Why rent instead of buy a house

**Georgie** · 05-07-2007, 09:50 PM

This is an interesting article on why to rent instead of buying. I'm not sure I agree with it, but it has some interesting points. You guys that have some financial savvy, what do you think?

http://articles.moneycentral.msn.com...GetRicher.aspx

**RuhlFreak55** · 05-07-2007, 09:52 PM

i was always told buy never rent

**Georgie** · 05-07-2007, 10:01 PM

Originally Posted by RuhlFreak55

i was always told buy never rent

Yeah, I agree with that conventional wisdom for most situations, but the article makes some interesting points.

**Dude-Man** · 05-07-2007, 10:01 PM

It ***ends on what you're after. If you know you're only going to be in a certain place a few years, it doesn't make sense to buy. If you move and rent the place, you typically won't be able to get enough out of a renter to cover the morgage payments.

**Georgie** · 05-07-2007, 10:08 PM

Originally Posted by Dude-Man

It ***ends on what you're after. If you know you're only going to be in a certain place a few years, it doesn't make sense to buy. If you move and rent the place, you typically won't be able to get enough out of a renter to cover the morgage payments.

The author of this article is stating the opposite. He claims that over the long run (20 years from now) you will not make anything in housing. In recent years people have made a lot of money in housing over the short term, but the author claims you will get a greater return on your money in stocks and in the end you will be richer for renting. I'm not sure I agree with it, but his ideas are interesting. I for one am a landlord and make my living renting commercial buildings that I own. I know why it makes more sense for businesses to rent, but I have never thought about it making sense for middle income to affluent people to rent. But this guy has some interesting ideas to think about.

**lpicken** · 05-07-2007, 10:23 PM

You have to live somewhere, so you might as well buy a house if at all possible. I can see the authors point of view but stocks can always take a nose dive where as the house will be there indefinently as long as you take care of it.

**collar** · 05-07-2007, 11:10 PM

i didnt read the article.
but i wouldnt buy.
why would i want to give half my money to the bank?

**Benches505** · 05-08-2007, 12:48 AM

Being in real estate, I would not buya house now that was not in forclosure. Prices are on the drop and the trend looks like it will continue for the short term in most places around the country. I deal in a niche market so the drop doesn't affect me at all.

Good thing regular folks in my area don't read this board...Just a word to the brothers

**nalbano34** · 05-08-2007, 02:57 AM

I have been renting for a long time and have been looking at buying a house recently. I really can not see how my renting is netting me ANY return compared to at least some of a mortgage payment going into my property. How could it possibly be better?

**Gear** · 05-08-2007, 04:22 AM

I have my own place. And yes it's hard because the mortgage repayments are always higher than rent, but later down the track when I retire, at least I know I will have my own house that's paid of instead of paying rent.

-Gear

**I_Want_Abs** · 05-08-2007, 05:17 AM

i am looking at getting an investment property within the next 2 years as im still living at home and will be for a while *bludger*
i feel it's a smart move at this time in my life as i'm only 23 and earn alot of money for my age and i want to try and set myself up for the future, i have done the sums and can more than aford it
and hey, you have to start somewhere, if your smart 1 can turn into 2 and so on as long as you can financial support the investment and are dedicated

by the way how ya goin Gear?

**Benches505** · 05-08-2007, 05:32 AM

There were more than 400,000 forclosures in this country between Jan of 07 and March of 07. Many of the special loans with no money downa nd adjustable rates were just not sustainable by these folks who could already just barely afford their homes. Prices will be coming down even more in the next year and then will eventually level out. It is a great time to buy a forclosure since the market is flooded with them. Pay no more than 75% of actual value and you should be fine

**gixxerboy1** · 05-08-2007, 06:02 AM

Originally Posted by nalbano34

I have been renting for a long time and have been looking at buying a house recently. I really can not see how my renting is netting me ANY return compared to at least some of a mortgage payment going into my property. How could it possibly be better?

he is saying that because lets say your rent is 1000 a month. Your mortgage might be $1500. He is saying it is better to pay the $1000 and invest the $500. So you are spending the same amount as if you are buying the house.

**majorpecs** · 05-08-2007, 06:33 AM

Originally Posted by collar

i didnt read the article.
but i wouldnt buy.
why would i want to give half my money to the bank?

