patrick.net

Call it Crazy says

Bigsby says

This is ridiculous. You aren't renting the property from the bank. You are paying down a loan you took from the bank. The two things are not the same.

I give up (banging head against the wall...)

Good, because your points are obvious and irrelevant.

Call it Crazy says

woppa says

-I know I am not going anywhere for a long time, at least until this house is paid off.

I hope you are right......

That is the point that you question? I could have sworn you were going to tell me my house is going to be worth about the same as a compact car by the time I am ready to sell. I am extremely comfortable in my house, and my job is extremely secure. I am not going anywhere for a good while.

Call it Crazy says

I think you need your calculator... how much "equity" do you have? Let me "help" you with your numbers.

How much is your loan?
How much did you spend on all your renovations so far?
How much did you spend on all your closing costs the first time? (go look at your HUD-1)
How much did you spend on your recent refi costs for appraisals, closing, etc?

Now add this all up and THEN subtract from your perceived value. What's your "equity" now??

Your welcome for the math lesson!!

Such insight. Such mathematical genius. Could you possibly be the very first person to take these factors into account when contemplating real estate?

Call it Crazy says

woppa says

I have 160k of equity according to that recent appraisal, and an 80k loan.

I think you need your calculator... how much "equity" do you have? Let me "help" you with your numbers.

How much is your loan?

How much did you spend on all your renovations so far?

How much did you spend on all your closing costs the first time? (go look at your HUD-1)

How much did you spend on your recent refi costs for appraisals, closing, etc?

Now add this all up and THEN subtract from your perceived value. What's your "equity" now??

Your welcome for the math lesson!!

Okay, I simplified slightly, but the closing costs were added into the loan my friend. I did not miss those. My 50k invested into my house is now equity in my house. Equity is found by subracting the amount of all loans from the current value. That comes out to 160k. That is called equity my friend. I did not say 160k profit, I said 160k equity. Keep trying...I am still not tired of this yet.

Call it Crazy says

Try not paying your taxes and you'll truly see who the REAL owners of your house ends up being... (hint, it won't be YOU)...

I thought I was the employer and I had some employees working for me, but I stopped paying payroll taxes and now I'm no longer a business owner.

I thought I owned a car, but stopped paying my reg fees and I'm not allowed to drive it anymore

I thought I was free to travel internationally, but I didn't pay my passport renewal fee, and now I'm stuck in the US

I thought I was a lawyer, but I failed to pay my annual bar license fee and now I can't practice

I thought I owned shares of Apple, but when I failed to pay my taxes they threw me in jail

I thought I owned my cash, but I couldn't pass it along to my heirs without being taxed

Woe is me, who owns nothing. If only I lived in Somalia where I own everything I can protect with my AK47. That's some true ownership there.

Bigsby says

You make claims of expecting a further 50-70%+ drop in prices

Again, what the hell are you talking about? Crazy talk you do.

woppa says

I mean what do you think these taxes go towards?

Paying the DEBT interest
Paying for the bank bailouts
Paying for socialized home ownership programs
Paying for the wars

Did I miss anything?

Bigsby says

Call it Crazy says

We're getting closer... a calculator is your best friend!!!

Besides your monthly payment, now add the loss of use/investment of your down payment for any other use, add in your closing and legal costs both buying AND selling, add in the money spent on the current renovations and the money you need to save for future repairs and renovations and don't forget to add the increases in costs of your property taxes and homeowners insurance.

Now take your calculator and put ALL those into your "monthly costs" by "owning" and then come back at tell us which way is better...

Yes, yes. There are both costs and benefits involved in purchasing a house. Your point has been made hundreds, probably thousands, of times before.

And each and every time you avoid using it. Pure genius are you.

woppa says

A ninth grader could debate that ridiculous statement into the ground.

Is this ground theirs or do they still pay taxes on it? Just curious.

RentingForHalfTheCost says

And each and every time you avoid using it. Pure genius are you.

Clearly not genius enough to understand what the hell you are saying, but then it's generally a struggle to parse your nonsense.

