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rent vs mortgage
 

I want to hear some insight in regards to renting versus mortgaging a house.....

I still rent to this day.....partly because i cannot get a home loan because I am self employed.....and its hard to show documentation for my income.......

some real rich people i know say that you should buy a house in cash. rule of thumb in fact is always buy everything in cash. Renting a house is smarter until you can buy a house in cash because you get freedom as an asset......and dont incur a crazy liability like a huge house loan.

I see people who bought in like many years ago at 300k in hawaii and now their homes are worth 950k if they sold today........

I read just about all the arguments between buying and renting already.....
what do you people believe?

Re: rent vs mortgage
 

Pay taxes on that money and you won't have that big of a problem. lol

Re: rent vs mortgage
 

I'm involved in real estate and I have to agree, your 1040's and bank statements tell all to the knowledgeable mortgage broker.

If you're self-employed it is harder to get a mortgage, but usually that's because self-employed individuals hide a lot of their income.

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yeah...........about that.......not going to happen anytime soon.......

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Anyone who doesn't use bank leverage is a moron. Unless they are have plenty of money. And not many people do...

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yes, and look at how that mentality worked out in 2007-2008 housing crisis subprime mortgage debt that led to a recession........

Re: rent vs mortgage
 

Not sure what point you're trying to make, but most of those people couldn't afford their payments. Also morons.

Help me out.... I'm drinking, here! haha

Re: rent vs mortgage
 

Drinking....nice :thumb: what drink?

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Any kind of beer, plus lime! haha

Michelob Ultra in this case.

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I kind of believe renting is better for me at the moment and if in the future it is possible I would buy a place in cash. Let's hope crypto will be widespread so I can buy a house in bitcoin lol. Us government will never allow me to buy a house in cash

Re: rent vs mortgage
 

I never liked dealing with banks at any given situation

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Eh, owning a house vs renting depends on your situation.

I own a few investing properties. They don't make much money, they're expensive and the headache makes me think otherwise anytime I think of buying another one.

A personal house however... that makes sense.

I would rather own than rent; it's cheaper and it's an asset that usually increases in value.

Now if you don't see yourself staying in the same place more than 5 years.. than rent until you find a place you want to settle. Renting enables you to pick up and leave at anytime. If something goes wrong with the house.. you have someone to take care of that for you.

You will be paying more than if you owned the place but that's the cost of renting.

I'm self-employed.. and I do my taxes every year. I don't have any trouble getting loans.

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the house is only an asset if you literally own it outright.....until then its a liability until you pay it off.......

it does increase in value........but i heard you have to pay for things like interest, insurance, property taxes.....these things you have to pay......so your still throwing money away.....

if you look at this amortization schedule example of a 300k property,

https://www.mortgagecalculator.org/?q=AymDy

the first 10 years your paying on average 10-12k in just interest payments yearly towards your home loan on a 300k property.......money you will be giving to the bank.....

Re: rent vs mortgage
 

Not really, you build equity as you pay it off. You can use that as collateral in future loans (I know). It's an asset. And the longer you have it the more you build.


Yes, mortgage interest (which is tax deductible), house insurance (which has a use and is again deductible), property taxes (which I'm pretty sure is deductible as well)

You're not throwing money away; you're investing into a property. You don't have 300k to put down so you borrow that. Inflation along with property appreciation and tax deduction generally take care of all these costs. You pay 1,000 month mortgage for example.. what is 1,000 25 years from now? I'm sure it's not worth the same as it is day. Appreciate and tax savings throughout the years adds up. The longer you have a property the better..

You have to look at it long term. If you can't see it long term than don't buy a house; you're not ready.

Re: rent vs mortgage
 

I have an uncle that owns property, he told me that yeah the value of the property does go up but the issue as well if the value of the properties around him go up as well, and you have to requalify with the bank for the higher loan amount.....they put you through the ringer and they may not allow you to get the more expensive house if your income does not meet the requirement......

