Do you rent or own?

[jlwilliams]

I'm 43 and have owned homes since I was about 28. Looking back, I wouldn't do it like I did it if I was doing it again. I made a lot of decisions based on what my wife wanted and what I wanted for her. Fool play. We bought a house in the country, fixed it up and did another...and another. Anyway, had I bought houses based on what most people want, instead of where I like to live and where my wife likes to raise animals, I would have done much better. (rural renting is it's own insane universe) When we were looking for our first house I wanted to buy a duplex, live in one side for two years then buy another house and have both sides to rent out. She needed to have a place to raise goddamn chickens.

If you can buy property that makes you money, do that. Buying a place to live makes less sense than buying a place to rent out when you can live in other places cheaper. This is particularly true of a single young person who is building a business. Get a small apartment in a neighborhood you can live in and get it as cheap as you can. If you buy a nice house in the suburbs, by all means rent it out.

I take it you are single. If you buy a place that makes sense for one person living alone, you will need another place later and the place you bought now is not the most desirable rental. One bedroom rentals typically have turn over rates that keep you working at the job of finding tenants. (that job sucks) If you buy a nice house, you can get more renting it than it will cost you to live in a studio which is all the room one man needs.

Think of it this way. Do you want debt that makes money or debt that crumbles around you?

If you are in a position where you can qualify for a mortgage on an owner occupied house it is worth looking at it but only if you are clear on a plan of action to make money. If you buy a house, spend a year in it (establishing residency for the sake of the mortgage) and spend that year fixing everything that isn't perfect in the house and generally laying the ground work for turning it into a profitable rental that you can get great tenants into and then you will have an asset. Rent it out and move into a one man pad. If that isn't what you want to do with your next year, and you MUST be honest with yourself and know what you will and won't do; then skip it. Rent a pad and focus completely on some other profitable endeavor.

To wrap it up. Buy if and only if buying is a business move and if you want to spend some time doing that. If you do, spend that time focused on the house as a business. If you have a Fastlane vehicle you are trying to grow, don't get distracted, just rent a place. If you are looking for your Fastlane vehicle and haven't come up with The Idea that you are going to develop, then maybe spending the time working on creating the real estate asset will give you the breathing room to keep looking and keep thinking.

 

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[biophase]

If you can afford to own and buy right, I think it's a win.

I have rented in between owning, I personally can't stand renting.

Don't forget to factor in maintenance expenses when owning.

Why can't you stand renting?

 

[Quark]

Why can't you stand renting?

I probably come at this from a much different perspective. I'm 50 years old and have lived a slowlane life and retired from it. My wife an I both owned houses in California and were lucky enough to sell prior to the crash, she had owned hers for about 19 years and I had mine for around 12 - 13 years. We both made a pretty good a profit. If we had rented all those years, we would have made no money when we were done there, but someone else s mortgage would be paid down.

We rented a house for a couple of years before leaving our careers and moving to Texas, it was a nice house, but we never hung anything on the walls and did not fully enjoy our time there because it belonged to someone else and we did not want to put nail hole in the walls. The owner / landlord had a nice custom home but he was a jerk. You don't know until you are in the house, what their true colors are.

Now if I was 20 something and headed for the fastlane with no children, I'd rent too, then pay cash when ready. I was so far from the fastlane thought process back then.........it's a wonder I wound up here at all.

 

[DKNJ]

I'm stuck with this decision as well. I've been supporting my brother renting a 2br 2ba apt and it's been hard to save up. I do have enough to buy a little house but I was going to use a 1/3 of it to invest in a start up. My start up partner might take an out of state job and bail on me. I was thinking maybe just buy a house and try to get a line of credit to buy another house to rent out but the amount invested vs the profit from rental income after the mortgage and everything including vacancies, never really appealed to me. I've considered buying an already established business as well that's generating good cash flow. I just have to wait a few days till my partner figures out if he's gonna bail on me or not.

 

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[ryanbleau]

There is a middle ground in this argument. Lately I've had clients ask me about tiny homes. Houses that are totally mobile and under 400sq ft. Best of both worlds. You own it out right unless you get an RV loan on it. and find a place to park it. You only rent the spot your on . If you get bored you hitch it up and move.

 

[TrowelHead]

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.

 

[Shdreams]

I'm In Ottawa, we bought a mortgage. 225k beautiful little town-home. Descent sized back yard. great neighborhood. we were renting in the "ghetto" before. crappy little ant riddled 2 bedroom apt. Before I had 5-600 dollars extra at the end of the bills. Now! I have $0 and sometime negative -200 after all is said and done. The wife and baby are safe here where we live. I don't have to worry as much about crack heads breaking into my vehicle. But I'm pretty certain the financial burden is going to kill me quicker than the crack heads at the apt. If your buying don't forget to add up everything! property taxes, mortgage,cable,internet, gas,hydro,condo fees. home insurance, alarm costs if you want an alarm. car insurance, gas for the car, groceries. There has to be money left at the end or you will end up like me. a super stressed out father who works for absolutely no reason but to watch it dissappear out of his bank account 24hrs after the checks are cashed.

