rent vs mortgage

[ebaystealth1974]

And to top it all off, renting is just throwing money out the window.

If you're going to live somewhere for 5 years, and are going to pay 1000/month, that's 60,000 dollars GONE. If you had put that into a house mortgage, though, you can get it back when you sell it.

Or, just keep it and rent it out when you move somewhere else.

[H4ck]

rent is not throwing money away.....you are receiving something in return a place to live. you are receiving freedom which is an intangible asset.....

Also if i were to put a down payment for a 300k property that equates to roughly 71k for 20%.

you can say goodbye to that money, you cant touch that money and it will go towards your second house.

the person renting paid probably 1 months security deposit than used the other 70 grand to start a business or invest........

you need to count the opportunity costs involved as well.....

[Play]

Originally Posted by jarsky541

rent is not throwing money away.....you are receiving something in return a place to live.

Very surprised to hear your views. If a poll was carried it (most probably already has) and you asked average people why they were renting as oppose to owning a home, I would put it down to affordability (at least in the UK, if not globally), as oppose to choice.

When you take into account most US residents are living pay cheque to pay cheque each month, (I think its something like 60%? of US citizens), they just don't have the money for a down payment.

So like I say, I doubt most people do it out of choice. Owning a home is usually the more sensible option, but that's just my opinion.

Also if i were to put a down payment for a 300k property that equates to roughly 71k for 20%.

you can say goodbye to that money, you cant touch that money and it will go towards your second house.

Not true. If you buy "smart", and you know the value would appreciate, then the value of equity you hold would appreciate. You can sell the property/liquidate it. You're better off.

But it can go the other way too... you buy a house today, tomorrow recession hits, financial collapse, house prices plummet, and you find yourself with less value now with the equity you hold.

Also, you come across very young, so if you invest wisely, you'll ride through those dips, and long term you'll see a financial gain.

Furthermore, you have another issue (from your crypto posts), you have no patience (saying it in the most respectful way possible). That's your short fall, and you'll need to overcome that if you're ever going to see returns on any investments in life.

In the end, just decide what you're comfortable with. If renting is what you want to do, then so be it, i'm sure you're landlord will be a happy man/woman. Cha Ching

[H4ck]

Well the bank will never give me a loan because I cannot prove income.......


I listened to people from goldman sachs, various others folks......

What I would prefer doing is buying a small apartment or condo in cash to start if I really wanted.......to get rid of the rent payment.....only put down 20% of my net worth in a place.....

then the other 80% my own business.........

slowly upgrade to a bigger place with cash........

I am young......but i have more cash equity than 80% of the us population lol.....

[H4ck]

I think what many people fail to understand as well is.....the bank makes the ultimate decision on how much they approve you for........

their are so many factors that get put into the decision on the banking side.......

when people finance houses, or cars i always see it as the banks is the owner....you are just the tenant.....if you don't believe me attempt to default on your payments they will send the sheriff to force you to vacate the premises......

[RustyShackelford]

It all really depends on the housing market you are in, I have seen places where the rent is far lower than what your mortgage payment would be, and vice versa, to a certain degree buying a house with a 30 year mortgage is not the smartest move. If you plan to stay the full 30 years think of the condition/construction of the house, will people still want it compared to other houses around. From what I seen internationally (newer cities not Europe were everything is 1000 years old lol) peeople dont tend to live in the same place for long, old buildings get torn down, new buildings get built down the street and the city shifts a little back and fourth. So in those cities id only rent.

Next topic is housing bubbles, since the last crash of 08 many cities have not bounced back to pre crash prices, meaning some people are still upside down. Outside major cities housing prices are flatline, not up, not down, so if you adjust for inflation, youre losing value of your house. I am a believer of a bigger crash is eventually going to happen, and cities such as San Francisco, NYC, LA etc, where housing prices are astronomical, will fall hard, and not recover.

Last, think about freedom, if you rent, you arent married to your house, if you want to travel, live in other cities, pick up and go, houses you are married, always some issue, some repair, maintenance, etc.

One more thing I would like to add, Ive met a few rich people that told me never look at a house as an asset.

[Hercules]

I read a study on a life time of renting or to buy. It came out to be about the same IF you put the money in a fund of some sort. The only benefit was that you could leave when ever you wanted and without the headache of selling at a bad market time. Plus the maintenance of a property.
I ad when most people live their lives they divorce or relocate which starts the new loan that drains your money up front with little principal being paid to the loan.
Amortization = bank robbery on your wallet.

