and sometimes HOA fees that you won't get back that you don't have to pay when renting, but a home is an investment. An investment either pays off or it doesn't. When renting, there is no opportunity for any kind of investment.
     
  19. Upsadaisy

    Upsadaisy Moderator

    Joined:
    Aug 2, 2002
    Messages:
    18,938
    Likes Received:
    678

    May 29, 2014

    But landlords will have already incorporated those expenses into the rental price; they don't rent property in order to lose money.
     
  20. SF_Giants66

    SF_Giants66 Cohort

    Joined:
    Dec 22, 2012
    Messages:
    635
    Likes Received:
    0

    May 30, 2014

    When renting a single family home yes. I think most people rent houses because they have a large family and either don't have the desire to settle on one house, or they don't have the ability to get a mortgage because of credit problems.

    A family of 3 or less will generally settle for a duplex or an apartment I think, which would be cheaper than a mortgage, but no opportunity for an investment.
     

Share This Page

Members Online Now

  1. Blondie1988,
  2. waterfall,
  3. Ichi,
  4. deysi meza,
  5. Mr.history,
  6. RainStorm,
  7. TrademarkTer,
  8. YoungTeacherGuy
Total: 360 (members: 10, guests: 321, robots: 29)
test