Buying a home or renting apartment

[Brian Suh]

I am looking into owning my own place. I am sick of sharing space with others. Is it best if I save up to pay off a house completely or rent an apartment? I have heard two sides as renting an apartment, when something goes wrong in the place the apartment building will take car of it but you still are offering a bit of control whereas if you completely pay off the house it is yours and yours alone but so are all the problesm that go along with it.

 

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[oa92]

I am looking into owning my own place. I am sick of sharing space with others. Is it best if I save up to pay off a house completely or rent an apartment? I have heard two sides as renting an apartment, when something goes wrong in the place the apartment building will take car of it but you still are offering a bit of control whereas if you completely pay off the house it is yours and yours alone but so are all the problesm that go along with it.

Im still living with parents so can't help you out, but Ive seen this question come up a couple of times recently. It might be worth having a read through this thread: Buying vs Renting. Which are YOU?

 

[Raoul Duke]

Who's opinion are you seeking? Under 35 or Over 35...

 

[ChrisV]

Who's opinion are you seeking? Under 35 or Over 35...

you forgot to ask if they own a Lamborgini

HOT! - List @ The Few People who have Lamborghinis

I have been around with Self Help/Self-Improvement/Personal Development Industry for a while. It's all good but at the same time it is exhausting like which people shall I listen to for advice So many people are there but there was no list to narrow down manually. When there is no structure &...

www.thefastlaneforum.com

 

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[struka]

Who's opinion are you seeking? Under 35 or Over 35...

He should create a poll based on that criteria.

Buy or Rent for under 35
Buy or Ren for over 35

 

[Jaden Jones]

I will always advocate for buying, but with the minimum down payment possible and longest term possible. It most cases, even with repairs, homeownership is still cheaper than renting. And never pay off your mortgage early or put a bigger down payment. That extra money will make better interest other places

 

[Strategery]

GOLD! - REAL ESTATE - STOP Paying Rent: Live For Free

Fastlane brothers and sisters, I am here to show you the light should you so accept to see it. I’d like to offer some advice from my experiences and to share the wealth of living rent free. This is not a revolutionary topic, and I am not a revolutionary human. Living rent free has been done by...

www.thefastlaneforum.com

I like this option, but I'm not married, I have no kids and no pets.

 

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[deniz]

I bought a cheap property to live in. My mortgage costs me around half what renters in the same area pay for. So not only does it reduce my living expenses, it's also an investment that will eventually be paid off with a house to keep. Having said that, situations may differ when you start looking at actual numbers... this works for me.

 

[DeletedUser0287]

Long term - Buy a home
Short term - Rent

Although some places COL is so high that it is near impossible to buy, forced to rent.
I would almost always choose buy because you potential to use it as an asset

 

[gloriusubiquity]

I would rent and invest any surplus income into a cash flowing asset instead, then use the proceeds from that asset to pay for your rent.

Then, once you decide to settle down for 7+ years, you can consider buying a house.

In summary, just keep renting and focus on the "what color should my lambo be?" questions later.

 

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[ChrisV]

Although some places COL is so high that it is near impossible to buy, forced to rent.
I would almost always choose buy because you potential to use it as an asset

my dad used to say "that's not too expensive, you're just poor"

okay, my dad never said that.. but i heard someone tell that story and it's true

 

[DeletedUser0287]

my dad used to say "that's not too expensive, you're just poor"

okay, my dad never said that.. but i heard someone tell that story and it's true

Unfortunately, I am poor...

 

[Kevin88660]

I am looking into owning my own place. I am sick of sharing space with others. Is it best if I save up to pay off a house completely or rent an apartment? I have heard two sides as renting an apartment, when something goes wrong in the place the apartment building will take car of it but you still are offering a bit of control whereas if you completely pay off the house it is yours and yours alone but so are all the problesm that go along with it.

My opinion is never buy a house just because you are tired of renting.

Buying a house is a heavy investment. With mortgage loan it will make it a high leveraged investment. When the property market goes down by 5 percent, you don't lose 5 percent of down payment, you lose 5% óf the entire value of the 400k investment.

A debt basically tie you down against taking future risk. If you are not coping well with rental there is always a choice to move into with friends or move to somewhere cheaper 6 months later. Good luck when you have a mortgage loan. Your property is with the bank. In fact your bank keeps the title deed before you loan is fully paid up.

If you have to buy one make sure it is a small apartment in a reasonably good location, has high rental yield, and not at historical high in term of price per unit area.

 

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[DeletedUser0287]

Buying a house is a heavy investment. With mortgage loan it will make it a high leveraged investment. When the property market goes down by 5 percent, you don't lose 5 percent of down payment, you lose 5% óf the entire value of the 400k investment.

Only a problem for those trying to time the market, sell right away. Aka short term people.

