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Buying vs Renting. Which are YOU?

apollo_web

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Jun 10, 2019
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Hey there guys,

I'm interested in which camp you are in, have you bought your residence? Or do you rent?

Was speaking with a long time friend earlier today about the concept of buying a house to live in rather than the typical "throw money away" on rent argument you hear.

Went to the mortgage advisor, and could pick something up worth quarter million (UK pounds), at first I was excited at the prospect, but there's always something internally stopping me from pulling the trigger.

At first I couldn't ascertain whether it was fear, or whether it was my gut telling me I'm about to make a big mistake.

It's interesting, many people I know are now sitting pretty with a ton of equity in their homes having bought years ago... Despite being an entrepreneur, as of right I have a grand total of $0.00 in equity.

But a good litmus test, is when I look back I have zero regret having perpetually rented.

I've instead lived a unconventional life, lived in different countries, stories and experiences that would take days to document.

Digital products created from being on the move, gaining new skillsets.

Spent time in perpetual creation & ideas rather than repairing things.

In addition, if for whatever reason you need to scale back on living costs, you can lower your standard of living at a months notice, rather than being locked into a 30 year mortgage.

However I DO believe it depends on your stage of life. There's a time to rent, and a time own.

There's the idea of "house hacking" which I'm very interested in, bringing your monthly house expense to an minimum.

However they are only my thoughts of quite a controversial topic, would be great to hear what you guys think / any experiences you've had.

What are your thoughts?
 
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Insidious

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IMO, buying is for when you've determined where you want to be for a good length of time (10 years) OR when buying represents a fraction of your net worth.

For many people MOST to ALL of their 'net worth' is tied up in their residence. As a Fastlaner, that's not for you.

Yes, your monthly payment might be lower if you buy, but that's AFTER you cough up the down payment. And if you're thinking in terms of 'how much is the payment?' on anything, you're doing it wrong.

Wait until your real asset pile is big enough that the house is inconsequential to your net worth.

I appreciate Harry Browne's categorization of Real Estate: if you buy it to live in it, its a CONSUMPTION ITEM, if you buy it to rent it out, it's a business, if you buy it to flip it, it's a speculation.

(The threads on building a four-plex, or other structure in the forum, are BUSINESS strategies that have to meet an investment return criteria. This is completely different than a home residence.)
 

MJ DeMarco

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Decision is as much personal as it is financial.

For someone in the net worth expansion stage of their life, I'm all for renting so your options are more flexible. If we hold on to the idea that our net worth will grow through successful business operations, we can easily forgo the opportunity cost of "your house will appreciate!"

Likewise, if you travel a lot, a rent option might be better.
 
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apollo_web

apollo_web

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Jun 10, 2019
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IMO, buying is for when you've determined where you want to be for a good length of time (10 years) OR when buying represents a fraction of your net worth.

For many people MOST to ALL of their 'net worth' is tied up in their residence. As a Fastlaner, that's not for you.

Yes, your monthly payment might be lower if you buy, but that's AFTER you cough up the down payment. And if you're thinking in terms of 'how much is the payment?' on anything, you're doing it wrong.

Wait until your real asset pile is big enough that the house is inconsequential to your net worth.

I appreciate Harry Browne's categorization of Real Estate: if you buy it to live in it, its a CONSUMPTION ITEM, if you buy it to rent it out, it's a business, if you buy it to flip it, it's a speculation.

(The threads on building a four-plex, or other structure in the forum, are BUSINESS strategies that have to meet an investment return criteria. This is completely different than a home residence.)
Love that! Thank you for your thoughts, I totally resonate.

So difficult to "go against the grain" when you're putting in the actions surrounded by the mainstream, but with persistance the long-game will come out on top I'm sure.

Looking at buying rentals before buying personal real estate, and it's thanks to this forum and posts such as yours that keeps that fire and belief alive.
 
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apollo_web

apollo_web

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Jun 10, 2019
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Decision is as much personal as it is financial.

