patrick.net

robertoaribas says

why don't you guys just say home insurance costs $1,000,000 a year, it would be just as believable!

You'll pay 3500 a year for a 970 sq ft 2br house in south Florida even though the house could be only worth 75K and you only owe 35K.
Citizens the insurance monopoly has the authority to use a software that calculates all houses using the same cost per square foot to replace, formula. So you have to insure the replacement cost as if your house is in a swanky gated comunity, at $225 per square foot.

Though there's not one single new construction house in South Florida selling for anywhere near that price. BUT they get away with it, because they are the monopoly.

Isn't a $ingle payer grand?

tatupu70 says

I still don't see how you can get anywhere close to $10K/year. That's just ridiculous.

You ain't livin taputu. I tear through TEN THOUSAND DOLLARS just on my window cleaning bill in a year.

MsAnnaNOLA says

$10,000 / $250,000 purchase price is 4% of purchase price per year.

Percentage of purchase price has is a lazy man's analysis of maintenance costs. The same $400K home in Los Angeles would probably go for $200K in Michigan.

Why would my house in Los Angeles have such a higher maintenance cost than the same house in Michigan?

ANSWER.. It wouldn't, it probably has less cost since the Michigan home has much worse weather beating down on the roof and windows than any home in So Cal.

BoomAndBustCycle says

Why would my house in Los Angeles have such a higher maintenance cost than the same house in Michigan?

Great point. Maybe the cost of major maintenance, roof replacement, or something where labor is involved. But DIY projects, there shouldn't be a difference. You raise a great point that I hadn't considered.

Housing Patrolman says

ALL manmade items depreciate. ALL of them. If you need the IRS to tell you that, you've already lost many tens of thousands of dollars.

Well, if he's buying a SFH, he'll have land that's not manmade and won't depreciate.

HRHMedia says

It's worth mentioning that home ownership only works when there is appreciation at above 5% a yr. More than likely you will lose 13% a year while home prices under perform from the 5% increase norm

Let's take this $250k house vs $2500/mo rent comparison and assume the house LOSES 5% of it's value per year for the next 10 years and rent stays the same. Which do you think comes out ahead a decade later? and by how much?

I'd like to see the numbers.

FloridaBill says

Let me clarify about the area. 99% of the working class here either wouldn't afford a $2500 a month rent, or would rather buy.

99% of the population SHOULD buy if that's the rent/buy ratio.

Call it Crazy says

Nope, Very likely.... mine averaged $10K a year on a 35 year old, two story colonial just staying current with normal upgrades/replacements/repairs.

Could you detail it out roughly?

I've owned for the last ~15 years (with 3 yrs. of renting in there) and have never spent anywhere close to that. And that includes putting in a new roof, new floors, and a new kitchen. The kitchen was close to $10K but that was 1 year out of 15.

Build New For Less Than Used says

cw says

there is a tax thing called "depreciation". It does not mean that your house is loosing value

WRONG again. Why are you lying? You're a liar.

ALL manmade items depreciate. ALL of them. If you need the IRS to tell you that, you've already lost many tens of thousands of dollars.

Stop your lying.

Do explain the details of depreciation as it relates to taxes. And perhaps explain my motivation for "lying" about the tax advantages of owning real estate. It is simply a fact that when one is deducting actual expenses paid out on a rental, one is able to take a deduction for depreciation even though it is not a real expense. You can even shelter income from a regular job. Then later when one sells at a profit the depreciation must be recaptured. That is the flip side to depreciation since in real life I have actually always had a profit when selling rental properties. Yes, even the one I bought in 2002 returned a 15k profit in 2010 when I sold it. Sadly, had I sold it in 2005 it would have been a spectacular profit. I guess I am just luckier than you...or maybe you just turn people off by shouting LIAR? Maybe you are confusing depreciation with deterioration?

Build New For Less Than Used says

Circle one

buy = yes

Don't buy = no

You left one out:

INVESTMENT PROPERTY = $$$$$

I own 30 Silk shirts.

