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Sugoi

Accomodation: Rent or buy?

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Sugoi    46
Sugoi

Do you live in a rented accomodation or in your own one?
If you live in a rented accomodation are you going to buy one in the future?

 

I'm a tenant. But since I don't have the necessary amount of cash at hand and don't feel like becoming the "slave" of a bank/loan shark/etc. I personally prefer to rent accomodation. Also ownership has its responsibilities (big ownership = big responsibilities). So all in all renting leaves me personally more freedom.

 

Plus, at the very end all your belongings won't actually belong to you, anyways. A person is born with nothing and when they die they take none of it with them. So I keep my (temporary) belongings rather to a minimum.

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Urd    46
Urd

I faced that dillema years ago.

 

 

I looked at my father, who paid rent all his life. He's now 71. What does he have? Nothing. He paid all his life for something that does not belong to him in old age.

 

Being slave to a bank or being slave to a landlord is going to end up pretty much the same way, monthly wise. In fact, where i live, many bank loans tend to be cheaper than average renting price. Major different, for me, is that at the end of 30-40 years, when you're retired, you won't have to worry about paying rent to a guy who doesn't care if you're old and need to buy your meds or not. He just wants his rent.

 

Will not even go into the argument that at least you'll have something to leave to your kids. If my parents had worried about buying their own house when they were young, perhaps my life would be much different. But they didn't, and so i had to buy everything on my own.

 

And that's not even mentioning the freedom you have on your own house. Want to nail a painting in the wall? No problem! Want to change the floor? Do it!

Rented house? You can't even paint the walls another colour you like without asking for authorization first.

 

But that's just my POV ofc.

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Sugoi    46
Sugoi
On 11.7.2016 at 0:24 AM, Urd said:

Being slave to a bank or being slave to a landlord is going to end up pretty much the same way, monthly wise. In fact, where i live, many bank loans tend to be cheaper than average renting price. Major different, for me, is that at the end of 30-40 years, when you're retired, you won't have to worry about paying rent to a guy who doesn't care if you're old and need to buy your meds or not. He just wants his rent.

Mhhh, according to my experience as a former home owner I can say that owning a home isn't necessarily cheaper than renting. While there is no rent to pay there may be plenty of other expenses caused by maintenance, taxes, changes in legislation, etc. instead.

 

I guess back then the benefits of being a home owner were outweighed by the downsides by far in my case. Now I really appreciate the flexibility and freedom to just go elsewhere if things are not to my liking at all. (be it the landlord, neighbors, change in the environment, or whatever factors I have no influence on)

 

 

On 11.7.2016 at 0:24 AM, Urd said:

Will not even go into the argument that at least you'll have something to leave to your kids. If my parents had worried about buying their own house when they were young, perhaps my life would be much different. But they didn't, and so i had to buy everything on my own.

I don't have kids but I have never had such expectations of my parents. They have brought me into this world and have been supporting and taking care of me ever since which is what matters to me. Material-wise I believe life is what you make it.

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Boe409    5
Boe409

     Rent vs Mortgage if you only look at this in a month to month manner they both appear to be the same.

 

But don't forget that mortgages get paid off eventually, rent goes on forever.

 

Even while you are still paying off your mortgage you have the option to sell your home and depending on the market and how smart you are in your home choice you could sell it for more than you bought it for in the first place. Which is much like getting all the money you paid the banks back. Or in other words you lived there rent free the entire time.

 

Even if you sell at a loss you still recoup a majority of your money.

 

Home ownership also gives you greater leverage when applying for auto loans or other types of financing because you can use the home as collateral.

 

Rent on the other hand, that money is gone.

 

If you're paying rent then someone owns the property. In spite of all the maintenance costs associated with home ownership that person is most likely making a profit off of renting to you.

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Sugoi    46
Sugoi
3 hours ago, Boe409 said:

But don't forget that mortgages get paid off eventually, rent goes on forever.

