patrick.net

joeyjojojunior says

Do the NYT on it before you make such a swift determination. I bet it is cheaper to own if you plan on being there for 10+ years.

You may be right, but who knows how long I'll be here. I'm not a dentist with my own practice nor do I work for the government where I know I want to retire. I'm a corporate executive with less job security and with also a desire to jump companies if something much better comes along. I don't want to be under water because I bought at a peak, which is my biggest fear, and I don't want to have to wait 10-15 years to break even on selling my house.

Yep--flexibility is a very legitimate reason to rent. I completely understand your reasoning.

just any guy says

Strategist says

You will be renting for a long long time.

Talk to someone who bought in 2005.

My gardener did. He bought a house with no money down, stayed free for more than 2 years before they kicked him out. Lucky bastard.

just any guy says

I don't want to be under water because I bought at a peak, which is my biggest fear

You understand that pretty much by definition, when you buy you buy at what is then the "peak" correct? The only way to get around this is to buy in a declining market (which scares the shit out of everyone) or go back in time and buy in 2012.

As such, if you examine your words, I think you will agree with others that you very well could be renting for a long time - perhaps forever. I am not saying this is bad however - just be very self aware of what your risk tolerance is. You may just find that buying is not right for you. Likewise, understand that if you don't buy, you very well will be nibbled to death in rent increases where you have no choice to move away. This choice isn't great either, but again, its all about self awareness IMO.

Strategist says

just any guy says

Strategist says

You will be renting for a long long time.

Talk to someone who bought in 2005.

My gardener did. He bought a house with no money down, stayed free for more than 2 years before they kicked him out. Lucky bastard.

If the 2005 buyer could afford it, in most places he is above water now. And he is now 12 years into his note - 18 years til being payment fee and eating through principal at a very fast rate. I'm sure the first years of worry sucked, but he would much rather be where he is now than having rented for 12 years and NOW thinking about starting that 30 year clock to freedom.

somecrappynumber says

If the 2005 buyer could afford it, in most places he is above water now.

Calculated against inflation? Guessing not.

somecrappynumber says

30 year clock to freedom.

If freedom can only be purchased with 30 years of slavery, it's not worth shit. 30 year originated for vets, 15 used to be standard. For responsible people, 15 is still standard.

NuttBoxer says

Calculated against inflation? Guessing not.

I said above water in part because of principal pay down - inflation is a fair point and more important if you are looking at better investment, but this has little to do with under/above water which is nominal.

NuttBoxer says

somecrappynumber says

30 year clock to freedom.

If freedom can only be purchased with 30 years of slavery, it's not worth shit. 30 year originated for vets, 15 used to be standard. For responsible people, 15 is still standard.

Ok then, for the responsible person that would be 12 down, 3 til freedom. Still, even at 30 years, very few people who rent for 40-50 or 60 years would call a mere 30 year payment term "slavery"

somecrappynumber says

As such, if you examine your words, I think you will agree with others that you very well could be renting for a long time - perhaps forever. I am not saying this is bad however - just be very self aware of what your risk tolerance is. You may just find that buying is not right for you. Likewise, understand that if you don't buy, you very well will be nibbled to death in rent increases where you have no choice to move away. This choice isn't great either, but again, its all about self awareness IMO.

He's right, just any guy. You are taking a greater risk by waiting for a crash, and not buying now.

somecrappynumber says

My gardener did. He bought a house with no money down, stayed free for more than 2 years before they kicked him out. Lucky bastard.

If the 2005 buyer could afford it, in most places he is above water now. And he is now 12 years into his note - 18 years til being payment fee and eating through principal at a very fast rate. I'm sure the first years of worry sucked, but he would much rather be where he is now than having rented for 12 years and NOW thinking about starting that 30 year clock to freedom.

Even buying at the worst possible time and holding on to the property, works out better than not buying at all.

somecrappynumber says

very few people who rent for 40-50 or 60 years would call a mere 30 year payment term "slavery"

Sorry, to be clear I don't consider rent slavery, because it doesn't involve debt and it's much easier to leave a rental than a house you still owe on.