Call it Crazy says

New complete kitchen replacement, 3 renovated bathrooms, new deck, shed, all new interior doors and hardware, new light fixtures, finished 1/2 of basement, new sump pump, new carpet, closet systems, landscaping, dining room renovation, some windows, patio awning, pool liner, pool filter, lots of painting.... there must be more but my fingers are tired typing..

Some of those I wouldn't call maintenance, but rather improvements (basement, closet systems, shed, new deck). Even so, it seems hard to get $100K out of that.

zesta says

99% of the population SHOULD buy if that's the rent/buy ratio.

Why should people buy if they can't afford the house?

Call it Crazy says

You DON'T have these extra costs coming out of your pocket when you rent......

I get it, but my point is that you don't HAVE to finish the basement or add a new shed either.

IMO, maintenance is fixing a broken AC unit or replacing a 20 year old roof.

FloridaBill says

Why should people buy if they can't afford the house?

They shouldn't. Just like they shouldn't rent if they can't afford the apartment.

Living within your means is a completely different discussion and not relevent to the buy vs. rent question.

Call it Crazy says

When was roof last replaced, HVAC age, bathroom, kitchen and appliance ages, windows, etc.....

Agreed--those are very important points. I made a checklist so that while I was looking I remembered to look at all those things. Especially windows, electric, roof, foundation, etc.

My wife can worry about granite--I'm going to look at the other stuff.

Call it Crazy says

These "additional costs" are the numbers most people DON'T consider when the do the rent vs own calculation...

And I'd still argue that you shouldn't consider those. While I agree that owners generally do more than landlords, it's because it gives them more utility.

If you're truly doing a buy vs. rent, you should make it apples to apples.

Call it Crazy says

Well, that's the TRUE reality of ownership in general, owners WILL spend more. These costs HAVE to be considered!!

OK--we'll have to disagree on this one.

BoomAndBustCycle says

MsAnnaNOLA says

$10,000 / $250,000 purchase price is 4% of purchase price per year.

Percentage of purchase price has is a lazy man's analysis of maintenance costs. The same $400K home in Los Angeles would probably go for $200K in Michigan.

Why would my house in Los Angeles have such a higher maintenance cost than the same house in Michigan?

ANSWER.. It wouldn't, it probably has less cost since the Michigan home has much worse weather beating down on the roof and windows than any home in So Cal.

Did you read the rest of my post?

Call it Crazy says

In reality, it depends on how you want to live and how you want your home surroundings. You don't HAVE to finish a basement, but if you want a place for the kids to play, you do it. You don't have to put in a shed, but if you don't like the look of throwing a tarp over your lawn mower, you do it. You get my drift....

Yeah, you're crazy to include upgrades in your rent vs buy calculations. Maintenance items are things you would ask your landlord to fix. Unless you're expecting your landlord to upgrade your kitchen every decade, how can you include that as maintenance. It's like renting a house with a three car garage and saying that since there's an extra garage you need to upgrade to three cars and that's maintenance. Or since there's extra land you need to put in a swimming pool.

I understand there's the temptation of spending money for things you want since it's your home, but it's a choice. The way you describe it, it seems like a hobby for your wife.

Plenty of people I know haven't made any improvements to their house since they've moved in except perhaps a new coat of paint and new carpet (similar to what you'd get when you move into a rental)

zesta says

HRHMedia says

It's worth mentioning that home ownership only works when there is appreciation at above 5% a yr. More than likely you will lose 13% a year while home prices under perform from the 5% increase norm

Let's take this $250k house vs $2500/mo rent comparison and assume the house LOSES 5% of it's value per year for the next 10 years and rent stays the same. Which do you think comes out ahead a decade later? and by how much?

Since I have some time, I'll plug it into the NY Times Rent Buy Calc.