 

Even while you are still paying off your mortgage you have the option to sell your home and depending on the market and how smart you are in your home choice you could sell it for more than you bought it for in the first place. Which is much like getting all the money you paid the banks back. Or in other words you lived there rent free the entire time.

 

Even if you sell at a loss you still recoup a majority of your money. 

My experience with credits/mortgages is that if you hit financial straits (an awful lot can happen in those 20 - 30+ years of period) "your" property may be gone more quickly than you expect. Money lenders natually don't care about your personal situation but the money only. So you better not expect them to be hesitant at all about putting up your home for compulsory sale when they have the opportunity.

 

Regarding selling, if you have something that's sought after things are cool. But if's the opposite...

 

3 hours ago, Boe409 said:

Home ownership also gives you greater leverage when applying for auto loans or other types of financing because you can use the home as collateral.

 

Rent on the other hand, that money is gone.

 

If you're paying rent then someone owns the property. In spite of all the maintenance costs associated with home ownership that person is most likely making a profit off of renting to you.

That's true.

 

However, I personally wouldn't want rent to other people (if I was in the position to do so). If your tenant turns out to be a rental nomad despite taking all sorts of precautions (e. g. background checks before signing anything) your investments will go down the drain in no time.

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Boe409    5
Boe409
22 hours ago, Sugoi said:

Money lenders natually don't care about your personal situation but the money only. So you better not expect them to be hesitant at all about putting up your home for compulsory sale when they have the opportunity.

 

Well no. If you borrow money from a bank you have to pay it back according to the terms of the contract you signed. If you don't they have every right to take the property that you bought with their money, in order to recoup their loss.

 

22 hours ago, Sugoi said:

(an awful lot can happen in those 20 - 30+ years of period)

 

Yes it can. Which is why 20 and 30 year loans are for suckers or people that have a super stable financial situation and don't mind being ripped off. A 30 year mortgage at 4% interest will cost you about an additional 75% above your loan amount. Most people run into trouble because they buy the most expensive house they can get approval for, and therefore can only barely make their mortgage payment when everything is running perfectly. If something goes wrong? Forget about it.

 

22 hours ago, Sugoi said:

Regarding selling, if you have something that's sought after things are cool. But if's the opposite...

 

If you make smart choices you won't have this problem. Affordable houses are ALWAYS sought after. You buy an expensive house you'll have a hard time reselling at a profit. You buy a cheap house and do some work to it, It'll sell fast and easy.

 

I just paid off my third house this January. I live in it and rent the other two. The rent from the other two paid my new house off. I'm now looking at a nice place out in the country with acreage. If I rent all three of the houses I own now and  put that money towards the mortgage with an additional 500 a month out of my pocket each month. I should be able to pay it off in about five years. So renting can have it's up side as well, as long as your the landlord.

 

My argument in a nut shell is: Owning you can loose money. Renting you will loose money.

But if renting works for you go right ahead.

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Sugoi    46
Sugoi
On 22.7.2016 at 1:36 AM, Boe409 said:

Well no. If you borrow money from a bank you have to pay it back according to the terms of the contract you signed. If you don't they have every right to take the property that you bought with their money, in order to recoup their loss.

Sure. It's just that I don't like those kind of obligations. To me they are like shackles limiting my freedom.

 

 

On 22.7.2016 at 1:36 AM, Boe409 said:

If you make smart choices you won't have this problem. Affordable houses are ALWAYS sought after. You buy an expensive house you'll have a hard time reselling at a profit. You buy a cheap house and do some work to it, It'll sell fast and easy.

The thing is despite making smart choices one cannot predict the future, unfortunately. If for example the goverment decides to build a new motorway resulting in the majority of traffic being redirected and thus making your area/region lose significance that'll naturally affect the value and attractivity of your property. The same applies if let's say the course of that newly built motorway or railway is close to your home as this would cause appropriately higher noise and air pollution.

 

I know one person who's home's value has dropped to hell because a refugee reception camp was set up nearby. It probably won't be there forever. But there is no telling when the need for it will be gone...