RentingForHalfTheCost says

Bigsby says

You make claims of expecting a further 50-70%+ drop in prices

Again, what the hell are you talking about? Crazy talk you do.

So you aren't Collapsing Housing Prices in another guise? My apologies. Your spiel is easy to confuse with his.

Yikes. I didn't think a discussion of "rent vs. buy" could turn into a flame war.

Everyone's situation is different of course. In many (most?) places it is probably better to buy than rent, as long as you plan on "staying put" for at least 5 years.

Call it Crazy says

Overall, when you consider ALL the costs, not just the actual mortgage vs. rent payment, in most cases the financial calculations support renting.

I'm not sure about "most" cases. I suppose without an actual scientific study it'd be hard to say for sure either way.

If you don't mind me asking, in what part of the country (or world) do you live?

woppa says

Wrong, my house had been appraised at 150k 2 years ago when I bought it, it now appraised for 240k with 6 comparisons a few months ago when i refi'd to a 15 year. Try as you may, making up numbers doesn't really mean jack. These are the facts. 10% a year in NYC! LOL

Bad appraisals all around the board. If you think it has appreciated over 50% then try to sell it and let us know how it goes. Reality can surprise even the 6 week educated appraisers.

EconPete says

what makes them better than someone who rents

BUNDLE OF RIGHTS ! http://definitions.uslegal.com/b/bundle-of-rights-property-law/
Yes E.P. We all become native american indians if we fail to fulfill our promised obligations. The title changes from "Owner" to "Being on borrowed Time" if you damn up the cash flow. You do NOT own the Mercedes until it is paid off. You do not have the right to live if you miss a payment on your health insurance.
Santa has left the building. If you do not make payments on anything, your carcass will be scraped up and thrown in the bin with the other Soylent Green contributors.
Oh Yeah ! Did you pay the rent this month ?

Call it Crazy says

After we sold the last house, I went back and did a "scientific"study on all the houses to see if we truly "made money" on our "investments". For many, this would be tough to do, because you really have to be "honest" with your calculations and not "sugar coat" the data for emotional reasons and living the "American Dream".
Well, after crunching all the Real numbers and Real costs on all the houses, let's just say, the results were very depressing to say the least. Even with one of the houses doubling in value in 2-1/2 years, it didn't help the bottom line.
The result..... there was NO financial "benefit" to "owning", just spending $100,000's of extra dollars for the emotional happiness of "owning" vs. "renting".

I definitely get your frustration with the whole "a house is your best investment" meme that was going around. I remember it well. It seems like everyone "knew" that you had to buy a house to be finacially secure.

I suppose a house is an "investment" in the sense that you don't have to pay rent to a landlord. But of course, when you have a mortgage, you are still "renting" in a financial sense: you're just renting the money (from the bank) rather than the house (from the landlord).

Still, don't let your emotions get the better of you. Often it IS cheaper to rent money to buy a house than it is to rent an equivalent house. Just watch the transaction costs of buying (commissions and legal fees). If you're moving all the time, you're better off renting obviously.

North Jersey is one of those expensive areas. It might be better to rent there. Use Patrick's calculator under the "Real Estate Tools" link to see.

Call it Crazy says

"Well, my rent was $1400 a month and my mortgage payment is only $1200 a month, so I am saving $200 a month "owning" vs. "renting".... how many times have you heard it that way??

But, like you stated, what's missing from the equation is the closing costs, legal fees, the 6% going to the realtor when you sell, transfer fees, points, etc.

Then factor in the cost of the new roof, replacing the HVAC that blew up, installing the new kitchen the wife wants, upgrading the bathroom with new fixtures, it goes on and on.... that $200 "savings", vaporized very quickly!!!

