Do you rent or own?

[socaldude]

Some interesting insights by Kevin O'leary on renting:

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[DKNJ]

I'm not very familiar with real estate and factoring all the numbers. I always looked at it as the mortgage, property taxes, HOI for a house may be a little under the rent value depending on how much you put down. There will also be vacancies and maintenance expenses. However, after many years and it is paid off, the cost to live in that house (property tax, HOI) will be a significant amount less than the rent price. You also have something to pass on to your grand kids to give them a little head start in life. Only if I had the extra capital laying around though. I currently rent and I'm working on building a business and would prefer also purchasing an already established business that has room for growth that generates more net profit than I would be saving from rent if I tied those funds into purchasing a house. The only downside is the business isn't guaranteed to hold value.

 

[AgainstAllOdds]

 

[Mineralogic]

we've been through this already in this thread.

Thank you for not contributing to the actual question/thread topic.

You are welcome. Maybe look within a bit and not demand everyone solve your problems or questions when you already know what is best for you

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[biophase]

I don't see a point in renting.. its like burning money

Im 20 and I bought a duplex, everyone else pays my rent and I live for free. This is fastlane because the $400.00 I was paying in rent is now going towards my fastlane pursuits and future multi family units.

This is good, but let's say you decide to move to another state. You rent out your portion of the duplex. When you get to the next state, are you going to buy right away or rent? You would not be in a good position to buy at this point. This is where you would rent for maybe a year. This one year that you take to evaluate your situation, location, rei market will save you money in the long run. You may pay $1000/mo for 12 months, costing you $12,000. But this will give you time to look for a deal, maybe decide you don't like your neighborhood, or move somewhere else. This is not wasting money, don't think like that. It is saving you money in the long run!

 

[FeaRxUnLeAsHeD]

Own ... for wealth protection.
Rent ... for wealth acquisition.

Mobility is important.

Plus ... the consequence of defaulting on a mortgage ... versus defaulting on your rent ... is not even close. Don't pay your rent ... lose your security deposit. No big deal. Allow your home to go into foreclosure ... and you could be facing a $50k to $100k deficiency judgment. Hell ... I even have one client right now facing a $1 million dollar deficiency judgment.

Serious stuff.

My advice: Unless you are balling in the Fastlane ... rent.

I'm gonna actually write that one down. I think it's gold.

 

[FeaRxUnLeAsHeD]

Not necessarily.

Imagine you are 27 years old earning $65,000 per year at your job. You "own" your own $200,000 home with $30,000 equity. You pay a mortgage of about $800/m, of which about $570 is direct profit to your bank in the form of interest. Of course you are getting to deduct the interest from your taxes so at a 30% tax bracket, it saves you about $170. But you still pay $400 net out of pocket.

Now a business opportunity appears offering you an income of $85,000 per year. But you have to start next week or you lose it. A $20,000 raise after tax is $15,000 at best.

You have a couple of options. Fire sale the house for $170,000 or less losing your equity (which means you were really just renting the house from the bank anyway but it inflated your ego to be called a homeowner), or keep it and pay the mortgage and hope you can find a tentant who won't destroy your house since you live 2000 miles away.

Of course if you were renting a house for $800/m, you don't have to be concerned with all of these details and your worst case scenario is that you lose an $800 security deposit for leaving before your contract was up.

This is just one example, but the point illustrates that owning minimizes your mobility and the ability to participate in other opportunities.

That is called opportunity cost. And in many cases, this is the biggest cost of all.

I had this argument with my brother a few years ago about a rental house my sister has. Its about 3000ft2 and she rents it for $1500/m. The tenants have lived there for 15 years.

My brother argued that the tenants were stupid to keep renting but my sister was getting huge benefit.

I laughed at him out loud.

Maybe 15 years ago the rent was reasonable for the house, but today it is WAY cheap.

He would be an absolute moron to buy that house. At a minimum it would cost $300,000. If he put 20% down his mortgage would be around $1200. But lets not forget property tax, insurance, maintence and repairs.

Like the ice storm that took a tree down and destroyed the deck. The tenant called my sister and she paid $5000 to rebuild the deck and repair damages.

The tenant, he sat in the living room drinking beer watching the workers through the glass deck doors.

Or when she put on a new roof while he has lived there and spent about $12,000. Or repainting.

Based on my figures, she could raise the rent another $1000/m before he should even consider the option to buy.

By renting for the past 15 years he saved at least $1000/m - which he could invest in something that caused him much less hassle and returned a decent yield.

Sounds like everyone wins to me..