 

[Kevin88660]

Only a problem for those trying to time the market, sell right away. Aka short term people.

That's precisely the issue of the problem. People like to think property price will go up forever, at least gradually over the long term.

I disagree. I think property price going down 5% is just as bad as your stock portfolio going down 5%. At least stocks are more liquid and I can find business that give me a good dividend yield.

Buying a property for the average young person will be a huge gamble on their net asset.

 

[zoeyallen6]

Every person in the world wants to have their own home. Keeping a person away from all the hassles gives your family a good feeling. If you too are thinking of making your home, then you have a good idea. Taking home a share is sometimes a hassle. So if you are able to take it alone then it will be a good decision.

 

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[WJK]

Here in the US, it cheaper to rent short term. This is especially true since the tax cuts were enacted. With the high personal standard deduction, almost no can itemize. (Congressional study says 96% can't.) That means that the renting is head to head with homeownership. BUT, the biggest asset for most middle-class people is their home. So, in the long run, renting will make most people poor in their elderly years when they need a paid-off home to have a place to live cheaply.

 

[Seamster]

If you can't decide the answer is ALWAYS to rent. Why? It's CHEAPER than owning a comparable house in the same area. House is bigger but you have taxes, insurance, and upkeep. Plus, the market is so high right now (crash coming I think) that you're paying $180k for something in 2011 was $110k. Your buy price goes up 40%/mo on your mortgage (and taxes...and insurance too) but Renting an apartment across the street will only go up by $100 or less.

I've been renting for several years. $500 which is cheap for my area but is a nice place (don't tell the landlord that he should raise it). To get a house in the same neighborhood, even a 2 bed 1 bath would be $100k. That payment alone would be $500 and with taxes and insurance I'd be at $650. Even if I live in the apartment for 10 years and save that $150/mo in a piggy bank I'd have $18k saved. If a mortgage I would have probably only gained about that same amount in equity (but then you're at risk of a market crash and you're $100k place could be back down to $65k).

*Note: I own rental properties but I don't live in them. I fix shit all day. I don't want to go home and fix shit!

 

[DustinH]

Good luck when you have a mortgage loan. Your property is with the bank. In fact your bank keeps the title deed before you loan is fully paid up.

In the US, the bank doesn’t hold title over the property. They only have a 1st lien position on the property. Meaning, they have the first right to take back the property if there is a default.

Your home will have a perpetual lien on it until the end of time because of property taxes. If you don’t pay them then you lose the home. Same goes if you’re in a homeowners association. Plus, some homeowner associations make you have homeowners insurance. You never escape having a monthly or quarterly payment.

So, eliminating a mortgage is not eliminating your house payments. It would only be giving you a feeling of relief that you have less to pay each month.

But there are advantages to having a mortgage:
The interest is tax deductible.
In the beginning you are paying about 75%-80% interest in your payment so it’s a large tax deduction (I’m talking US taxes)
It’s the only debt where you can get 30-yr fixed rate term at or below the rate of inflation.
After time the value of money is eroded through inflation but your payment is exactly the same.

If you went to a bank and asked for $200,000 to invest in the stock market or a business. Told them you would pay it back over 30 years at 4% interest. What would they say???

They would say hell no and laugh. But if you changed it to a house instead of stocks they would be scrambling to find the papers for you to apply immediately. So that tells me that banks think the house is a safer bet than stocks.

 

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[Seamster]

I don't know about that. Thanks for this information. I will take in consideration when I will buy my own house.

This cannot be answered until we know the costs involved of the places you're considering. Generally speaking, renting is generally cheaper in the short term. In some areas renting forever is cheaper. In some areas you can have a mortgage payment that would be cheaper than rent. You will get into a lot of arguments online with people who have less money than you. They'll tell you about appreciation and resale value. Yet they won't present any numbers. Ignore anyone's opinions who doesn't back it up with numbers. I don't know what you're buying so I don't have numbers either, but I can give some food for thought.

I work an an office were most of us make $50–80,000. Our ages are in the 25–40 range, for the most part single. There are only about 50 of us but it seems that every month I see a new car in the parking lot. A few of us have $1000 cars. I did the math. I’ll keep the numbers around the average and simple:

Person A - New Car, Trendy Apartment
Monthly salary: $3000
Living expenses (not including the few months per year you pay medical bills, plane ticket, car tires, etc.) $1200
Apartment price: $1000 (some are even more)
Car payment: $500
Leftover per month: $300

Now let’s look at a few of us who want to retire early and have more money to spend on things we care about that don’t include living in the trendy area or having a newer car. Look at how rich we are vs the others.