 

And there are so many other reasons that can have negative impact on your property. For instance:

- change in legal regulations

- new findings

- annoying neighbours...

 etc.

 

Sure if the price is low enough you can always sell. But that can be crippling...

 

 

On 22.7.2016 at 1:36 AM, Boe409 said:

My argument in a nut shell is: Owning you can loose money. Renting you will loose money.

But if renting works for you go right ahead.

Hmm, I have never considered the money spent on rent as "losing". There's countless ways to spend money or rather one's resources. The way I do it just makes me get something different out of it (more free time and freedom) which matters more to me.

 

Of course doing it your way definitely has its advantages too!!

The way to happiness is different for each individual. ^_^

 

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Keiichi Morisato    417
Keiichi Morisato

Before my parents passed away, they were purchasing the home we currently live in through what's known as a "land contract". They had been renting the home until our dad decided he wanted to purchase the house. It was paid off long before they passed away. Land contracts are known in the United States because it allows renters to keep paying the same monthly rental fee and have it applied to purchasing the home over a fixed number of months. I guess it all depends on what you can afford and what the property of the home is valued at.

 

Home owners who wish to sell try to sell the home at a vastly inflated price but that I wouldn't advise purchasing a home until it get the value of the home appraised. Where I live, prices for homes that have been seized by the country for non payment of taxes are priced far higher than what the homes are actually valued at. For instance, most homes are valued at around $40k but that the actual value of the homes, because of the deteriorating value of homes due to certain neighborhoods have seen actual home values around $2k to under 10k.

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DeLtA    8
DeLtA

It depends on a few things:
1. The amount of risk you're willing to take.
2. How much money you have to spend.
3. What your credit worthiness is.
4. How much time/money you're willing to invest in maintenance.
5. How long you are going to stay in the region.

I like to take moderate risks, so I bought a 2br/2ba house about 5 years ago. I nullified some of the risk by renting a bedroom to another tenant(s) for most of the years. I had some initial money I could spend because my parents were very generous and supportive. I had good credit, so I could get a loan without being shafted by the interest rate. I was willing to invest in maintenance, but I was not skilled enough to follow through, so it cost me more money than anticipated. And finally, I had planned on staying in the region for >5 years, however, I did not. I am currently renting the home to someone else, which brings its own difficulties. All in all, I have mostly broken even, when I compare it to living in an apartment. Here are numbers (slightly fudged/rounded for security reasons) and the lessons I've learned that might be helpful for you.

1. The numbers: Cost of home was ~$130k; Down payment was ~$20k; Mortgage was ~$110k at 3% APR for 10 years, then up to 8% for 20 years; my current mortgage balance is at ~$100k
1a. Costs: Since buying the home, I have paid $60k to the mortgage; I have also paid >$10k in starting equipment and maintenance around the house.
1b. Credits: During this period, I rented a bedroom to people for a total of ~$20k; I am currently renting the entire house to a person for a total of ~$20k. I pay taxes for this income at a hefty rate, so I probably only see about a half to 2/3 of this.
1c. Net total: Owning a house (to me, so far) is about the same as paying $600/mo rent for 5 years, but with a benefit of having about 1/10th of the mortgage paid off (which may or may not be easily turned into cash if I were to sell).

2. Things break, and without an emergency fund for the house, you can get into a lot of financial trouble quickly.

3. Getting money from tenants gets taxed at an incredible rate, and figuring out how to put it on your taxes is very difficult. I had simply put it as additional income for several years, which got taxed at a very high rate. I didn't opt for a tax professional because they cost more money because of how it was more complicated to fill out. Only recently did I figure out how to fill out the right form.

4. Finding tenants is very tough and requires time and effort. I haven't done background/credit checks into people because, honestly, I don't know how to do it easily. I am sure that if I end up with a bad tenant, I'll have to change my tune. I have been lucky so far.

5. Your house value changes. If I sold my house right now, after paying realtor fees, I don't think that I can recover any extra money.

So, right now, I still don't know if it was worth it buying a home. I am sure that if I own it for longer, I can come out on top, but until another decade, I will still be incurring risk.