250k house - DEPRECIATES @ 5% / year
2500 / mo rent - NO RENT INCREASES
20% down
4% 30 year fixed mortgage
Prop tax 3800 / year* after tax deductions
Maintenance 4750 / year (seems high, but will hopefully satisfy the maintenance hounds)
Insurance 3325 / year

"If you stay in your home for 10 years, buying is better.
It will cost you $16,542 less than renting, an average savings of
$1,654 each year."

"If you stay in your home for 15 years, buying is better.
It will cost you $70,997 less than renting, an average savings of $4,733 each year."

"If you stay in your home for 30 years, buying is better.
It will cost you $344,985 less than renting, an average savings of
$11,499 each year."

(This despite your home is only worth $53k after 30 years of 5% depreciation) )

Build New For Less Than Used says

Nonsense.

A 250K house can be rented for $800/month at current inflated asking prices of resale housing.

Nice try though. Ya liar.

FloridaBill says

Going rate is 2.5k a month for rent something "worth" 250k

FloridaBill says

I can rent in the same exact area, a nice 2 bedroom condo for $1200 per month.

Build New For Less Than Used says

Call it Crazy says

owners WILL spend more.

ALWAYS*.
Why? One word. DEPRECIATION.

*anywhere in the northeast/mid atlantic/New England

Ok, I want to add my 2 cents in.

After wisely studying Patricks housing blog in 2005, I sold my crap hole 930 square foot condo in the Central San Fernando Valley where I was an upside down mortgage prisoner for 11 years and did not buy locally. After paying off a previous free money financial/criminal housing equity loan whatever scam, buying a car, and paying some bills I had 100K.

I happily rented in Hollywood for two years before purchasing a condo outright in Texas for 91k.

At first it was great, I got a job, and had these expenses, $371 HOA that includes electric, $200 a month Property Tax, and $40 insurance. I now have $100 a month in interest in a HELOC and I pay someone $50 a month to manage it for me.

This brings the total monthly expenses to $760.

The economy tanks and I move back to California, staying with my Dad.

One deadbeat renter moves someone else in and stops paying. Got rid of them. Now it's vacant, $760 a month added expense. Not knowing what else to do, (Sell? yeah right) I throw money at the problem and spend $5,000 fixing it up.

Yes, it's rented now for $1,050, netting me $300 a month.

Nice, you might say. However, it will take 16 2/3 months to recup my $5,000 and some electrical plugs just went kapooey which sent me back another couple hundred.

I lean toward it costs more.

Granted Yes, living in a paid for home with a job is the best option...

Build New For Less Than Used says

A $250k house anywhere in the northeast/mid atlantic/New England rents for $800/month.

ehh what kind of neighborhood. I'm in Southeastern MA and while there are some homes available for rent at that price, I'm not so sure they would be on most peoples "A: list.

Another factor would be the number and size of the bedrooms. If it's a 3 Bedroom in a good area, your probably more at $1200/month and up. If the rental is in or close to the Boston Market the rental price will nearly double.

Build New For Less Than Used says

Once again, you misrepresented the truth.

I had lobster for breakfast. Wore a silk bib. All because I own houses.

JodyChunder says

I had lobster for breakfast. Wore a silk bib. All because I own houses.

Totally depends on which houses you own!

If you own houses that cannot be rented for your costs, you lose.

If you own houses that can be rented for enough to cover the cost of owning them, you win.

Realtors never tell you about the first possibility. Most owners ignore it too.

JodyChunder says

All because I own houses.

How many of that were bought in 2006?

Call it Crazy says

it's your duty as an American

It's our duty to the people and companies loaning mortgages. They have seriously expensive lifestyles to maintain.

Totally depends on which houses you own!

You move down here to sleepy Victorville and buy a little cottage like this one here:

http://www.zillow.com/homedetails/Little-Beaver-St-Victorville-CA-92395/2126120472_zpid/

And then another one and another...and pretty soon you'll be eating at Jody Chunder's table.