[rsot]

Originally Posted by Hercules

I read a study on a life time of renting or to buy. It came out to be about the same IF you put the money in a fund of some sort. The only benefit was that you could leave when ever you wanted and without the headache of selling at a bad market time. Plus the maintenance of a property.
I ad when most people live their lives they divorce or relocate which starts the new loan that drains your money up front with little principal being paid to the loan.
Amortization = bank robbery on your wallet.

Good point Hercules - I was reading that study as well

[Shassar]

Originally Posted by jarsky541

I think what many people fail to understand as well is.....the bank makes the ultimate decision on how much they approve you for........

their are so many factors that get put into the decision on the banking side.......

when people finance houses, or cars i always see it as the banks is the owner....you are just the tenant.....if you don't believe me attempt to default on your payments they will send the sheriff to force you to vacate the premises......

I think your main issue is with getting approved for a bank loan. You should pay your taxes but there are loans you can get without having to provide the bank with tax returns. They are alot more rare since the market crashed but stated income loans allow you to basically tell the bank you make any amount of money without them verifying it as long as you have a significant enough down payment.. usually 30%. In conventional loans the bank only checks your income to make sure you will be able to make the payment and it won't go into foreclosure. If you put enough equity in the house they basically have that same security without checking income because who in their right mind would put $90k down on a $300k house and then walk away? Either way they can't lose so that's why they don't check income. You'd still have to explain to the IRS where you came up with that down payment tho. There's a way around everything except taxes

[elmo]

renting/owning is subjective to your lifestyle

if you have 500K cash to buy a house outright, it can be smart to put 100K down and get a 30 year loan and use the 400K cash to invest into anything that gives you a larger annual return than the 4% being charged by the bank loan. That comes with risk and potential upside, but that's not for everyone, some people would be happy without a mortgage.

I see people saying all the time that if you're renting a place vs buying a place, you're losing money every month that would otherwise be going straight into your own house. That's not entire true if you're getting a 30 year loan a big portion of your monthly mortgage is going straight into interest payments for the first few years. you are getting some equity for sure but renting has other benefits like freedom to move/experience other cities/states among others

I think everyone should move around renting different locations before buying a place just to give yourself reference experiences of what you like/dislike about cities/states, and then buying when you're more sure about where you want to be

Well the bank will never give me a loan because I cannot prove income.......

If you got tax returns, then you can prove income. its not that hard for a self employed person to get a bank loan as long as you have a few years of filing taxes

Freddie mac I believe has terms where if you have 5 years of taxable income as a self employed, they will only look at your most recent year and give you a loan rate based on it. most other lenders will require 2-3 years of tax income and they will take an average of your last 2 years to give you a rate

[aspkin]

ha!

I bought a 3plex a couple years ago and lived in one part of it for about a year..

I paid $390k for it; it's worth a little over $500 now and because I lived in it I fixed it up myself and now that I moved out I'm ready to rent out the open unit.

It makes more money than it costs; it's in a great neighborhood. It was a good investment but I got lucky with it.

The longer I have it the more I will be making from it.

[Hercules]

Originally Posted by aspkin

ha!

I bought a 3plex a couple years ago and lived in one part of it for about a year..

I paid $390k for it; it's worth a little over $500 now and because I lived in it I fixed it up myself and now that I moved out I'm ready to rent out the open unit.

It makes more money than it costs; it's in a great neighborhood. It was a good investment but I got lucky with it.

The longer I have it the more I will be making from it.

You really were a renter until you turned it into a full investment. Almost but not the renter/ buy discussed here. You have a business not a home with a mortgage in the regular sense. If you wanted to move far away and get out of being a landlord sometimes selling it can be a P.I.A.
I can't thank you enough for helping me transform my life with this website.

[yotano211]

I own 2 fourplex apartment buildings. I bought my 1st one cash, 2nd one, I put down 80% cash. I still live in a very cheap apartment in a cheap area of the US. I see any home as a liability and not investment. I studied Economics so I see things in a different way.

Any money that I make goes into a index fund and a REIT, I watch it grow over the years. I agree with aspkin, apartment buildings are a pain in the ass to manage yourself. Sometimes I wonder if having apartment building is worth it or not. I kinda just feel like selling both buildings and put everything into the REIT fund.

[Hercules]

Originally Posted by yotano211

I own 2 fourplex apartment buildings. I bought my 1st one cash, 2nd one, I put down 80% cash. I still live in a very cheap apartment in a cheap area of the US. I see any home as a liability and not investment. I studied Economics so I see things in a different way.

Any money that I make goes into a index fund and a REIT, I watch it grow over the years. I agree with aspkin, apartment buildings are a pain in the ass to manage yourself. Sometimes I wonder if having apartment building is worth it or not. I kinda just feel like selling both buildings and put everything into the REIT fund.