Sister is getting $$$ from tenants
Deck guys get $$ to repair the deck (At a small cost to your sister - What about homeowners insurance to cover stuff like that, by the way?)
tenants don't have to drop insane $$, pay property taxes, be indebted to all the potential damages, risks, etc
Roof guys get $$

There's risks in all, but that sounds like wins all around to me. Sure your sister had to drop $5000 here and there for shit that happens, but she's got a passive flow of income. Sounds like your bro is the only one who doesn't get it.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[eliquid]

You should take a look at my thread on living rent free internationally.

Oddly enough I did a few times. Glad you reminded me, I need to write this idea down.

 

[Vigilante]

I own my house in Minnesota. By own, I mean:

• it's worth $150k now less than I paid for it and
• I pay a bank every month for it (because technically, they own it)
• and I probably owe more on it than it is worth.

However, I don't care as I am not selling it (today.)

I rented a house in Florida.

• I will put nails where ever I want. In fact, in celebration of this thread I am going to just go throw a random nail up somewhere
• I change what ever I want. For the most part, I am talking small cosmetic changes. However, I won't spend much money. I might get a new door knob, change a faucet, etc... (and as Biophase said, it is all reversible). I call the landlord to fix major issues, and don't ask permission for anything else. I just do it. F*ck it. F*ck 'em. They want my money.
• I just got here Friday. Today I had a landscape guy come cut down some branches I didn't like. In a few days, he will be taking some palm bushes back 3 feet. A couple hundred bucks to make me enjoy the place WAY more. The landlord likely would THANK ME for improving his place. Most people treat a rental like you are holding someone else's fragile egg. If I am going to live somewhere, I want to LIVE there.
• We've done a lot to this place in the last 72 hours. However, you can do a ton cosmetically that can all come with you when you leave. We won't be here longer than a year or so... maybe less, maybe more. While we are here I will enjoy it.
• Renting sucks. Do does having a mortgage. The only REAL freedom, in my opinion, is free and clear title, so your only boss then is the State.
• Associations also suck.
• To the person who posted about random inspections? Absolutely not. Unless that is in your lease, tell them to get screwed.

 

[The-J]

I'll add something here.

I currently own a rental property, and buying another soon

But i rent my main residence.

The reason? In my area of the UK, I can buy small apartments that rent out and give ROI of 11-13%. For example, a 50k unit that rents for 500 pcm or a 40k unit that rents for 450 pcm.

If i used that cash to purchase the apartment i live in (nice area) i would only be getting a ROI 5% (saved rent) as the cost of the housing here is way more expensive. For example 170k/180k apartment rents for approx 750pcm

I'd rather purchase a few small units "in the ghettos", and then rent my main resi - or (no mortgage, no worries if things break, no maintenance etc)

In fact, when i have a few of these units generating cash flow, i could use the monthly cashflow to rent a huge house if i wanted - but i'm more likely to use the cashflow to reinvest or use for fun / hobbies etc. And one HUGE upside is that i can relocate anywhere in the world with 30 days notice and use the cashflow from my rental units to rent a nice place there instead.

It is hard to break out of the mindset of wanting to "put down roots" and the emotional triggers we are all brought up with - the emotional reasons to purchase a home, the perceived security etc etc

I may choose purchase my resi home in the near future. Main reason for this is that it would improve my availability to finance further rental properties. But the more i think about it - the more i'm happy with my current choices.

Rep+

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[GlobalWealth]

Sister is getting $$$ from tenants

She is getting $18,000 gross income per year on a $300,000 house. Is that really winning?

Deck guys get $$ to repair the deck

Deck contractor definitely wins.

tenants don't have to drop insane $$, pay property taxes, be indebted to all the potential damages, risks, etc
Roof guys get $$

Tenants and roof guy are definite winners. Tenants are paying $18,000 on a $300,000 house. That money would barely rent them a decent 2-3 br apartment.

There's risks in all, but that sounds like wins all around to me. Sure your sister had to drop $5000 here and there for shit that happens, but she's got a passive flow of income.

The issue for my sis is that her passive income after expenses is virtually (or completely) non-existent. At a bare minimum, her operating costs are 20% of gross income. That means her NI is at best about $14,000.

$14,000 on a $300,000 asset is 4.8% yield. I can get a better return in the stock market without having to ever call a plumber or roofer. Plus my stock market asset would be 100% liquid whereas my $300,000 house could take months or years to sell depending on market conditions.

My brother is biased toward owning a home because he is a builder. Or maybe he doesn't know how to do math.

 

[biophase]

I own my house in Minnesota. By own, I mean:

• it's worth $150k now less than I paid for it and
• I pay a bank every month for it (because technically, they own it)
• and I probably owe more on it than it is worth.

