patrick.net

wave9x says

5k/yr house maintenance and renovation

1k/yr homeowners

Cost of buying 1%

What justification did you use for making these lower than the default?

FunTime says

5k/yr house maintenance and renovation

Actually, I made a mistake and think this is the default. cost of buying defaults to 4%

Of course you can't predict the future, but that doesn't mean you should take a random course of action and hope for the best. You can make educated, conservative guesses as to what inflation and other factors will be based on historical data. I think saying 2% inflation with house values and rents matching that is pretty conservative and is biased towards renting if anything. House values and rents have gone up much more than inflation in my area over the past 10 years.

4% cost of buying is way too high - that would be $40k in closing costs on a $1m place.

wave9x says

Even if his rent never went up, i.e. 0% rent increase, he will STILL be ahead buying in 4 years.

I tried to duplicate that and it didn't seem to work. Even upping to a one percent rent increase makes buying better in 7 years, but at zero it shows no dice.

SFace says

Value is in the eye of the beholder. It's easy to say I'm single, I can sleep in my car and cost nothing. A house has no value to me. It's another thing when you have a wife, 2 kids and other. The value is worth a lot more when there are more heads involved.

i totally agree with SFace. well said.

This is my situation. I have a non-increasing, month-to-month, $1600/month rent from a foreign landlord who just wants his property always occupied and has had a history of druggie criminal tenants, so I'm a godsend to him.

My rent hasn't increased in four years since I started renting houses and it's not going up any time soon. Even using the very optimistic 2% nominal appreciation for housing, I would never, ever come out ahead by buying given the current prices in south Florida. If prices collapse another 30-50%, which is likely given all the fundamentals, then I get majorly ass-fucked by buying now. Why take that risk?

Boomers are retiring and downsizing. Gen X is tiny compared to boomers. Millennials have no money, no jobs, and hundreds of thousands of dollars of college debt. Right now low interest rates and foreign investors are propping up housing in the sun belt. What happens when interest rates go up (they can't go any lower) and foreign investors find better returns on their cash (say in China or other developing markets)? Total collapse.

Worst case scenario, I rent and invest my money letting it grow. When I retire, I move someplace cheap and live like a king. Time is on my side, not the side of foolish real estate speculators from the Boomer generation. They'll die before I have to buy.

Dan8267 says

This is my situation. I have a non-increasing, month-to-month, $1600/month
rent from a foreign landlord who just wants his property always occupied and has
had a history of druggie criminal tenants, so I'm a godsend to him.

Like, SFAce said--you can make the calculator say whatever you want it to say based on your inputs.

I notice you chose no rent increase forever--which is pretty ridiculous. You think your landlord will not raise rent for the next 30 years??

Also, you have an interest rate of 5.5%--is your credit rating subprime or something?

More realistic numbers of 2% annual rent increase and 3.5% mortgage rate with 20% down, give a result that it's better to buy after 5 years.

And if you put taxes at 1% instead of 2% (which, based on a few ads on zillow, appears to be closer to reality), it's better to buy after 4 years.

wave9x says

House values and rents have gone up much more than inflation in my area over the past 10 years.

I think this is the operating basis for a lot of calculation, they are based on the Real Estate market performance of the past ten years.

Home prices are allowed to rise now, because they are measured to the "peak" in pricing.

The price however is unsustainable.

You don't get to have inflation if the consumer can't afford to pay more. They, whoever they are, can figure the CPI anyway they want until the cows come home, but unless the consumer has the ability to pay there is no inflation, it's just random pricing with alternative choice.

Absolutely renting is at least at par with buying. Buying is a thirty year debt. Where will you be in thirty years?

SFace says

Value is in the eye of the beholder. It's easy to say I'm single, I can sleep in my car and cost nothing. A house has no value to me. It's another thing when you have a wife, 2 kids and other. The value is worth a lot more when there are more heads involved.

We continue to pay a mortgage because of our kids, and the school they attend. In two more years I'll think seriously about whether to keep the house, walk away, or sell, whatever comes of the market place.

We can buy for cash in most parts of the country, and maybe here close to Seattle, but I don't see the point.

I see a feel good aspect to property, or bragging rights? but economically I would rather own another business than a rental, or personal residence.

Take your money and run until the next roller coaster ride the way I see it.