patrick.net

Patrick, when I first read about your theory concerning "rent Vs Buy" strategy, I was intrigued. So, I started analyzing my own behavior using this theory. I have found many intervening variables that cloud the decision. Even local REALTORS are using a similar Rent Vs Buy ratios to tout the sale of unsold houses. How can "evil incarnate" be on "my side"? They are not!

This is only my story, but think about it and respond if you like. I am not defensive, so If you can, let me have it.

I have been paying more per rent of "my" house (no lease- month to month) than it costs to buy since 2007. No matter how many times I calculate it....As a renter...I am still winning, and as an "owner" I would be losing. This is true even if I had NO mortgage and bought the house with cash!

I was using your theory of Rent V Buy in 2007. The house is exactly like the one I rent....across the street. Its a typical tract house starter 3/2/2 built in the 80's.

The asking was $200,000 in Jan 2007 ("only" $385 K and climbing in June 2005---a 185K haircut in 18 months+ all the Realtor commissions of 23K + 12 K = 35 K. I did a "walk through" and Due Diligence using my VALUE THEORY for "rent v buy" decision making. The property was listed through a Realtor, and I decided the best approach, is to deal with the listing broker.

Note: I reside in California, where dual agency is still legal. Here is a simple explanation. If my "Buyers Agent" is lied to by the Listing Broker about ANY issue concerning the deal ...I have NO RECOURSE to sue, even If I can PROVE the deception. If I use the listing broker under Dual Agency...they are on their "best behavior---which is low already...but I CAN SUE and cost them higher E and O premiums ---forever---if I lose, or "win" in court. Simply filing the lawsuit...will increase their E and O premiums!! That is all they care about anyway...maximizing misery for buyers and sellers...and profits for their monopoly.

Back to my VALUE Theory. I offered substantially less then $200,000 but with cash, NO CONTINGENCIES...no title insurance....no building inspection...no excuses for a QUICK 3 day escrow! In a lousy market. I could give them cash with no hassles of qualifying ....appraisals, rules regulations, disclaimers and third party double talk. Nothing to stymie the deal...cash for house...end of story. It would be a win-win for buyer and seller. The seller bought in the 80-'s and had no liens or seconds. That means EQUITY! The broker freaked out...."thats not the way I do business"....blah blah blah.

Me: When you go to the store to buy milk....OR ANYTHING else...I trade my hard earned cash for the item. Whats the big deal about a termite trap? What is so special about it?

Realtard: Its a "home"...its blah blah blah.

The house "owner" had equity and I knew their position (financially and personally) from my extensive background investigation.

Realtard: "...I can not EMBARRASS the owner with such a slow offer.."

Me: "I only ask that you SHOW THEM MY OFFER...Do you want cash, Gold, or Cashiers check?

The broker never showed my offer, and started a "bidding war" of straw buyers against someone who got emotional about the house (a pregnant woman) . I saw ALL visitors to the house since it is across the street. THERE WERE NO OTHER "BIDDERS". The sucker was bidding against himself....yes I reported it to the local assocation...and to the CAR and DRE....but what is so unusual about faux bidding...thats what the DRE AND the CAR said to me. I know several sellers who explained their scams with Realtards to dump worthless properties. All they need is one sucker "with emotion"...and the "bidding war" starts until the sucker is broke buying the old rat trap.

The house sold 6 months later under an FHA loan with 3% down to a "buyer" who is NOW underwater by at least $70,000. AND FOR THE COST OF THE INTEREST REALTOR FEES ( > $12,000) AND > 200K HOUSE DEBT....as the house was dropping in "market" value...not cash value but "market" ie OPM- (mortgage) --low interest value which is always HIGH.

Even if my offer was accepted ...cash...no contingencies...if I bought...I WOULD BE THE FINANCIAL LOSER using your calculator at any day from closing to now. Thats a reason that Realtards are now touting "buy Vs own" calculators for Nouveau wannabe flippers and other get rich quick dupes.

Why? the Rent V Buy calculator looks innocent enough? Well...its called VALUE. There are a lot of houses on this street that are foreclosures, REO's, walk-aways....and that same house can be purchased for $105,000 AND DROPPING. Why do I rent at almost TWICE my expected PITI? Its a place to sleep....store my junk and scheme my schemes.

I add up all my rent payments....and yes throwing a way good money...IS BETTER than going into debt for any length of time on a mortgage to A BANK! I HAVE FREEDOM...lets look at my Profit V loss numbers. In that house ....two adults are working TWO government jobs...and in DEBT....for years...they pay an additional PMI premium....and will pay and pay as the house LOSES VALUE.

If one of the owners gets sick, gets in an auto accident, or loses their job....they will not be able to make the monthly PITI + PMI and I will have another shot at it.... AT A LOWER PRICE.