 

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[Shdreams]

I'm 43 and have owned homes since I was about 28. Looking back, I wouldn't do it like I did it if I was doing it again. I made a lot of decisions based on what my wife wanted and what I wanted for her.

I made the same mistake!

 

[LibertyForMe]

I dunno, I am in a different situation than a lot of you I think, but I'm excited to be buying.

I did the math, and I will be outlaying the same amount of money each month as if I were renting, but I have a better place. 3bd 2 ba instead of renting a 2 bd 1 ba. Better neighborhood. More space. Mobility isn't a concern for me, because I don't really want mobility right now. I live reasonably close to my family, in a good area, and I want to be here pretty long term.

I've got some room for home appreciation, but even if I didn't I don't care because I plan on living in this house till I can put 50% down on a big house or something like that. For me anyways, it makes sense. To rent a comparable home, I'd be looking at $1,200 per month at least, so I am saving $400 a month by buying.

 

[Shades]

I understand the pros to renting houses. But just dont have the personality to live in someone elses house and not be able to do with it as I please when I please without the overlords approval.

 

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[Get Right]

I own. I need to have a few things that are consistent (since my businesses and everything else evolve continuously). My house is one of those consistent(s).

 

[eliquid]

I own my home free and clear.

I like having 1 base location I own and can come back to as needed. Im looking to rent other homes/condos though so I can travel to certain cities more.

 

[biophase]

I probably come at this from a much different perspective. I'm 50 years old and have lived a slowlane life and retired from it. My wife an I both owned houses in California and were lucky enough to sell prior to the crash, she had owned hers for about 19 years and I had mine for around 12 - 13 years. We both made a pretty good a profit. If we had rented all those years, we would have made no money when we were done there, but someone else s mortgage would be paid down.

It's great that you sold for a nice profit, and yes you get a nice lump sum when you sell, but did you really make money? It really depends on the rent prices vs the mortgage. Then you factor in all the upkeep that you did. Maybe if you had sold after or during the crash you may not have the same opinion. I own 4 properties, but rent the place I live in. You have to do the math to see if buying is really more profitable than renting. I have shown many friends that renting is a better financial decision than buying unless their home appreciated by $30k in 5 years.

Regarding the walls and such, there's no reason you cannot hang paintings and poke holes in the walls. How often does your landlord even come into your home? I haven't seen some of my rentals in 8 years! I have no idea and don't care if they are poking holes in the walls. A little bit of spackle and a new coat of paint and nobody can tell.

If you are renting a place for many years, go ahead and paint the walls, hang paintings and put in new lights. That can all be put back to how it was. You can price that into your rental decision.

 

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[Kelly C]

I would LOVE to own my own house. I rent and hate it. I hate 3 monthly inspections and dealing with people thinking they have a right to criticise the way you live and look down on you. I am a very private person and so is my Husband so having some stranger who thinks they are better then you coming into your home every 3 months is frustrating.

I would rather deal with maintenance myself then relying on an unreliable agency/landlord. I like getting things done.

Also they can throw you out whenever you like. We had to move after 5 years in a property as landlord sold....they sold to someone else who eventually rented it out. Unfortunately we had to leave at a time where there was literally nothing else to rent - very stressful time for us and the distraction of housing means taking your eye off other important goals.

 

[biophase]

I dunno, I am in a different situation than a lot of you I think, but I'm excited to be buying.

I did the math, and I will be outlaying the same amount of money each month as if I were renting, but I have a better place. 3bd 2 ba instead of renting a 2 bd 1 ba. Better neighborhood. More space. Mobility isn't a concern for me, because I don't really want mobility right now. I live reasonably close to my family, in a good area, and I want to be here pretty long term.

I've got some room for home appreciation, but even if I didn't I don't care because I plan on living in this house till I can put 50% down on a big house or something like that. For me anyways, it makes sense. To rent a comparable home, I'd be looking at $1,200 per month at least, so I am saving $400 a month by buying.

Just doing some math in my head, you are saying that your payments will be around $800/mo. I'm assuming that includes taxes? Are you paying principle and interest? Do you have an HOA? How much down are you putting?

Based on your $800/mo assuming its P&I and taxes and that you are putting down 20%, you are saying that a $180,000 home rents for $1200 a month in the area that you are buying. That's a decent area for an REI investor and would be a decent buy as your first home and eventually your first investment property.

 

[LibertyForMe]

Just doing some math in my head, you are saying that your payments will be around $800/mo. I'm assuming that includes taxes? Are you paying principle and interest? Do you have an HOA? How much down are you putting?

The $800 does include principle, taxes, interest, PMI, and a small insurance policy. No HOA, I would hate living in an HOA, haha. Not putting down a ton, which is the only downside. But at this stage in the game keeping a little more cash on hand to grow my biz is more important than getting a couple more bucks off a month on the payment. Plus, I don't have enough cash to plunk down 20% and get rid of the PMI anyway, so it wouldn't be a game changer.