However, I don't care as I am not selling it (today.)

I rented a house in Florida.

• I will put nails where ever I want. In fact, in celebration of this thread I am going to just go throw a random nail up somewhere
• I change what ever I want. For the most part, I am talking small cosmetic changes. However, I won't spend much money. I might get a new door knob, change a faucet, etc... (and as Biophase said, it is all reversible). I call the landlord to fix major issues, and don't ask permission for anything else. I just do it. F*ck it. F*ck 'em. They want my money.
• I just got here Friday. Today I had a landscape guy come cut down some branches I didn't like. In a few days, he will be taking some palm bushes back 3 feet. A couple hundred bucks to make me enjoy the place WAY more. The landlord likely would THANK ME for improving his place. Most people treat a rental like you are holding someone else's fragile egg. If I am going to live somewhere, I want to LIVE there.
• We've done a lot to this place in the last 72 hours. However, you can do a ton cosmetically that can all come with you when you leave. We won't be here longer than a year or so... maybe less, maybe more. While we are here I will enjoy it.
• Renting sucks. Do does having a mortgage. The only REAL freedom, in my opinion, is free and clear title, so your only boss then is the State.
• Associations also suck.
• To the person who posted about random inspections? Absolutely not. Unless that is in your lease, tell them to get screwed.

Seriously, is the landlord going to even know if the light fixture, faucet or door knob is different. When one of my tenants moved out I thought they took my fridge and washer and dryer. Then I realized that my unit didn't have one when I rented it.

I also did not realize that my units had no garage door openers. The tenants were actually getting out and manually lifting the garage doors each time. Guess how I found out? One tenant said they would renew if I put in a garage door opener and pay $25/mo more for rent! I've had the place for 10 years!! I would have put one in for free as I can't imagine not having one, especially in Utah during the winter!

So don't think that your landlord will be super picky and notice every little detail. They will notice anything that is damaged or broken, but they will not notice anything wrong with anything that is working.

 

[Quark]

The house I rented in California - We stayed there for 3.5 years $2,500 month rent. $3,000 deposit

Before we had our walk through upon moving out, I hired carpet cleaners, maid service and a guy who specialized in cleaning stone floors as most of the first story was travertine.

We never hung anything on the walls, ever. His fridge was in the house and we bought a matching washer and dryer for the place. When we left, we left the washer and dryer because we did not want to move them to Texas.

He met me at the house for the walk through and immediately upon entering the house to look it over, he turned around and began inspecting the hinges on the front door. The freakin hinges! It took over 90 minutes for him to inspect his house and declare everything was ok, but he didn't think the laundry room door knob was dented when we moved in.

Then he took over 60 days to mail us our $3,000 deposit back.

The new renters emailed me (because I showed his house to new renters for him) they said they wanted satellite TV, the owner had to be there to oversee the appointment to approve this and was such a DI** Head to the Satellite guy, he refused to install and would not return.

Not all landlords are cool. The kicker was, he and his wife rented it out because they could no longer afford the place.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[YogiTheBear]

I am renting. Tired of explaining countless times to friends/families why I made the stupid decision of renting.

IMHO, entrepreneurs should not buy because buying takes away from entrepreneurs that precious 'call option of money' that allow us to buy into business opportunities that might come up any second; opportunities with ROI that far outweigh any financial benefits that come from buying a house (if any).

On the other hand, buying a house (with a mortgage) is good for some people because it serves as a Forced Saving mechanism. Some people, with money, will simply spend all that on alcohol, women, etc etc. If that is the case, no matter how wrong the decision of buying a house is, the good thing is you will not end up with $0 when you are 60.

 

[Deleted20833]

I would suggest rent, a 30 yr commitment to pay for a house sounds crazy to me

 

[Deleted20833]

I would suggest rent, a 30 yr commitment to pay for a house sounds crazy to me

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Shades]

To me not every move made in life has to be about making the best possible investment. Its gotta be about happiness too right? Otherwise WTF is any of this for?

Im more then willing to take a possibly worse investment in order to not rent. But lets not act like its impossible to get a good investment on a home. Especially if you buy a house that needs some work that you can build a bunch of equity in to within the first few months.

 

[biophase]

Not all landlords are cool. The kicker was, he and his wife rented it out because they could no longer afford the place.

These are the worst landlords. They will nickel and dime you because they need to scrape up all the money they can get from you to pay for their own rent. They are the ones who don't fix a leaking faucet because a plumber is $59 a visit. Then they get high turnover and wonder why their tenants never stay.