So you'd rather give ALL your money to a landlord? That makes no sense, at least in buying a house you get some kind of return on your money.

**Gear** · 05-08-2007, 06:37 AM

Originally Posted by bex304

i am looking at getting an investment property within the next 2 years as im still living at home and will be for a while *bludger*
i feel it's a smart move at this time in my life as i'm only 23 and earn alot of money for my age and i want to try and set myself up for the future, i have done the sums and can more than aford it
and hey, you have to start somewhere, if your smart 1 can turn into 2 and so on as long as you can financial support the investment and are dedicated

by the way how ya goin Gear?

Bex, mate what's going on? Been a while.

I been alright man, just going with the wind. Hope things are well with you. You look great in your avatar, keep up the great work

-Gear

**ebjack** · 05-08-2007, 06:50 AM

Owners pay property taxes..mine was 2000$ last year...they also have to keep up the property.. painting..A/C..roofing.

renting looks like it might be a good idea as I get older.

**Dude-Man** · 05-08-2007, 06:56 AM

A good friend of mine is in futures and thinks that the housing market is going to become less and less profitable over the next 5 years as debt becomes a larger problem. The net savings of the entire country is in the negatives..

**1819** · 05-08-2007, 07:37 AM

Originally Posted by ebjack

Owners pay property taxes..mine was 2000$ last year...they also have to keep up the property.. painting..A/C..roofing.

renting looks like it might be a good idea as I get older.

great point. my property taxes on my homes is over 20,000 a year combined. pissed away so i will never see it again. what a joke. if i was a young guy just starting out, i would never buy a house.

**dhriscerr** · 05-08-2007, 08:16 AM

This article is saying you have to put the difference of the rent compared to mortage payment into stocks so you will make up the difference.
I'll give you two examples
1. Buy a house for $250,000 at 6% for 30years. Your payment will be 1498.88 a month. You will spend $250,000 on principle and $289,595 for interest to the bank, that means you spent $539,595 for the house. Take into consideration 30 years of Home owners insurance at 1,500 a year thats another $45,000 so your at $584,595 now real estate tax ***ending on where in the country but lets say its 1% thats 2,500 a year for 30 years another $75,000 so your total is now up to $659,595 by the time your house is payed for.

Example 2. Renting You only pay 1,000 to rent that same place from someone else so you save 500 a month off a mortgage payment and you invest that. Ok so whats your cost of renting for 30 years? $360,000 in rent
$30 a month for renters insurance 10,800 for 30 years. so your up to $370,800 no real estate tax and no COST OF REPAIRS which can be a killer.
now lets look at your $500 a month investment for 30 years Lets say you can pull a modest %7 your $500 a month for 30 years that you saved will equal $614,043

Example 1. You own your house after 30 years at a cost of 660,000 assuming you never made a repair.

Example 2. You dont own a house after 30 years but you have $614,043 in the bank and you can buy a nicer house for cash. If you can pull 10% return about what the S&P average is since inception of the stock market your return on $500 a month would be 1.14 Million

On a side note I bought my house but thats because it was 42,000 dollars and I put 10,000 down, so my monthly payments are less than 1/2 of what rent would be. So there are situations where buying will be better.

**dhriscerr** · 05-08-2007, 08:23 AM

Originally Posted by Dude-Man

A good friend of mine is in futures and thinks that the housing market is going to become less and less profitable over the next 5 years as debt becomes a larger problem. The net savings of the entire country is in the negatives..

I read somewhere that in 1975 the average person saved 8% of what they earned and in 2005 the average person spent 1.5% more than they made.

Just an example of how huge of buisness this is for banks and credit card companies. Wal-Mart made more money off the interest on credit cards than they did in retail sales in 2006. Used car dealerships have to make a killing charging people 10% up to 20% for used cars that have bad credit. You could buy a car for 5,000 bucks and sell it for 3,000 and still make a profit in the end becuase of the interest.

**dhriscerr** · 05-08-2007, 08:25 AM

Originally Posted by majorpecs

So you'd rather give ALL your money to a landlord? That makes no sense, at least in buying a house you get some kind of return on your money.