All these can be easily accounted for with the 10X increase in home value over the period of 30 years. :)

Doesn't. Thing is rents are not in line with what they should be. The rental market is so fixed price its way beyond what it should be. For apartments that detrioriate very quickly with way to much human activity. Usually made entirely of wood. That deteriorates faster than anything else. Except maybe "drywall". They don't want to build out of whats simple, rock which lasts forever and is legit to use. Because the owners may hand down to the next generation instead of escaping, selling because of the detrioration. Which puts the lender, loan people right back in the loop and on top of the asset again. Hey I get the depreciation. Yea, but my fucking building is falling apart. Rock or stone means you don't have to visit Home Depot anymore for the most part, roofs, floors everything remains in tact. Once again there is the human flesh factor. You shed that stuff dosen't go away after some years you can smell all the dead flesh and it gets in everything. With Stone hey hose it down. Scrub it till your arm falls off nothing bad happens to it. Another words look up France and see how they deal with it. The same families have been living in the same buildings with no re-mortgage if their ever was a mortgage for in some cases 7 centurys. That dosen't work for someone that needs your labor makes a car that costs 29,000 dollars its getting there where they used to cost only 4,000 not to long ago. They last the same amount of time. No one seems to reccon that. What it really adds up to is fixed price, increased cost. You on the labor spit. Unable to negotiate in any real way. Hey they will knock 200 off on the clear coat on an automobile that costs 3,000 to make with all they take and the technology. People will trade their nads to get something with technology that is nothing more than a little circut board. Fat ass lenders calling congress.

Fat ass lenders calling congress come in congress. Congress. Yes fat ass lender. Yes I want you to do something to get rid of television with tubes in them. The material is much more labor intensive that what we have in mind. Really fat ass lenders? Yes we have 35 dollar circut boards that are really easy to ship. Lender "fixed price" markup to 800 dollars. That will keep the little fuckers busy. Hey maybe they will put in on a revolver they can pay for it for the next 5 years.

So another words your buildings are very cheap. Made of cheap material. That is very easily and quickly thrown up. They don't last. Thats just fucking fine with them. The repairs etc. The obsolesence that leads to more borrowing. A lot of tear downs and more building. Many more move outs and move ins. More modern. They could care less. Stone is just as cheap its there. However for what it is lasts well for a long long damn time. Go look at the Rocky mountains.

What is really outrageous once again is building out of material they know full fucking well will detriorate. That means the building is done for and another loan to keep them at it. The more they have you in debt. The longer they have your labor. Wake up their going to do this to your children to. You may not know these people like I do. Get rid of them. They are going to play the consession game with you. Even if you did get rid of them they will try to weasel their way back in. Thats how they do things.

These guys do not think in terms of cash. They think in terms of material, food, labor or work. Another words how much material do I have to provide and food with the labor that takes to get it done with the material and food they have to provide to them. Then it becomes a game of food, shelter, transport. How long can I keep them working without retraining? Thats another spate of food, shelter and transport for the people that train. It's also considerable time to train and weed for what they need done. The cash is only used or "fixed" to measure how long they can keep you at work. They know full well that if prices are not fixed. You can bargain your way out of laboring for them. That should really scare the shit out of people. Why because you know that you are dealing with usury and people that can dictate a fixed price scheme. Another words your entire monetary system is lending and loans.

Deal is YOU have nothing to trade. You just think your trading labor. No. They are putting you in debt for your labor. See the difference? See they got mountains of paper. Whats that mean. I go to them with a newfound gold mine. Well fuck as if they aren't crazy enough. Let see. It's not going to be paper I trade for they know it. I got buyers on this stuff. I'll take oh 1/4 of your best Oklahoma farmland. Well fuck Warren owns that. Good what do I need you for? Maybe I can build some grocery stores. So I can fuck people with the basics like you do.

So after all just forget it who the fuck wants to trade with someone that steals from you anyway. They are proud of that of course. All I can do is wish them a happy Coronary thrombosis. They know the deal. Not my fucking problem. All the flattery and love in the world isn't going to save the little Humpty's

Call it Crazy says

The result..... there was NO financial "benefit" to "owning", just spending $100,000's of extra dollars for the emotional happiness of "owning" vs. "renting".

How did you estimate the rental cost for the houses you were living in?

tatupu70 says

Call it Crazy says

The result..... there was NO financial "benefit" to "owning", just spending $100,000's of extra dollars for the emotional happiness of "owning" vs. "renting".

How did you estimate the rental cost for the houses you were living in?

Math. Very simple math at that.

RentingForHalfTheCost says

Math. Very simple math at that.