Re: rent vs mortgage
 

If he takes out another loan? I guess that makes sense. But if he's not upside down on the property it shouldn't be that big of a deal.

Real estate is tricky.. I know people who make bank with it.. they buy property for cheap and flip it.. but you have to find the property. That's the tricky part.

Re: rent vs mortgage
 

However, if you buy something with debt with high confidence level that what you buy is a huge discount than what you can sell at whatever market you're in, it's totally fine. Just collect the proceeds and pay back that debt right away.

Re: rent vs mortgage
 

nice topic jarsky... i tend to lean towards avoiding huge debt at all costs :thumb:

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i am not a supporter of getting any type of loans from the bank....

i know people who have loans for just about everything car, phone, house, and medical......and they work and work and work.....

little weird that people finance such an expensive house yet they never are at home to really enjoy it......they are too busy hustling all day long......

then theirs me, where I have a lot of free time on my hands to work on my business with straight cash......no real stress live well within my means....

Re: rent vs mortgage
 

If you want flexibility and don't need a whole lot of room(my situation) only buy real-estate when it makes $$$$$ and move into a Keystone Montana or Alpine fifth wheel and work whenever and wherever you want :)

Of course this does not work for everybody and it certainly has its downsides and upsides as well :)

Re: rent vs mortgage
 

Im from South Florida and ran a cash only business for 15 years that frequently gave out credit. I feel the same way you do about credit or loans. If I cant pay for it in cash I shouldn't be getting it.

A home doesnt apply to that. Even if you had the cash, youd make more off the cash than you would save in interest off the mortgage. As long as you know how to flip money and aren't JUST a 9-5 slave.

It all comes down to the interest rate too. A lot of people who bought homes prior to 2008 had adjustable mortgages and got f#cked when they adjusted.

I would be paying the same to rent a two bedroom 1 bath apartment as I am paying a mortgage on a 3 bedroom 2 bath house with 9 foot ceilings and a 2 car garage.

Paying a mortgage is like putting money in the bank or buying BTC every month. There's risk involved. I might loose, I might break even, or I might make a few bucks...

But my odds of making a few bucks are good. The house I financed is only 9 years old. Its in a good neighborhood with a piece of undeveloped land a half mile long by a quarter mile wide across the street in a growing mini city on the beach with a port.

If your buying or building a home in the woods in the middle of no where its a different ball game..

The best advice anyone could give is to buy a duplex for your first home if you can find one. That way you can rent out one side and live in the other so as long as you paid a few dollars less than it appraised at and you got a good interest rate and the duplex isnt falling apart. You'll have most if not all your mortgage paid by your renter and you can stack your money to buy a second permanent home for yourself. (with 9ft ceilings, marble or wood floors, and granite counter tops).

You will make and save more money on a home by getting your credit straight by over paying taxes and showing more than you actually made for 3-4 years than you would save in taxes. After you get your home loan, you can go back to doing business as usual.

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To add to what Nate is saying, you can pretty much live free and clear if you buy a 2-3-4 unit. Bank wont care what your income is as long as rent covers the mortgage. Now keep in mind, buy this, live 1-2 years, rent your spot and now this income can cover your new mortgage.....

Hire someone to handle the rentals. A good property manager is worth the fee by a long shot. It is also easier to get a loan this way.

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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.

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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.....

Re: rent vs mortgage
 

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.

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 ;)

Re: rent vs mortgage
 

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.....

Re: rent vs mortgage
 

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......

Re: rent vs mortgage
 

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.

Re: rent vs mortgage
 

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.

Re: rent vs mortgage
 

Good point Hercules - I was reading that study as well

Re: rent vs mortgage
 

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 ;)

Re: rent vs mortgage
 

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

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

Re: rent vs mortgage
 

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.

Re: rent vs mortgage
 

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.

Re: rent vs mortgage
 

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.

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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.

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

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

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

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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

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

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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.