Hello. I recently posted a comment in the thread Buying a Home or Renting an Apartment. Doing that reminded me of how people illogically buy new cars because they feel it saves them money on gas, so I made a post about it: The Tesla Money Saving Scam. Reading those are not necessary to enjoy this thread. Since I'm on the topic today of saving money, I thought I'd also share this somewhat different information in a new thread.
I will discuss 4 reasons why people choose to buy homes vs renting an apartment:
1. In my personal case, I live alone in a 900 sq ft 2 bedroom apartment with garage and nice empty grass yard for $500/mo. Most places in my area cost more . Let’s say I’ve been in my apartment 10 years. Had I bought an $80,000 house (typical 1200 sq ft with yard and garage) 10 years ago, since the mortgage + tax and insurance + upkeep would have been $800–900, I’d have spent $4000 extra per year. So, after 10 years I would have saved $40,000 by not buying a house. Had I gotten the mortgage on house after 10 years I’d still owe $70,000 or so. Could the house have increased in value? Yes, it could have. By $40,000 on an $80,000 house? I wouldn't bank on it, but it's happened in the past. And prices do, on average, go up over a long time period. This is reason #1 that people buy houses vs renting: they think “it always goes up.”
2. Was my rent “thrown away”? Let’s see, in 30 years the house would be paid off so I’d have an $80,000 house. Do you really think it would have gone up to $120,000 in 30 years? Ok, let’s say it has. But in 30 years I would have saved $120,000 by renting. Sure rent could go up, but sure, the house would need a roof and furnace and other $1000s more of repairs during that time. Plus with renting I get the money now, vs later. And I don’t have sell at the bottom of the market if I want to suddenly move. But what do people see? They see what the media tells them to see: rent paid = never get back. Reason #2: people think they’re throwing money away (we all know most people are not going to invest it anyway but…).
3. Now, let’s look at things a different way. Let’s say rent is $750 in your area and the house for your growing family is only $100,000. Personally, I’d still rent because who knows if they want to stay somewhere for the life of the mortgage. But, reason #3 to buy a house: people who live together need more space. Plus, if you’re paying $750 for rent now vs $900 for a house, you’re only saving $1800/yr. Sure, you still have house upkeep, but your wife might be working too to help out. Or, the house might be $1500 sq feet (with basement) so you could get a roommate. Or you might have 2 kids or pets who you want contained in the yard (kids and pets are a both waste of money with no logical benefits but people want something to be emotionally attached to). If I woke up in the shoes of a man with a dog, cat, wife, 2 kids, and a desire to lounge around at home, I would consider this option.
Finally, reason #4 is that a house is a status symbol and the next step in life! People are raised being taught that you go to school, graduate, go to college, get some job, save money, marry some man/woman who’s just going to get fat and lazy, finance a $40,000 car, then buy the biggest house you can afford. You and the wife make $75k each? You can afford a $500k house! That’s what they tell you. And you believe it! This payment with tax and insurance is only $2500. Your car payment on the Lexus is only $500/mo. And you just paid off the 2016 POS Jeep Compass! You EACH bring in over $3000/mo and $3000 is your total bill for housing and cars. You have $3000 leftover to use on food, gas, dogs, boats, medical bills, kids, vacation home, and any other ways you can think to rid yourself of the excess income. Better hope she doesn’t leave you or you’ll have to sell, but hey, you’re different, y'all be like like, really in love.
Thanks for reading. Excuse the sarcasm. I wrote it so I guess I’m allowed to add a wee bit of opinion. Opinion aside, though, the numbers don't. Me poking fun at money wasters, parents, or pet owners helps me keep myself from hypocritically spending my savings/investment money on things I don’t need. Writing this helps me more than you. But I hope it will help you spend less money as well.
I will discuss 4 reasons why people choose to buy homes vs renting an apartment:
1. In my personal case, I live alone in a 900 sq ft 2 bedroom apartment with garage and nice empty grass yard for $500/mo. Most places in my area cost more . Let’s say I’ve been in my apartment 10 years. Had I bought an $80,000 house (typical 1200 sq ft with yard and garage) 10 years ago, since the mortgage + tax and insurance + upkeep would have been $800–900, I’d have spent $4000 extra per year. So, after 10 years I would have saved $40,000 by not buying a house. Had I gotten the mortgage on house after 10 years I’d still owe $70,000 or so. Could the house have increased in value? Yes, it could have. By $40,000 on an $80,000 house? I wouldn't bank on it, but it's happened in the past. And prices do, on average, go up over a long time period. This is reason #1 that people buy houses vs renting: they think “it always goes up.”
2. Was my rent “thrown away”? Let’s see, in 30 years the house would be paid off so I’d have an $80,000 house. Do you really think it would have gone up to $120,000 in 30 years? Ok, let’s say it has. But in 30 years I would have saved $120,000 by renting. Sure rent could go up, but sure, the house would need a roof and furnace and other $1000s more of repairs during that time. Plus with renting I get the money now, vs later. And I don’t have sell at the bottom of the market if I want to suddenly move. But what do people see? They see what the media tells them to see: rent paid = never get back. Reason #2: people think they’re throwing money away (we all know most people are not going to invest it anyway but…).
3. Now, let’s look at things a different way. Let’s say rent is $750 in your area and the house for your growing family is only $100,000. Personally, I’d still rent because who knows if they want to stay somewhere for the life of the mortgage. But, reason #3 to buy a house: people who live together need more space. Plus, if you’re paying $750 for rent now vs $900 for a house, you’re only saving $1800/yr. Sure, you still have house upkeep, but your wife might be working too to help out. Or, the house might be $1500 sq feet (with basement) so you could get a roommate. Or you might have 2 kids or pets who you want contained in the yard (kids and pets are a both waste of money with no logical benefits but people want something to be emotionally attached to). If I woke up in the shoes of a man with a dog, cat, wife, 2 kids, and a desire to lounge around at home, I would consider this option.
Finally, reason #4 is that a house is a status symbol and the next step in life! People are raised being taught that you go to school, graduate, go to college, get some job, save money, marry some man/woman who’s just going to get fat and lazy, finance a $40,000 car, then buy the biggest house you can afford. You and the wife make $75k each? You can afford a $500k house! That’s what they tell you. And you believe it! This payment with tax and insurance is only $2500. Your car payment on the Lexus is only $500/mo. And you just paid off the 2016 POS Jeep Compass! You EACH bring in over $3000/mo and $3000 is your total bill for housing and cars. You have $3000 leftover to use on food, gas, dogs, boats, medical bills, kids, vacation home, and any other ways you can think to rid yourself of the excess income. Better hope she doesn’t leave you or you’ll have to sell, but hey, you’re different, y'all be like like, really in love.
Thanks for reading. Excuse the sarcasm. I wrote it so I guess I’m allowed to add a wee bit of opinion. Opinion aside, though, the numbers don't. Me poking fun at money wasters, parents, or pet owners helps me keep myself from hypocritically spending my savings/investment money on things I don’t need. Writing this helps me more than you. But I hope it will help you spend less money as well.
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