For someone in the net worth expansion stage of their life, I'm all for renting so your options are more flexible. If we hold on to the idea that our net worth will grow through successful business operations, we can easily forgo the opportunity cost of "your house will appreciate!"

Likewise, if you travel a lot, a rent option might be better.
Thank you @MJ DeMarco, you probably know this already, but your works really are changing lives, mine included.

Have only been active on the forum for a week or so, and can already feel my mind and belief system changing surrounded by forward thinking people looking to make the most out of the time we were given on this earth.

Thank you for all you do.
 

Insidious

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Decision is as much personal as it is financial.
=) This is certainly true.

While I'm currently renting, my landlord is driving my nuts. Has me considering a purchase (in violation of my own advice).

=p
 

Johnny boy

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Buying is for rich people or boring people.

Me? I need my money for business. I need my freedom for living life. If I had a house with equity I’d be always pulling the equity out to use for my business anyways. I’m 22. I would take out a loan to take out a larger loan to put it all on black on a roulette wheel and not worry what happens. I’ll pay a premium for freedom any day. The only time I’ll buy a place is because I’m building a custom home on some property and that’s one of my goals to accomplish in a few years.
 

astr0

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It's not only about finances.

Having your own house add a ton to convenience, security and life quality in general.
I've built my house and probably can sell it for not more than 50% of funds dumped into it. And I knew it from the start and could buy/build something similar in area and even better looking from the outside for 3 times less.
However, my house is in a location with 12-15 km of fields around it from two sides and a line of houses with more fields on the third side. Beautiful sunsets and sunrises, clean air, zero noise, zero distractions, 900m from not too busy highway, 12 km from the city, top quality water (although not much of it as it's slightly on the hill), no noisy planes flying above, no AC required in the summer, only floor heating in the winter, low utility bills, video surveillance and security alarm wired, smart-home half-done(hobby), everything autonomous except electricity and the internet (have 12-20Mbit 4G backup), no gas, 2 cars garage, play-zone for kids and the garden in progress, sauna planned. I can get anywhere in the city in less time during rush hours than from some districts inside the city. Yes, more mileage, more fuel, more car maintenance costs, etc.

Couldn't go all in into business without it. Having kids would be much harder without it. Relaxing fast while spending time with kids would be nearly impossible too.

Financially renting is a no-brainer here, in Ukraine. 14.5+% mortgage rates with 25+% downpayment compared to around 5%/year USD ROI from long-term renting (bank deposits ROI 13-14% in a local currency, 2-4% in USD). One exception is deferred payment for real-estate during the construction. 0% rate, but the price is usually increased by 10-15% compared to full payment and it's usually an investment contract so the construction company doesn't owe you anything if something goes wrong and you take all the risks.

I don't really need much for a living, so if I would probably continue to rent and invested that money somewhere if I was single. Don't see how I could comfortably rent with 2 kids and go all in on the business risking years with zero income before building other stable income streams.

I'm also in real-estate investments for the last couple of years. And can already tell that people are crazy stupid here and construction companies think only about money. Like 20-floors building with 8 apartments per floor and 2 elevators, really? Large residential complex (~20 11-floor buildings) almost sold out with no parking, no room for school/supermarket and one small road leading to the overcrowded already bigger road with 2 more similar complexes in construction further away from the city center. "Elite" building in an area that has some sewers issues and stinks during the whole summer, also sold out. And of course monolithic frame technology "done right" where people can hear drilling and bass from 4th floor on 11th cause the frame is everywhere inside the apartment, not hidden in closets/wardrobes like in my friend's apartment in Poland.

Anyway, with some thinking about the future, it's kinda easy to spot profitable deals. One of my apartments is +25% in 2 years already cause of lots of factors, mainly location and big trading center built next to it with large outdoor free parking that fixed the parking issue (it has underground parking, but crazy expensive and only for 30% of people). Another two are +5% in 2 years and still under construction, but should be huge cause it would have a nice view and are in the closest possible business-class apartment building to the upcoming IT cluster (our Silicone Valley).
My uncle is a hired CFO of a real-estate empire of local oligarch and his advice was to look for something undervalued now that would be huge in 5-10 years if some factors become real. He also helped to validate the options and advice to stay away from the old building unless in downtown (Lviv is a tourist city so downtown is great and the real-estate market is completely different there, focused on restaurants, entertainment, and daily rent).
 