Person B - Used Car, Nice Apartment
Monthly salary: $3000
Living expenses (not including the few months per year you pay medical bills, plane ticket, car tires, etc.) $1000
Apartment price: $500
Car payment: $0
Leftover per month: $1500

We’ve had a recent trend in the last 2 years for SINGLE people to go out and buy houses in the trendy areas. These are $150–200k homes. Some are condos that are no better than my apartment. I’ve watched this happen before my very eyes even though my recommendation was to not buy the house/condo. These people are always the ones with the new cars too. And I can understand if a married couple gets a house and plans to live there for a long time, but the people buying the houses are single and are unlikely to live in that house long-term. They buy the house for the same often harmful reasons some people go to college, have kids at a young age, get tattoos, etc.: following the heard of what you should do at a certain age. In fact, two people who bought houses are already talking about moving. Let’s look at those numbers.

Person C - New Car, Trendy House
Monthly salary: $3000
Living expenses (not including the few months per year you pay medical bills, plane ticket, car tires, etc.) $1500
$170k Mortgage, taxes, insurance, HOA fees, house upkeep, etc: $1500
Car payment: $500
Leftover per month: -$500 (time to get a roommate)

The costs and stress associated with moving are not factored in, nor are the $4000 loan origination costs or the 5–10% you’re going to need to put down for a good rate. Let’s say this cost was $15,000. The big question is, “Will you definitely be living in this house at least 15 years?” If you are, great. I will wouldn’t spend like you do but at least you’ll benefit from paying down the mortgage and maybe get some appreciation, which is something you can’t count on. If you’re there 5 years, you haven’t really paid down much of your loan and if you move again you’re losing money. If you know you’ll be in one area for at least 20 years, then it might be a different story.

Married Couple D - Used Cars, Nice House
Monthly salary: $6000
Living expenses (not including the few months per year you pay medical bills, plane ticket, car tires, etc.) $2000
$100k Mortgage, taxes, insurance, house upkeep, etc: $1000
Each buy a $10,000 car every 10 years: $200/mo
Leftover per month: $2800

So, as you can see, buying a house can be a good thing. You don’t want to live with your wife and kids in a small apartment. If you’re the type who wastes money on stuff, you need a house to hold it all. This type of person usually drives a newer car too. They live paycheck to paycheck. All the numbers above are made simple, but the examples clearly show that someone who is not definitely going to stay in a certain spot should not buy a trendy house.

If you like this, next we talk about how people are wasting money on Teslas.

 

[WJK]

In the US, the bank doesn’t hold title over the property. They only have a 1st lien position on the property. Meaning, they have the first right to take back the property if there is a default.

Your home will have a perpetual lien on it until the end of time because of property taxes. If you don’t pay them then you lose the home. Same goes if you’re in a homeowners association. Plus, some homeowner associations make you have homeowners insurance. You never escape having a monthly or quarterly payment.

So, eliminating a mortgage is not eliminating your house payments. It would only be giving you a feeling of relief that you have less to pay each month.

But there are advantages to having a mortgage:
The interest is tax deductible.
In the beginning you are paying about 75%-80% interest in your payment so it’s a large tax deduction (I’m talking US taxes)
It’s the only debt where you can get 30-yr fixed rate term at or below the rate of inflation.
After time the value of money is eroded through inflation but your payment is exactly the same.

If you went to a bank and asked for $200,000 to invest in the stock market or a business. Told them you would pay it back over 30 years at 4% interest. What would they say???

They would say hell no and laugh. But if you changed it to a house instead of stocks they would be scrambling to find the papers for you to apply immediately. So that tells me that banks think the house is a safer bet than stocks.

The tax saving due to interest is not as easy to take these days. The standard deduction has wiped out the possibility of itemizing for over 90% of the taxpayers (per a Congressional study). This happened in the last tax cut legislation. That put homeownership head-to-head with renting -- which is cheaper in the short term. I think it's a backhanded way to help wipe out the middle class in this country. Usually, one's home is our biggest asset. So, yes, I'm for working people buying a home and PAYING IT OFF. On the other hand, it has created a whole new rental market for single-family residents in modestly sized housing -- another investor opportunity.

 

[spreng]

The tax saving due to interest is not as easy to take these days. The standard deduction has wiped out the possibility of itemizing for over 90% of the taxpayers (per a Congressional study). This happened in the last tax cut legislation. That put homeownership head-to-head with renting -- which is cheaper in the short term. I think it's a backhanded way to help wipe out the middle class in this country. Usually, one's home is our biggest asset. So, yes, I'm for working people buying a home and PAYING IT OFF. On the other hand, it has created a whole new rental market for single-family residents in modestly sized housing -- another investor opportunity.

Agreed, this country been in this direction for some time. It would be great to see it ease back towards equity, but history shows that things like this arn't rectified by any means other than violence (unfortunately).

 

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[Onakosa]

Many (many) years ago a rich man once told me that 'wealthy people rarely buy property. If you're stuck for cash you can't sell off a bedroom'. I've italicised the word 'buy' as most rich people, in my experience, inherit it.