It has actually nothing to do with math.

Call it Crazy says

Well, you're assuming a 20 year payback. But HONESTLY, how many people you know have stayed in the same house for over 20+ years??

Well that's just it. The transaction costs of owning will kill you if you move every few years. If your job isn't secure or requires you to relocate frequently, you're probably better off renting.

Call it Crazy says

I know of ONE, and they went back and refinanced/ATM and pulled more money out of the house, reducing their equity (and now paying a lot more interest on the NEW loan).

Yes that was a very dumb thing for them to do. If they wouldn't have fallen for the "get free money from your house" pitch from the banksters, they'd probably be doing just fine.

Call it Crazy says

Well, that's exactly my point. How many people buy a first house at age 28 - 30 and live in it until they die?? Many either move because they want a bigger house because the family grew or move for a better job opportunity. I would guess very few stay put for the 30+ year duration. I would like to see if there is a data set that breaks this information out.

Yes, there is definitely a case for renting. It gives you the freedom to move as soon as your lease is up. I'm currently a renter and there's a nice "intangible" feeling of freedom that comes with it.

It's true that "job security" has become almost non-existent. There are "luxury" rentals that cater to well-heeled professionals who want the freedom to move if their employer wants it. They also have the freedom to move to a better opportunity that might arise elsewhere.

Call it Crazy says

Even if you used a conservative CD rate of 2%-3%, how much would your bank account have grown???

Almost nothing, relative to inflation.

Real interest rates = nominal interest rates minus inflation

Speaking of inflation: inflation is good for buyers with mortgages. As long as your income keeps up with inflation, inflation has the effect of making your loan balance worth less and less.

Or another way of stating the same thing:

Real (mortgage) interest rate = nominal mortgage interest rate minus inflation rate.

Right now real interest rates are about 2%. Maybe less depending on how you measure inflation. Not a bad time to buy if you plan on staying in Your Town for at least 5 years.

Call it Crazy says

Not to mention having cash and not throwing money at additional "house expenses" every month on a depreciating asset...

Agree but how much money were you spending on maintenence before? If your house is well built it shouldn't cost more than a few % per year. Did you have a big lawn that needed constant care? A bad foundation maybe?

Call it Crazy says

I agree, as long as your home doesn't take a "beat-down" on value in the upcoming years. If it does, then you are pissing away equity faster than you are paying it down. A loser in the end...

Nobody knows future prices. But it's wise to consider various "what if" scenarios, like prices falling 5, 10, 15%. Always better to be safe than sorry.

Nationally it looks like house prices are getting back to the long term average:

http://www.multpl.com/case-shiller-home-price-index-inflation-adjusted/

Call it Crazy says

Worse, I had a wife who loved to start home projects, just because... it was GREAT, she started them, and I got to finish them.... /sarc

lol. Yes, if you start lots of house renovation projects "just for fun" than your maintenance costs will be much higher than normal. ;-)

tatupu70 says

RentingForHalfTheCost says

Math. Very simple math at that.

It has actually nothing to do with math.

My bad, I thought it was math. Your right. Lets not use math here. Lets just use words and gestures.

edvard2 says

And again as it bears worth repeating, stocks do not require light bulbs, roofs, paint, carpet, or 12 o-clock midnight calls for broken toilets. I say this from experience as my parents owned a couple of rentals and none of them made them rich.

And you have to pay the government atleast 25% of your profits (15% federal, 10% CA state tax)...when you sell your stock... And if Obama gets his way, that rate may increase!

Makes the 4.5% redfin commission for sale of your home look less painful. (Well, unless you didn't make any profit on your home.. then I'll admit, it sucks).

BoomAndBustCycle says

And you have to pay the government atleast 25% of your profits (15% federal, 10% CA state tax)...when you sell your stock... And if Obama gets his way, that rate may increase!

If you don't invest you won't retire. Plain and simple. They saying these days is that you will need anywhere from 1 million dollars in 'normal' areas and 2 million in higher cost areas, per person, from age 60-100, which isn't out of the question. That's still not a ton of money per year. That won't come from buying a house. You have to live in something.