If you dont invest the difference your wasting your money, were saying somone has the discipline to save the difference of the rent and mortgage payment

**Act of God** · 05-08-2007, 08:55 AM

Originally Posted by dhriscerr

This article is saying you have to put the difference of the rent compared to mortage payment into stocks so you will make up the difference.
I'll give you two examples
1. Buy a house for $250,000 at 6% for 30years. Your payment will be 1498.88 a month. You will spend $250,000 on principle and $289,595 for interest to the bank, that means you spent $539,595 for the house. Take into consideration 30 years of Home owners insurance at 1,500 a year thats another $45,000 so your at $584,595 now real estate tax ***ending on where in the country but lets say its 1% thats 2,500 a year for 30 years another $75,000 so your total is now up to $659,595 by the time your house is payed for.

Example 2. Renting You only pay 1,000 to rent that same place from someone else so you save 500 a month off a mortgage payment and you invest that. Ok so whats your cost of renting for 30 years? $360,000 in rent
$30 a month for renters insurance 10,800 for 30 years. so your up to $370,800 no real estate tax and no COST OF REPAIRS which can be a killer.
now lets look at your $500 a month investment for 30 years Lets say you can pull a modest %7 your $500 a month for 30 years that you saved will equal $614,043

Example 1. You own your house after 30 years at a cost of 660,000 assuming you never made a repair.

Example 2. You dont own a house after 30 years but you have $614,043 in the bank and you can buy a nicer house for cash. If you can pull 10% return about what the S&P average is since inception of the stock market your return on $500 a month would be 1.14 Million

On a side note I bought my house but thats because it was 42,000 dollars and I put 10,000 down, so my monthly payments are less than 1/2 of what rent would be. So there are situations where buying will be better.

That's crazy when you break it down like that. I always freak out when I see the total payout for the mortage...basically double what the house costs.

And I think just about every house over 30 years will have major repair issues at one time or another.

I know I'm not ready to buy yet. I like my $900 rent and tons of liquidity.

**I_Want_Abs** · 05-09-2007, 05:24 AM

Originally Posted by Gear

Bex, mate what's going on? Been a while.

I been alright man, just going with the wind. Hope things are well with you. You look great in your avatar, keep up the great work

-Gear

good to here bro, everythings going good hear man.

sorry to hi-jack bro's....

will hit you up on msn if i can get on later.

catch ya later gear

**nalbano34** · 05-09-2007, 05:44 AM

I can understand if you stay in the house for the full mortgage term then that is insane amounts of money thrown on an ageing house. But, let's say that you stay in the house and turn it every 5 years....give or take. Seems you can get out with some profits if the property was good in the first place.

**juicy_brucy** · 05-09-2007, 06:37 AM

Why rent instead of buying a house? Because when I was a 25 year old college student, owing over $10,000, i could barely afford rent let alone get/borrow a down payment. Banks and credit card companies literally laughed in my face... But that all changed later on.

**StoneGRMI** · 05-09-2007, 08:15 AM

Originally Posted by dhriscerr

Example 2. Renting You only pay 1,000 to rent that same place from someone else so you save 500 a month off a mortgage payment and you invest that. Ok so whats your cost of renting for 30 years? $360,000 in rent
$30 a month for renters insurance 10,800 for 30 years. so your up to $370,800 no real estate tax and no COST OF REPAIRS which can be a killer.
now lets look at your $500 a month investment for 30 years Lets say you can pull a modest %7 your $500 a month for 30 years that you saved will equal $614,043

I don't know how it works where you live but the landlord usually rents the home for more than their mortgage payment. They're in it for the money, too. Renting makes sense in some areas but in most cases it's not a wise investment. With mortgage interest rates being at record lows you might as well lock something in while you can. Also, if you really want to make some money on your house buy a foreclosed home and then sell within 3-5 years. I've been cleaning up on foreclosed homes lately, in fact, I have a closing tonight!

**aadrenaline** · 05-09-2007, 10:28 AM

i have a WHOLE spread sheet showing you the advantages of buying over selling and the money you actually save

**canadian meat** · 05-09-2007, 11:43 AM

A while back my wife and I bought a 2 bedroom apt,morgage was about 900 a month about the same if I were to rent a place.The upside was the realestate market went crazy and I acually ended up profiting close to 60grand after the sale of it.And after we sat down and worked out the numbers it turned out we ended up living there for free.I acually own some investment properties now small apts that I acually rent out for more than the morgage is a month so my tenents are acually buying my place for me,what could be better.