I believe this to be true. I had condos rented etc.. sold them off for good. If you invest in a fund it will gain when the stock market grows. If there's a down turn in the economy so does all investments including properties. At least you can cash out on a fund to ride out a down market and enter later.

[ebaystealth1974]

Originally Posted by jarsky541

Also if i were to put a down payment for a 300k property that equates to roughly 71k for 20%.

You don't seem to be able to add that well lol

Originally Posted by jarsky541

Well the bank will never give me a loan because I cannot prove income.......

If you think getting a loan without proof of income is troublesome, just wait until you pay cash on a 300k home without it!

They will be on you like stink on sh*t!

[elmo]

duplex/3plex/4plex etc are definitely the smart way to go if you got the cash for them. Such solid long term investments

another thing I've noticed a lot since I travel the majority of the year is people converting their homes into a convenient airbnb setup.

what I mean is if you own a home and have some kind of way to design a private entrance for example a studio above the garage, you can make some real good money / put equity into your homes. This can be especially lucrative if you're in a popular city/attraction area where 1-2 weeks of occupancy covers your entire mortgage for the month

[yotano211]

Originally Posted by elmo

duplex/3plex/4plex etc are definitely the smart way to go if you got the cash for them. Such solid long term investments

another thing I've noticed a lot since I travel the majority of the year is people converting their homes into a convenient airbnb setup.

what I mean is if you own a home and have some kind of way to design a private entrance for example a studio above the garage, you can make some real good money / put equity into your homes. This can be especially lucrative if you're in a popular city/attraction area where 1-2 weeks of occupancy covers your entire mortgage for the month

Some cities in the US are really starting to crack down on airbnb.

[nate]

If you were to work on your credit for the next 3-4 years while you over claimed your taxable income you could easily get into a 200-250k mortgage with ZERO down and seller paying all closing costs.

Beats paying 1st, last and security on an apartment.

Only thing that could be a problem is what the interest rate will be in 3-4 years.

The PMI wouldnt make much difference. You should be able to make more with the 40-50k (20%) you saved off the front end over 10-12 years time of paying the PMI.

[aspkin]

Originally Posted by Hercules

You really were a renter until you turned it into a full investment. Almost but not the renter/ buy discussed here. You have a business not a home with a mortgage in the regular sense. If you wanted to move far away and get out of being a landlord sometimes selling it can be a P.I.A.
I can't thank you enough for helping me transform my life with this website.

Hey Hercules! Yeah, it's a business but it's a place I bought too and with that comes those problems of buying a house whether you live in it or rent it out; still the same issues just for another person.

Honestly I'm getting tired of these properties (I have more); they don't make money and they are a time sap. I sold one earlier this year. I may sell another one in a couple years.

Buying and renting houses is a business itself and if not done right can be costly.

I'm too busy to manage more little businesses (each house is a business)

Anyway, I could talk for days about houses.

[aspkin]

Originally Posted by yotano211

I own 2 fourplex apartment buildings. I bought my 1st one cash, 2nd one, I put down 80% cash. I still live in a very cheap apartment in a cheap area of the US. I see any home as a liability and not investment. I studied Economics so I see things in a different way.

Any money that I make goes into a index fund and a REIT, I watch it grow over the years. I agree with aspkin, apartment buildings are a pain in the ass to manage yourself. Sometimes I wonder if having apartment building is worth it or not. I kinda just feel like selling both buildings and put everything into the REIT fund.

Yep, REIT is the way to go!

[Play]

Originally Posted by aspkin

Honestly I'm getting tired of these properties (I have more); they don't make money and they are a time sap. I sold one earlier this year. I may sell another one in a couple years.

How comes you're not profiting? ... rental income should easily cover mortgage and leave change to spare right?

As for time sap, don't realtors take care of all that?, so in essence you just get a cheque end of each month with a guaranteed/fixed rent rate.

Not sure if all that is different in the US. But in the UK, right location, and you could make a living off of rental income with a few apartments.

[aspkin]

Originally Posted by Play

How comes you're not profiting? ... rental income should easily cover mortgage and leave change to spare right?

As for time sap, don't realtors take care of all that?, so in essence you just get a cheque end of each month with a guaranteed/fixed rent rate.

Not sure if all that is different in the US. But in the UK, right location, and you could make a living off of rental income with a few apartments.

I have been doing a lot of repairs the past couple years, more than I profit. Those repairs take a lot of management.

I have been remodeling a property for the past 6 months. It's nearly done and ready to be rented out. I do this so I don't have to touch it for at least 2-3 years but it's costly and taking a lot of time for now.

Two places need new roofs in the next couple months.

PITA!