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Damien Dev

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Mar 19, 2018
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For me renting is better. I live in Australia, where property ownership is worshipped and renters are looked down on. I couldn't give a stuff what they think though, I'm sitting by the beach overseas for 6 months during winter coding up products in between a lease. Owners are paying rent too, rent on the money itself.

In the 2 years I rented my last apartment the dishwasher broke, the AC packed in, the washer and dryer broke, the hot water unit failed. The kitchen fan stopped spinning, strata committee decided to paint all the walls and do a new garden (thousands each per apartment) All that would have cost a disgusting amount of money!

The only time I'd ever take out a loan is if I could pay it back tomorrow but wanted to use the money elsewhere. I've always lived a debt free, conservative existence.

It's a very personal decision though and there is no right or wrong. One must assess their own situation, crunch the numbers, factor in their short and long term plans and then do what makes total financial sense for them.
 

Adelaide

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We own our home in South Australia (not outright, we have a mortgage).
We are child-free by choice and have a 3 bedroom townhouse in a terrific area, one suburb from the CBD.

Buying was the right choice for us.

1) We DID NOT extend ourselves. We bought modestly compared to our options and saw the property as a financial decision, not a "home" if you get what I mean. Our mortgage isn't a big payment that we worry about. We pay off the principle and have savings in our offset account. We travel, buy things, live life.. this mortgage has only positively affected our lives.

2) Here, people our age are buying or building big homes for the lifestyle they want, not the one they have. They paint themselves into corners financially and professionally. Since owning, Husband and I have both left our corporate jobs and made career moves that would be too much of a risk for other home-owners.

3) We are both career driven workaholics, so having 3 bedrooms means we both have home offices. Since I'm now working on my business fulltime, this means I didn't need to rent office-space. It's also AWESOME to have our individual space for a million other reasons.

4) Being one suburb from the city makes transport a breeze! Our suburb (and street) are in high demand for renters and I know we can rent this place out easily (or even just a room) if things expectantly changed.

When we move oneday - which we talk about a fair amount - we probably wouldn't buy the new place. We'd just pay off this house. If we bought again, it'd be for investment, but again - modest purchase.

Everyone keeps telling us that houses are a safe bet (our family is big into buying property) but we like the flexibility we have now, to be in control of our lives, to invest in both our businesses and frankly - for just the two of us, we don't need the space.
 

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Ubu_roi

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Whatever is your decision, from a financial point of view you should be aware that as long as it doesn't generate money, a house is a liability: if you live in the house you own, you should consider it an expense, and not an investment. This is what many people are missing when they buy their home, and it explains why they spend WAY more than they should.

On the other hand, as you have to live somewhere, this expense is something you must consider anyway, even if you rent. So if you plan to live in the same place for several years, it might make sense to buy.

Personally I bought the house where I live, and I like the freedom of not having to pay a rent. Other people might consider it the opposite of freedom, as they want to change place easily. That's why in the end it's also very personal.
 

Ecom man

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Here is how I made the decision to purchase rather than rent....
in the event of a cataclysmic event that causes every business/ investment I have to tank... I can go out and get a job at McDonald’s and still take care of my family without our standard of living changing at all.

For me the security of owning helps me be more risk tolerant in my businesses as I know my worst case scenario is better than 90%+ of the rest of the country.
 

A_Random_Guy

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If losing the item I buy might cause a heart attack, I'd rent it instead.
Most things degrade their value and quality with time and better items replace them in the market, so renting is actually a better option.
 

Timmy C

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I live in Australia and property is out of reach for most people in the country right now unless you have a joint income.

There is always exceptions such as Perth and regional centres where prices continue to fall.

Renting, living with parents, or a share house is the way to go until or if the market corrects and you can buy a home with business profits.