 

[Jambla]

I have own a house and have a mortgage because,

• Rent compared to house prices is the most expensive in my area of the country, it costs the same in repayments for rent as it does mortgage repayment
• I am settled with my partner
• We bought at a rock bottom price, 2 years ago when the UK housing market was at it lowest. It has gone up 20% in value since.
  
  Saving up for the deposit took me away from my side walk mentality in my mid 20's and I started thinking about the future, it graduated me onto the slow lane. Because we bought a modest house the repayments are not crippling us and we are able to over pay 20% each month.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[GuestUser140]

Can't imaging owning at this point of my life, so I'm paying about 600€ monthly in rent. Don't even know if I want to stay in Germany, not the kind of guy to backpack travel in Thailand either, but the area I'm living in now doesn't really feel like home, though I was born here. Switzerland is amazing if you want to settle down IMO, but having mixed feelings about the Swiss people. Looked at Malta in the past, but don't really like islands and the living standards are lower. Will definitely invest in properties in the future, but I'd rather focus on making more money first and then look into that later on.

To sum it up I would really make sure that the decision you make is flexible enough to be changed in the future if you aren't 100% sure.

Just read this and it's like reading my own thoughts....

Have you looked at Prague, the Baltics, Portugal as a way to live very well on your current budget? Or do you need to be in DE for income?

 

[MyronGainz]

I rent, downtown Toronto. Also own a 3-Unit multi 30km North of the city.

 

[Deleted35442]

Just read this and it's like reading my own thoughts....

Have you looked at Prague, the Baltics, Portugal as a way to live very well on your current budget? Or do you need to be in DE for income?

Prague is a beautiful city, awesome nightlife. How much does $1000 a month get you there?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[GuestUser140]

Prague is a beautiful city, awesome nightlife. How much does $1000 a month get you there?

$1000/m. for housing? https://www.airbnb.com/rooms/9124457?checkin=01/01/2016&checkout=02/01/2016&s=YQazCWzq

If you know some people locally, you can find lower prices.

 

[JustAskBenWhy]

I've determined I can't handle roommates for much longer. Because I can't/don't want to pay $1,400/month to live in a basement, I've concluded that I have to move to another city with more affordable housing.

Just curious if you guys/galls rent or own (with mortgage still counts), why you've chosen that path and if you could go back (in the case of owning) what you'd do differently? etc.

If I go the ownership route I'm not taking out a huge/crippling mortgage loan.. definitely under $100k with payments of $350-$550/month.

I like the idea of purchasing a new property every few years, and renting out the previously vacated property in perpetuity.

Not yet at the stage where I can buy an entire apartment block, but that would be ideal and live in one of the units

Number one thing is I just have to live alone, so I'm interested in to all of your living situations.

Cheers!

Not sure if anyone had already suggested, but you could house-hack. This is a beginner RE strategy whereby you buy a small multi-family and move into one of the units. This accomplishes several things:

1. It get's you a place to live
2. It enters you into property ownership, with all of the benefits that comes with
3. It off-set your living expenses - potentially significantly, and some times you can live for free

Just something to consider...

 

[DaRK9]

Not sure if anyone had already suggested, but you could house-hack. This is a beginner RE strategy whereby you buy a small multi-family and move into one of the units. This accomplishes several things:

1. It get's you a place to live
2. It enters you into property ownership, with all of the benefits that comes with
3. It off-set your living expenses - potentially significantly, and some times you can live for free

Just something to consider...

This is what I'm planning to do next year.

I rent in the meantime. Louisiana is fairly cheap. $700/m for a 1 bedroom with all utilities besides internet.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[TrowelHead]

The main reason that homeownership is considered golden by most "slowlaners" is it is their only shot at gaining some wealth.

Let's say a "homeowner" who is paying $1000 per month mortgage payment. This might be perhaps 750 in interest and 250 in principle payment.

So that is like a forced savings account of 250 a month - which for most may be their only chance of putting anything aside.

If their home tracks inflation, they look back in 10 years and think "wow what a great investment"

When in reality, if they had the discipline to invest that 250 per month in a S&P 500 index tracker (for example), while renting a place for 750 a month and enjoying the hassle free, flexible lifestyle) their actual return may have been significantly higher.

And to those who say "i want to hang stuff on the walls" - just do it. Ask forgiveness not permission. If you pay the rent 99% of landlords will not care.

In my rental units - i don't care what they do. At worst, i would make a deduction from the deposit at the end of the lease to put it back to how it was. If they paint the place they are probably doing me a favour - unless it's satin black or hot pink

One final point. Not many consider the opportunity cost of the deposit. Let's say you put down 50k. You could easily get a 7% on that cash (in real estate / stocks) That would be almost $300 a month cashflow you are giving up that would offset your rent.