NuttBoxer says

Sorry, to be clear I don't consider rent slavery, because it doesn't involve debt and it's much easier to leave a rental than a house you still owe on.

The slavery analogy is ridiculous. You have to pay for housing whether you rent or buy.

Renting does offer more flexibility, but almost always costs more over longer time frames.

The only people who aren't "slaves" are the guys who read patnet between shits at the public library before they go back to their mattress under The highway overpass.

joeyjojojunior says

Renting does offer more flexibility, but almost always costs more over longer time frames.

It hasn't caught up to me until year 16. I've only started paying something close to a mortgage this past year.

NuttBoxer says

It hasn't caught up to me until year 16. I've only started paying something close to a mortgage this past year.

I have zero problem with renting, so not trying to give you a hard time. But roughly, what would you say the percentage is you pay renting under having a similar house and mortgage? I'll try and dig something up, but I just feel like the parity between rent prices and mortgage costs over time really is not that big of a discrepancy. And if you already itemize on your taxes, without the interest and taxes of ownership, I have a hard time believing that renting is better. That saving of X dollars at the top of you income is substantial if you're making more than $150k as a family. Every $10k of income above $150k would be roughly $2,500 to $2,800 saved as you transition to the 28% bracket.

Mind you renting is likely better for a lot of people because of the time lived in a location. I've finally settled and been in the same house for four years (owning) but previously was moving every 2-3 years. We rented and that most certainly worked out. Right now though, where I'm located, I would have a hard time finding a rental that is cheaper then owning the debt. And even then, for my situation, the rental would have to be about 35% cheaper then the mortgage for me to rent again. Again, not happening in my area.

NuttBoxer says

It hasn't caught up to me until year 16. I've only started paying something close to a mortgage this past year

Yes, I think it's most likely a case of you not comparing apples to apples when doing buy vs. rent and/or not accounting for the fact that principal should be subtracted out of a mortgage payment for comparison purposes.

I was speaking simply from a monthly payment perspective. I didn't factor in the ownership costs of time, repairs, taxes, or down. If I was going to compare the rent I started paying this year to a mortgage I could get if I bought this year, I would still be doing better than owning.

As far as stability of ownership, yes, it takes longer to move when you want to, but no, renting does not mean you have to move every few years. I know people who have rented the same place for 20 years. We have moved fairly often, but that has more to do with a sickness than renting. We like looking at new places, but the worse part of deciding to move just because we can is passing.

NuttBoxer says

I was speaking simply from a monthly payment perspective

Yes, clearly if you do the calculation incorrectly, renting may appear to be cheaper over any timeframe

NuttBoxer says

As far as stability of ownership, yes, it takes longer to move when you want to, but no, renting does not mean you have to move every few years. I know people who have rented the same place for 20 years.

So what. I heard of a tenant being forced to move within 24 hours. The idiot threw a party on the first evening and all the neighbors complained.
Renting can never work out better than owning in California over any 10 year period, and never will in our lifetime.
The stock market can work out better over time if you won't be taking a mortgage, and plan on paying all cash. If you are gonna take a mortgage, the benefits of appreciation, tax benefits, and leverage will far outweigh the returns on the stock market. That's just the way it is.

NuttBoxer says

If I was going to compare the rent I started paying this year to a mortgage I could get if I bought this year, I would still be doing better than owning.

I still don't buy this. Markets are local, but I believe from past posts, you're on the West coast. Where are you renting that is so substantially cheaper then having a mortgage? There are bubbles for sure, but a 30% difference in rent vs. mortgage payment is pretty hard to come by in any area unless a landlord is just straight up lazy.

Rents are ultimately tied in some form or another to what people would pay for a mortgage. The smart landlord is going to push that as close to what a mortgage would be as they can. And in certain markets they even go over the cost of a mortgage. In a high COLA renting really doesn't make sense except for mobility.

WookieMan says

NuttBoxer says

If I was going to compare the rent I started paying this year to a mortgage I could get if I bought this year, I would still be doing better than owning.

Rents are ultimately tied in some form or another to what people would pay for a mortgage.

This is strongly correlated to home price.

