Quote:
Originally Posted by c1pher
Well, I won’t do the whole cost benefit analysis here, but unless you’re buying in a rural area or paying cash, you rarely are putting all your money into the house. You’re paying interest of course, property tax, home owner insurance, maybe flood insurance, HOA fees and dues etc. I can look at two homes side by side and the rental is typically cheaper with the owner paying the extras. That’s not the case all the time so it does pay to shop. And when you “buy” a home, with interest, you are paying 3-4x the original purchase price over the course of a typical 30 year.
Sure, if you can pay cash or pay the house off quickly, it may make sense, but someone making $65k a year asking if he can take a car loan isn’t in that situation.
Just simply look at your mortgage statement and see how much is actually going to principal. That’s what you’re saving. The rest is going out the window. Again, if you pay cash, sure it makes sense. And you may make a small profit if you have to sell which won’t be taxed if you lived in the house for at least 24 months. And what happens when you need to replace the roof, windows, or hvac?
Trust me. I’m 53, been there done that. Switching to renting was the best thing I ever did and I’ve amassed several hundred thousand dollars over the period of time I started renting in less than ten years. YMMV of course.
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What makes you think you aren’t paying those costs when you rent? Sure they may not be separately invoiced but you can bet a landlord factors in property tax, insurance, repairs and maintenance, cost of capital etc. into rental prices because if they didn’t it wouldn’t make much sense to be a landlord. Plus, renting subjects you to rental inflation based on trends in supply and demand. Yes, mortgaging a home results in interest cost, but a 15 year mortgage with a sufficient down payment and a favorable rate as has been available for quite a while now is still a reasonable proposition and results in at least a portion (which increases over time) of your monthly cost going to equity vs. zero when renting.
I think if someone needs to relocate every few years, can’t make a sizable down payment, has mediocre or bad credit or is prone to getting in over their head, there is no option other than renting. Otherwise, I would not rule out ownership because it makes someone directly vs. indirectly responsible for costs of ownership.