RentingForHalfTheCost says

My bad, I thought it was math. Your right. Lets not use math here. Lets just use words and gestures.

Yes, it was your bad. Knowing what a house rents for doesn't require math. It requires a thorough knowledge of the local area supply and demand situation for rental properties. Further, for his exercise, it would require knowledge of the rental market for the last 20 years.

I guess you need math to adjust for the differences between comps and the house he was living in. I'm pretty sure he could handle that.

So, if the mortgage holder is really just renting from the bank, what makes them better than someone who rents from an actual owner of a property....

There are a few differences, and some of them may not matter to some people, but to me they are substantial differences:

1. IF you pay your monthly nut, you cannot get kicked out. I have paid my rent dutifully and on time for many years and have still been kicked out of 2 rentals due to owner-occupied move-in after the house sold. (OK eminent domain excepted, but really what are the odds?)

2. If you are an animal lover it can be very hard to find a place to rent. Trust me, I know from experience. I have been turned down for rentals even after offering a $3,000 security deposit.

3. At the end of 30 years of being a permarenter, you have spent X amount on housing, and will continue to do so until the day you die. If you borrow money to buy a house, at the end of 30 years you will have paid X amount for housing and then only pay taxes and maintenance. That's why elderly folks getting evicted when they are on a fixed income is such a big deal.

I agree that home ownership isn't for everyone, and the idea that everyone should buy is ridiculous. But the idea that owning is always a bad idea is equally farcical.

I've been a renter for 30 years and do not intend to rent for the rest of my life.

edvard2 says

Houses simply do not make the best investment. Period

Yeah, but they make darn good shelter.

Call it Crazy says

and when the mortgage payment is less, they think they are WINNING...

That's because usually they are correct. Unless they know they are going to move within a short time period, if the monthly payment is less to own, it usually follows that it's cheaper to own.

BoomAndBustCycle says

And you have to pay the government atleast 25% of your profits (15% federal, 10% CA state tax)...when you sell your stock... And if Obama gets his way, that rate may increase!

Makes the 4.5% redfin commission for sale of your home look less painful. (Well, unless you didn't make any profit on your home.. then I'll admit, it sucks).

A totally different tax. The 4.5% is charged regardless of gains. The 25% is on gains and not on the purchase price of the investment.

1sfrenter says

So, if the mortgage holder is really just renting from the bank, what makes them better than someone who rents from an actual owner of a property....

Not many of the houses in the BA. I think you are safer under a tree sometimes. Most of the BA is just crap houses on crap land. Liquefaction anyone?

http://geomaps.wr.usgs.gov/sfgeo/liquefaction/susceptibility.html

Call it Crazy says

tatupu70 says

Unless they know they are going to move within a short time period, if the monthly payment is less to own, it usually follows that it's cheaper to own.

Can I ask a serious question?? How long have you been a home owner??

I first bought a condo in ~ 1994. I've owned a townhouse and two SFRs since, and rented for 5 years in between. I've had to move several times for job changes or transfers, but I've gotten relocation packages so I've always came out OK. My problem with renting is that it's usually been very difficult to find SFRs that aren't complete dumps. Except when I lived in CA. There were lots of nice rentals there.

And I agree. Houses are NOT an investment in that you don't buy them to make money on the appreciation.

The whole - freedom to move is an illusion if you have a family and home office.

I used to say, I am free to go wherever at any time, except I said that for 5 years and never moved because with a family and pets and home office its a total PITA to move and also costs money.

If you are single, live alone and want to browse around different neighborhoods, don't have much furniture, have a job that needs flexibility = renting is the way to go. More of a lifestyle question than anything.

Some people love living in the oakwood furnished apartments...they are very nice, pool, BBQ area, conference room and furnished. And expensive :)
But if you have money to blow and love that carefree lifestyle all the power to you.

SubOink says

The whole - freedom to move is an illusion if you have a family and home office.

I used to say, I am free to go wherever at any time, except I said that for 5 years and never moved because with a family and pets and home office its a total PITA to move and also costs money.

+1

And that's also assuming that chasing and finding cheaper rentals is possible. Not here in San Fran.