I am looking at Perth as things are becoming quite attractive there as the years go bye, trying to catch a falling knife on leverage doesn't sound fun though.
 

gryfny

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I too prefer renting. It gives me the freedom, and doesn't have surprise costs when something breaks or the market value plummets. However, I do feel like when I'd buy I would spend more time on small renovations (painting that one wall, transforming it into a smart home).
 

Vlady

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I bought!

As you know everyone's personal situations are different and affect their choice. I asked myself where I wanted to be in 30, 20, 10 years... reverse engineered my life and worked backwards to see what road path I would have to take to live the life I want. I asked mentors, I read books, I studied those whom I wanted to emulate and made my decision.
I think personal goals, current location, and current finances are the biggest imp-actors for that decision.

In regards to house hacking, have you ever looked up "Biggerpockets"? Great resource!

Where I live, you can buy an offmarket property and the numbers make sense to finance a multifam, live in one unit, rent the other and still be able to cashflow monthly. We're talking 5-7% interest, 20% down (3% with certain programs), 90-220k in a B-C class area (you'll be safe, buy 40-60% under market value forcing equity).

In my personal portfolio real estate was an asset I chose to work with as it will help me fulfill my goals. Good luck!
 
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windchaser

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Hey there guys,

I'm interested in which camp you are in, have you bought your residence? Or do you rent?

Was speaking with a long time friend earlier today about the concept of buying a house to live in rather than the typical "throw money away" on rent argument you hear.

Went to the mortgage advisor, and could pick something up worth quarter million (UK pounds), at first I was excited at the prospect, but there's always something internally stopping me from pulling the trigger.

At first I couldn't ascertain whether it was fear, or whether it was my gut telling me I'm about to make a big mistake.

It's interesting, many people I know are now sitting pretty with a ton of equity in their homes having bought years ago... Despite being an entrepreneur, as of right I have a grand total of $0.00 in equity.

But a good litmus test, is when I look back I have zero regret having perpetually rented.

I've instead lived a unconventional life, lived in different countries, stories and experiences that would take days to document.

Digital products created from being on the move, gaining new skillsets.

Spent time in perpetual creation & ideas rather than repairing things.

In addition, if for whatever reason you need to scale back on living costs, you can lower your standard of living at a months notice, rather than being locked into a 30 year mortgage.

However I DO believe it depends on your stage of life. There's a time to rent, and a time own.

There's the idea of "house hacking" which I'm very interested in, bringing your monthly house expense to an minimum.

However they are only my thoughts of quite a controversial topic, would be great to hear what you guys think / any experiences you've had.

What are your thoughts?
I have done both. The way I see it, buying or renting a house in which you are going to live should be approached as an expense decision, not as an investment as many people do. It is true that your house could appreciate a lot but it could also not happen or it could even lose value. The point is, you should not take RE appreciation for granted or buy a home just because of that and renting is not always thorwing money away, as sonetimes it could be the cheaper solution.

When I am facing that decision I run the numbers, based on the expected time I intend to live there, how much would cost me to rent vs buy (including downpayment, interest, taxes and maintanance).
Once I have the numbers I also consider subjective aspects such as opportunnity cost of downpaynent, value in flexibility, value in owning, tax advantages, etc.

In my case, I own my house, I bought it in 2008 for a very good price and my mortgage payment is ridiculously low, and it is getting even lower as I am repaying the mortgage to the maximum limit for tax benefits every year. If I rented I would pay at least double for a similar place.

When I moved to the US, I rented my place and covered expenses (and even make profit) and while in the US, I decided to rent, first because I didnt have the option to buy, but when I had enough money for the downpayment, I also preffered to rent for two main reasons: 1) I didnt plan to stay in that city for long enough so the numbers were worth it and mostly 2) opportunnity cost of downpayment (I preferred to quit my job and pursue entrepreneurship with that money).

For what yiu are saying, it looks like renting is a better choice for you in the qualitative part, I recommend you to run the numbers as well. Also consider that, if you move, you could rent this house as well, so it could be part home part investment, make sure the numbers work for both cases if you plan to do that.
 

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