If you own a house free and clear, let's say it's worth $400k - your opportunity cost of having the cash tied up is $2300 a month! Sometimes, the numbers work out so that it is significantly cheaper to have the cash invested and rent (especially in areas where house prices are higher!)

Now most of us here can think of ways to turn 400k into a hell of alot more. I'm thinking real estate investing, fast food franchises, hedge funds, venture capital. For us, the opportunity cost is significantly higher than my 7% example above.

Imagine for example you own a dominos franchise. They offer you the opportunity to open a new location. Your investment of 400k will return you for example 200k per year profit for the next X years - this guy would be crazy to take that cash and buy a house.

 

[Nicko]

while renting a place for 750 a month and enjoying the hassle free, flexible lifestyle) their actual return may have been significantly higher.

Whilst renting can potentially offer a more 'hassle free and flexible lifestyle' than owning, the flip side is the potential loss of security or stability. When you rent, you forgo control, for that flexibility. At any time, the landlord can jack up the rent, sell the property (which may require vacant possession), or just choose not to renew the lease. And (at least over here) there is strong rental demand so the control really rests with the property owner. Plus there are always limitations to what you can and can't do in someone else's property (pets, paint, even smoking). And as you highlighted above, if a tenant chooses to ignore those rules there is always a financial penalty imposed by the landlord.

So I prefer to own. And yes, the bank could always put up interest rates on a mortgage but there are a number of ways to counter that too. And whilst it might seem I'm giving up some flexibility, we always have the option to rent it out if we decide to pack up and travel or relocate anyway.

 

[AlexanderSuper]

Technically even without a mortgage you dont own. Disagree? Stop paying property tax and you'll find out who really owns.

Very True and smart indeed... but then, even all the issue of getting rich loses all sense: banknotes, especially in the U.S. are fed property, property itself is a goddam mo#$#@ker concept...
Anyway, just for general knowledge, I inform you guys that in the fair city of London the "ownership" is a right which lasts for 99 years... ridiculous! The ground is of her majesty...

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Shades]

The main reason that homeownership is considered golden by most "slowlaners" is it is their only shot at gaining some wealth.

Let's say a "homeowner" who is paying $1000 per month mortgage payment. This might be perhaps 750 in interest and 250 in principle payment.

So that is like a forced savings account of 250 a month - which for most may be their only chance of putting anything aside.

If their home tracks inflation, they look back in 10 years and think "wow what a great investment"

When in reality, if they had the discipline to invest that 250 per month in a S&P 500 index tracker (for example), while renting a place for 750 a month and enjoying the hassle free, flexible lifestyle) their actual return may have been significantly higher.

And to those who say "i want to hang stuff on the walls" - just do it. Ask forgiveness not permission. If you pay the rent 99% of landlords will not care.

In my rental units - i don't care what they do. At worst, i would make a deduction from the deposit at the end of the lease to put it back to how it was. If they paint the place they are probably doing me a favour - unless it's satin black or hot pink

One final point. Not many consider the opportunity cost of the deposit. Let's say you put down 50k. You could easily get a 7% on that cash (in real estate / stocks) That would be almost $300 a month cashflow you are giving up that would offset your rent.

If you own a house free and clear, let's say it's worth $400k - your opportunity cost of having the cash tied up is $2300 a month! Sometimes, the numbers work out so that it is significantly cheaper to have the cash invested and rent (especially in areas where house prices are higher!)

Now most of us here can think of ways to turn 400k into a hell of alot more. I'm thinking real estate investing, fast food franchises, hedge funds, venture capital. For us, the opportunity cost is significantly higher than my 7% example above.

Imagine for example you own a dominos franchise. They offer you the opportunity to open a new location. Your investment of 400k will return you for example 200k per year profit for the next X years - this guy would be crazy to take that cash and buy a house.

I dont believe everyone looks at where they live as a "by the numbers" thing. I have not and will never rent. Just cant do it. My personality wont allow it. I can not have a person have control over my residence. And just because you may have had great landlords, does not make that the common case. There is plenty of pain in the a$$ landlords out there. Just the thought of having to ask someone to do something or even have it in as a thought in the back of my head makes me crazy. Bluh, no thanks. I need something that is wholly my own.

 

[FreshStart87]

I have a mortgage. I think renting is throwing money out when a mortgage isn't even that much more. I also believe that if your fast lane ventures do not work out at least you may come out with a paid off home for retirement.(Slow lane mentality but worth a thought).