• Property isn't remotely liquid (per MJ's rules).
• A few years ago here in the UK the money magazines were telling us all to invest heavily in commercial office type property. In 2020, that's worked out well, hasn't it ...
• And people love to forget the transaction costs are horrendous.

People often say that renting is 'dead money'. Yes, and no. It's more expensive but you are buying your freedom. It's a bit like paying premium for a delivery to arrive at 3pm on Saturday because it suits you, rather than waiting in all week for it. With renting it makes makes no difference if you change your mind, need to downsize quickly, or a brothel opens up next door to you (sounds fun, but trust me it's not) You just hand in your notice and move.

My advice, for what it's worth is: buy a property because you want to live in that property long term. Don't buy it crossing your fingers that it will go up in price/you can sell it at a whim/Elon Musk will suddenly decide to route an Amazon server through it and pay you to move. It may well go up in price and become valuable (see my above point about wealthy people inheriting property) but if it doesn't then it doesn't remotely matter because you will enjoy living there and ultimately get your money back long term.

 

[Deleted50669]

To get a house in the same neighborhood, even a 2 bed 1 bath would be $100k.

You must live off the grid. 100k won't buy you a meth den in California lol

 

[Guest-5ty5s4]

You must live off the grid. 100k won't buy you a meth den in California lol

Do you seriously consider the other 49 states to be "off the grid?" Lol

 

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[WJK]

Agreed, this country been in this direction for some time. It would be great to see it ease back towards equity, but history shows that things like this arn't rectified by any means other than violence (unfortunately).

I'm not sure about the "violence" part. The pendulum swings back and forth. I hearing the rumbles of a push-back movement right now. I think that a lot of people have been complacent while resting in the silent majority. I not feeling that passiveness of the average person right now.

 

[WJK]

Many (many) years ago a rich man once told me that 'wealthy people rarely buy property. If you're stuck for cash you can't sell off a bedroom'. I've italicised the word 'buy' as most rich people, in my experience, inherit it.

• Property isn't remotely liquid (per MJ's rules).
• A few years ago here in the UK the money magazines were telling us all to invest heavily in commercial office type property. In 2020, that's worked out well, hasn't it ...
• And people love to forget the transaction costs are horrendous.

People often say that renting is 'dead money'. Yes, and no. It's more expensive but you are buying your freedom. It's a bit like paying premium for a delivery to arrive at 3pm on Saturday because it suits you, rather than waiting in all week for it. With renting it makes makes no difference if you change your mind, need to downsize quickly, or a brothel opens up next door to you (sounds fun, but trust me it's not) You just hand in your notice and move.

My advice, for what it's worth is: buy a property because you want to live in that property long term. Don't buy it crossing your fingers that it will go up in price/you can sell it at a whim/Elon Musk will suddenly decide to route an Amazon server through it and pay you to move. It may well go up in price and become valuable (see my above point about wealthy people inheriting property) but if it doesn't then it doesn't remotely matter because you will enjoy living there and ultimately get your money back long term.

How about buying for the cash flow?

 

[Deleted50669]

Do you seriously consider the other 49 states to be "off the grid?" Lol

Link me to a listing in a decent area where you're buying a 100k house with 2bed 1bath.

 

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[Seamster]

Link me to a listing in a decent area where you're buying a 100k house with 2bed 1bath.

I could send you a links for hundreds of 3 bed 2 bath in fantastic areas on 1 acre for $80k-120k. I'm not going disclose where I live but just to show this is definitely available in my area at least.

Though, I work 90 minutes from work in a big city. The aforementioned house near work would be $200k.

I'm going to go out on a limb here, and probably be totally incorrect in many cases, but I'd say that in many of the pink or red areas you could find a decent house in a safe area with some land for well under $100k. Blue is big cities and that's where the prices increase.

 

[Deleted50669]

I could send you a links for hundreds of 3 bed 2 bath in fantastic areas on 1 acre for $80k-120k. I'm not going disclose where I live but just to show this is definitely available in my area at least.

Though, I work 90 minutes from work in a big city. The aforementioned house near work would be $200k.

I'm going to go out on a limb here, and probably be totally incorrect in many cases, but I'd say that in many of the pink or red areas you could find a decent house in a safe area with some land for well under $100k. Blue is big cities and that's where the prices increase.

View attachment 35921

That's not really a strong argument. You're showing me a political geography breakdown. What I'm saying is, anywhere worth living (which by my own criteria is a decent dating scene, social options for entertainment within a 10-15 minute drive, moderate to low crime rate - not the ghetto) will not have options with those specs for less than 200k. The midwest might be an exception, and possibly other southern cities that haven't finished off being invaded by the coasts.