Your calculator ONLY LOOKS AT THE PAST and possible "present" at this hour. IT CAN NOT PREDICT the future variables.

I disagree with your Rent V Own calculations because of at least FIVE variables...that you can rarely control:

1) VALUE---ACTUAL cost to build new. Currently in San Joaquin county (Tracy etc) ...$75/sq ft NEW ...$65/sq ft fire insurance replacement costs.

2) Mortgage debts. MUST BE A CASH DEAL....then it "could" be a possible deal..if all variables are in alignment --- Syzygy with the planets...AND stars.

3) Location....house and neighborhood. Can change daily...a new "Group home" (Teen aged gangsters) moves in and guess what happens to the "hood"?

4) Vacancy. Can you Guarantee rent EVERY month? There are rentals for MONTHS around here...and that yields more pain against the "location" variable...the trend is down as dirt bag renters such as myself move in. I have security from "Smith and Wesson".

5) Tenant quality...subject house AND NEIGHBORHOOD.

Put these variables in your calculator.

I am NOT anti- real estate.. IF AND ONLY IF YOU PAY CASH.
Once we cut out the mortgages and Realtards...house prices MUST COME DOWN to earth.

In my scenario....as banks start to pretend they are using some underwriting...as the government gets out of the real estate business...as the Realtor cartel loses control of the market (MLS games) ....as the home mortgage deduction is removed....and lastly as INTEREST RATES INCREASE ...AND THEY MUST. Add to this millions of more houses LISTED for sale...from current REO inventory and the millions more finally going into bankruptcy....and lets not forget the lousy unemployment---underemployment rates ...and the FACT that SALLIE MAE ...student loan debt---has reached one TRILLLION DOLLARS...and RECORD DEFAULTS...with NO END IN SIGHT. WHO WILL PAY for this debt?

That little dancing alligator...alien...rap dancer etc etc ...from the millions of countrywide ads during the main part of the housing price bubble....on all the YAHOO internet pages..? HAVE BEEN REPLACED ...with a grandma wearing a mortar board...at no cost...just sign here for your educational "opportunity"...paid for by Uncle Sam. Sound familiar? Who will pay?

If I don't like the rent...I walk ACROSS THE STREET into the open arms of another upside down house debtor/flipper...I love to watch them sweat blood. Ahh "revenge" is sweet...as I count my cash/Gold and watch them gurgle blood.

It reminds me of 2004 ALL OVER AGAIN . I was renting and saving big bucks...when my house was flipped to a criminal (flipper) from a criminal (Realtor). My rent was DOUBLED in one day. If I had the opportunity to know about the pocket listing......I wanted in...thank you...I was NOT an insider..! So the Realtor-owner's buddy got the "low priced deal". I watched over the next year has the price bubbled up ...to the sky. The "landlord" was busy helocing and buying new toys, cars, boats, businesses....Like a Real late night TV real estate tycoon!

Until he forgot about me---the lowly tenant. Who let the last sucker know about the defects in the house that were NOT disclosed--you can trust Realtors right? I showed them my letters -as tenant- about unrepaired water leaks....lousy plumbing...broken and unstable foundation...and ah yes... I reminded the IRS about all that income that was NOT reported by the flipper. When I got done reminding the proper authorities...I sued the "landlord" for three times the value of a bounced security deposit check from him---the bigshot landlord-flipper....and I reported him to the credit bureau...for bouncing checks...three times. BIG MAN with the new cars...now in debt to the IRS and FTB..for TAX FRAUD!

The last I checked....he lost his cars....including a new red custom V 12 Viper, a silver Mercedes...boats...and SIX flip houses...as well as his custom McMansion ...that I was able to "evaluate" the bathrooms...when I walked through it as a "prospective buyer"..pre-acution. Ah yes...and he owes the IRS over $100,000 and climbing for his Real estate flipping experience.

The law REQUIRES reporting rental income...this is a cost.

You forgot another variable TIME. What is the "rush"? As long as house prices are bloated...and as long as banks are underwriting and LTV ratios are decreased. I am in a POWER position.

Its true 50% of house sales in some areas are cash deals (Phoenix...etc etc) BUT THEY CAN NOT RENT THEM...if they have a mortgage. I know broker-flippers who paid cash...and are begging for renters. If renters who "dont care"...double up (sub let or room mates)...the "landlords" choke because of the HUGE inventory.

I know of at least a dozen houses 1/4 acre 3/2/2 at lower rent within a mile. I am too lazy to move...too many hassles. But if I "need" the hundred or so month difference...I can move with 30 days notice...and my landlord will quickly lower my rent ...to prevent yet another rental vacancy.

BTW the dump I am living in was at $525K in 2005 and is now $150K....and it is still TOO HIGH.

#housing