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Keiichi Morisato    417
Keiichi Morisato

That's why it's to your benefit to come up with a contract of sorts, or a lease, that defines what the tenant can and can't do as renter of your property or apartment. The one thing to be aware of is when drafting such agreements as part of a lease or something is that the agreement be reasonable. For instance, some items that are allowed would be items relating to loud parties, sub-leasing, pets, late fees regarding non payment of rent, visitors, etc. Most people find comfort that renting their property out can sometimes be financially sustainable, especially if the housing unit has multiple units, such as a residential home that can house multiple families.

My neighbor across the street purchased a home that had been possessed by the city due to non-payment of taxes. Her lives in the bottom unit and rents out the other three units in the home to other people. In effect, his property basically pays for the taxes and whatnot. But, it's always a good thing to plan for things like this in advance, to determine what you want to do with your property.

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Sugoi    46
Sugoi
57 minutes ago, Keiichi Morisato said:

That's why it's to your benefit to come up with a contract of sorts, or a lease, that defines what the tenant can and can't do as renter of your property or apartment...

If you're unlucky enough to encounter one of those dreaded rental nomads as a landlord you're really screwed. They don't care about contracts. At some point they stop paying rent. And after running off they leave behind the rented rooms/apartment scrapped. And even if you get ahold of them they are usually so poor that you can forget about ever seeing a single penny from them...

 

In regards to my opinion of why to rent only, in light of what happened in Houston after Hurrican Harvey that's one more of a reason for me not to own real estate. If nature strikes in such a disastrous manner one's losses as tenant will be tremendously limited. Plus one can simply move to an area where those kinds of natural disasters are not so common.

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Urd    46
Urd
On 22/07/2016 at 0:36 AM, Boe409 said:

Yes it can. Which is why 20 and 30 year loans are for suckers or people that have a super stable financial situation and don't mind being ripped off. A 30 year mortgage at 4% interest will cost you about an additional 75% above your loan amount. Most people run into trouble because they buy the most expensive house they can get approval for, and therefore can only barely make their mortgage payment when everything is running perfectly. If something goes wrong? Forget about it.

 

 

That is just a poor comment on your part, i have to say.  Maybe reality is like that on your side of the ocean, but don't generalize and label ppl as "idiots" straight away.

Most part of Europeans have credits lasting between 30 and 40 years. And it's not for big fancy houses that are way over their budget. It's for normal houses. Do you think we like getting "married" to a bank? Or like being ripped off, knowing you are going to pay almost twice the ammount you asked for in the first place?

Thing is, houses are expensive here. And salaries are not very great. You don't buy a decent house with less than 110k euros, and that will be a finding. Most decent ones start at around 130k. Flats tend to be a little cheaper, at around 90k or so (older, used ones). That is where i live, in Portugal. And also, those are the prices for houses in the suburbs or villages...house in cities like Lisbon or Porto easily cost between 300k and 500k. Flats usually start at around 180k or so (again, old, used stuff).

 

If you don't have a house you can live in while you try to save some money for some initial payment (like, living in your parents house or something), or you don't have a very good salary (more than 1500€, tax free..which is something VERY FEW ppl have), you are screwed. You just have to enter debt if you want a chance of having something of your own. And rent is also pretty expensive (usually more expensive than the credit monthly payment) so you don't even have the option to rent until you can afford your own.

 

Took me 2 years to find a house i liked and that i could afford. Payed 20% upfront and got credit for the rest. Still, got a loan of 35ys. I'm expecting to pay it in 30years, which is very good, to our national standarts. 

 

Also, things like renting rooms to help with the income are not allowed everywhere. Here, for example, is forbidden to rent a house you are paying to the bank for reasons it would take me too long to explain. 

 

Bottom point is that reality regarding real estates change drastically depending on where you are.

 

Take Japan, per example. Their credit goes for 2 generations! Ppl buy houses that their sons will finish paying for. Literally. I'm not joking.

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