Call it Crazy says

Like I said, it depends on how you want to live. Your description sounds like my dog house. If you want to live in the luxury and condition of a crappy dog house, that's your choice.

So renting is like living in a doghouse then?

Call it Crazy says

No, you missed it... living in a house that is not upgraded regularly and where nothing is changed except paint is like living in a old dog house..

That describes most rental houses I've ever seen/lived in... If they do put in upgrades, the rent will upgrade as well.

tatupu70 says

If they do put in upgrades, the rent will upgrade as well.

If I have to snake your septic while you rent from me, I will be tacking on 10% next rent renewal.

Free gallon of spring water on rent day though.

tatupu70 says

OK--we'll have to disagree on this one.

Shwew! I was real worried you might be getting all amenable all a sudde3n!

Call it Crazy says

Go back up and read, the guy that made the reference was talking about other "owners" he knew not "renters"...

I know what he was talking about--you are completely missing the point.

It's the whole apples to apples thing. Comparing costs of renting vs. costs of owning.

Call it Crazy says

I know the point, I've done the spreadsheets, I can use a calculator... the math doesn't lie on a apples to apples comparison!!!

I'm not sure you do. It has nothing to do with spreadsheets or calculators. It has everything to do with understanding which costs are maintenance and which costs are simply consumption.

Appraisers Are Corrupt says

ALWAYS.

Why? One word. DEPRECIATION.

Appraisers Are Corrupt says

A $250k house anywhere in the northeast/mid atlantic/New England rents for $800/month.

Appraisers Are Corrupt says

And how about in Warren County? And Cumberland County? There are countless places in both those counties where $800 aren't just cherrypicked but the norm.

I like how we went from ALWAYS -> NE/Mid-Atlantic/New England -> "countless places in Warren County and Cumberland"

backpedal much? surprised you tried to keep arguing instead of just break out the real-turd/liar card.

Call it Crazy says

tatupu70 says

I know what he was talking about--you are completely missing the point.

It's the whole apples to apples thing. Comparing costs of renting vs. costs of owning.

I know the point, I've done the spreadsheets, I can use a calculator... the math doesn't lie on a apples to apples comparison!!!

Come back and see me when you find YOUR calculator.

I'm saying you're trying to add in things you "want" in your maintenance costs.

It's like saying a minivan is more expensive than a Ferrari because the extra seats in the minivan causes me to have more kids which are expensive. No calculator in the world will ever fix user error.

tatupu70 says

I'm not sure you do. It has nothing to do

Tatuptu! Let's argue about something. You pick the subject.

Appraisers Are Corrupt says

Isn't it interesting you liars detract from the $250k house/$800month equation with the same worn out lie of "not anywhere around here".

Why is that? Why lie? Why deflect?

Well, I didn't bring up the $250k house for $2500/mo, the OP, FloridaBill did. I bet if you could find him a $250k house in his area for available to rent for $800/mo he'd happily take it and probably pay you a hefty finder's fee for doing so.

It shouldn't be a problem, right? Good luck with that.

FloridaBill says

Is there anything I'm missing with my math? Is this correct?

yes, your math computes right.

besides housing , for example one can save tons of money by not marrying a housewife, not having kids, driving a used car, using disposable phone service, free on the air tv reception, etc.

One factor why people buy a house, because at one point in their life, they also wanted to pursue their american dream. or being on the same level as co-workers, or becoming a proud owner of a dream house after work so hard saving for it.

Suppose most of co-workers having a house, most of church acquaintances having a house, then you still only rent.
That is not good feeling, they might think things.

chip_designer says

becoming a proud owner of a dream house after work so hard saving for it.

In Every Dream Home a Heartache

http://www.LPmMveU0dmc&feature=related

Call it Crazy says

m going to have to stock up on some more zombie killer ammo after watching that video...

I've been scouring far and wide for a muzak version of that to play in the background of my Virtual Tours for my rental listings!