But the house is only $118,000, and I am still confident that I could rent it for $1,200, definitely $1,100. It is basically located right next to a fancy neighborhood, it runs on the utilities and sewer of a waaay cheaper neighboring city but is still zoned for the other city's good school district. The only reason it is a little cheaper is that the homes are a little older, so we'd have to update carpet and paint, but that is basically it.

 

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[GlobalWealth]

I own my home free and clear.

I like having 1 base location I own and can come back to as needed. Im looking to rent other homes/condos though so I can travel to certain cities more.

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

 

[Kevin Peter]

I own! Every country I travel to, I ensure there is a place I can say its mine. This helps me travel care free with people and not think twice on the accomodation and even my family and friends are benefitted to go use it.

 

[Envision]

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.

 

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[DeletedUser394]

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.

Just curious, where do you live where you can pay $400 rent? I can't even rent a bedroom in someone's house for under $550-$600.

 

[GlobalWealth]

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

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.

 

[DeletedUser394]

thanks for all the responses and perspectives y'all.

 

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[Envision]

Just curious, where do you live where you can pay $400 rent? I can't even rent a bedroom in someone's house for under $550-$600.

Moved into a buddy's house that's pretty normal rent where I am (Idaho)

 

[Envision]

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.

I see your perspective but there a few fundamental things that I believe in that prevent me from making those mistakes.

I wouldn't buy a single family home ever. Unless I was beyond wealthy and ready to have a family and take on that liability.

I will raise my rent EVERY single time the lease comes to pass. Your sister is a bad landlord and is most likely too attached to the tenants to raise their rent.

 

[GlobalWealth]

I wouldn't buy a single family home ever. Unless I was beyond wealthy and ready to have a family and take on that liability.

Again, this is closed-minded thinking. If you can make money from single family homes, why limit yourself?

I personally own a few single-family properties. You can see my thread here about the topic:

https://www.thefastlaneforum.com/community/threads/live-rent-free-in-multiple-countries.59964/

I will raise my rent EVERY single time the lease comes to pass. Your sister is a bad landlord and is most likely too attached to the tenants to raise their rent.

No you won't. You will raise rent every single time the market allows you to raise rent.

Do you think you would have raised rent in 2008 when the contract was due for renewal? hell no. You wouldn't have had any tenants. You would have lowered it. Probably by a signficant amount too.

I would agree my sister is a bad landlord (dumb actually, she's really good to her tenants). She should have raised the rent several times.
What I am trying to get across to you is that there is not a one-size-fits-all situation.

You are young and have limited experience. You will get it. And as a property owner at age 20 you are WAY ahead of most.

But not being open to other ideas and solutions will cost you A LOT

 

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[GlobalWealth]

Side note. One of the most successful real estate investors I know in the US owns over 400 units (some apartments, some homes).

He rents his residence.

I would not call him stupid for wasting rent money. He knows a hell of a lot more than me about the subject.

 

[Envision]

Again, this is closed-minded thinking. If you can make money from single family homes, why limit yourself?

I personally own a few single-family properties. You can see my thread here about the topic:

https://www.thefastlaneforum.com/community/threads/live-rent-free-in-multiple-countries.59964/



No you won't. You will raise rent every single time the market allows you to raise rent.

Do you think you would have raised rent in 2008 when the contract was due for renewal? hell no. You wouldn't have had any tenants. You would have lowered it. Probably by a signficant amount too.

I would agree my sister is a bad landlord (dumb actually, she's really good to her tenants). She should have raised the rent several times.
What I am trying to get across to you is that there is not a one-size-fits-all situation.

You are young and have limited experience. You will get it. And as a property owner at age 20 you are WAY ahead of most.

But not being open to other ideas and solutions will cost you A LOT

You're right and I should have specified about raising my rents; since we are in an appreciating rent market at this time and where I live the rental availability is .03 I can raise my rent ridiculous amounts.

I prefer multi family/self storage over Single family based on a couple things not saying I would completely avoid it but Im not looking for it.

Multi family has the potential for more doors to rent = more cash
They have one roof/one property management company for multiple units.
Vacancy risk can be diversified through the more units you have.


Im not saying SFH housing is awful... my dad has a few as well but for the goals I have and the lifestyle I want to develop in my opinion its a better route.

Gonna read through your thread now.

Edit: I need to add Im not close minded to anything - If a SFH popped up tomorrow and the numbers made sense I would most likely do everything I could to acquire it. But it's not the niche Im really focusing on.

 

[GlobalWealth]

No one is an appreciating rent market forever.

As for property type. The only thing that really matters is net cash yield (imo).

It sounds like a good idea that multifamily and storage would bring more cash, but not if re buyers have driven up prices.

Always look for the value. That's where you find high yield.

 

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[Mineralogic]

Unless you have allodiaL title you are a renter

 

[DeletedUser394]

Unless you have allodiaL title you are a renter

we've been through this already in this thread.

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