In the Bay Area, high end affluent areas can have as low an annual rent:price ratio as 3% and in less affluent areas as high as 10%.

Nuttboxer - The correct analysis is what are you paying relative to a mortgage from 16 years ago? I bought in 2003 and for the first 7 to 8 years paid more than rent, but now my mortgage is $5-600 less than current rent.

Again, if you're into the flexibility of long-term renting then that makes sense. Plus owners will always have the cost of maintenance and taxes which never go away. However how much longer do you plan to live? Compare your monthly rent costs for the next 45-50 years relative to a mortgage that would have stayed flat for 14 years, then dropped to $0 for the next 36 and the difference can be staggering.

anonymous says

Nuttboxer - The correct analysis is what are you paying relative to a mortgage from 16 years ago? I bought in 2003 and for the first 7 to 8 years paid more than rent, but now my mortgage is $5-600 less than current rent.

Again, if you're into the flexibility of long-term renting then that makes sense. Plus owners will always have the cost of maintenance and taxes which never go away. However how much longer do you plan to live? Compare your monthly rent costs for the next 45-50 years relative to a mortgage that would have stayed flat for 14 years, then dropped to $0 for the next 36 and the difference can be staggering.

I would not want to retire paying rent for the rest of my life. I would rather retire receiving rent for the rest of my life.

joeyjojojunior says

Yes, clearly if you do the calculation incorrectly, renting may appear to be cheaper over any timeframe

I omitted all the additional costs of ownership when I made my statement. So the only thing that could have possibly appeared cheaper was buying.

Strategist says

Renting can never work out better than owning in California over any 10 year period, and never will in our lifetime.

Forgetting all the underwater's from 2008 so soon? I'm not comfortable with a primary residence as an investment for a number of reasons. The biggest being that I'd have to pickup and move at market peak if I want to see any actual profit. Move where? To another house also selling for peak price? Or a rental renting at peak price? Second, you have to make a huge up front investment in the form of debt, and the success of your investment has zero to do with your personal ability to make the investment a success. It's all dependent on market whim. Yes, starting your own business often takes serious up front debt as well, but at least the success of that investment is tied directly to the work you put in. Third, the house itself is a giant money pit, continually depreciating, requiring upkeep. Fourth, there are much better investments outside of housing and stocks, so your view is too narrow.

I have done better, and done so for 17 years.

WookieMan says

Rents are ultimately tied in some form or another to what people would pay for a mortgage.

Rents are based on salary, mortgages are based on salary + government subsidies + interest rates + NRA scams. I never paid anywhere close to $2,000 until the past two years. My story isn't uncommon in any way except that I haven't closed my mind off to renting as a good financial decision. Doesn't sound like you've entertained that possibility for a long time.

anonymous says

The correct analysis is what are you paying relative to a mortgage from 16 years ago?

When I was just out of college, and didn't have a penny to my name. Not a realistic timeline.

anonymous says

Compare your monthly rent costs for the next 45-50 years relative to a mortgage that would have stayed flat for 14 years, then dropped to $0 for the next 36 and the difference can be staggering.

$0 meaning I no longer have to maintain my home, or pay property taxes?

NuttBoxer says

I omitted all the additional costs of ownership when I made my statement. So the only thing that could have possibly appeared cheaper was buying.

No. Why don't you put the numbers on here and I can run them through the NYT calculator to show you.

For one--not deducting the principal in the payment is a HUGE mistake. Colossal.

NuttBoxer says

I have done better, and done so for 17 years.

I highly doubt it. You've paid more for the freedom to move which is a personal choice. Completely reasonable.

But it almost certainly wasn't cheaper.

Nuttboxer said...."$0 meaning I no longer have to maintain my home, or pay property taxes?"

Nope - I specifically said "Plus owners will always have The cost of maintenance and taxes which never go away." However, how much longer do you plan to live? Compare your monthly rent costs for the next 45 - 50 years relative to a mortgage that would have stayed flat for 14 years, then dropped to $0 for the next 36 and the difference can be staggering"

Bummer: Report card says some Southern California beaches might make you sick

La Jolla Cove in San Diego, another new addition to the top 10, was in fifth place. This beach sits in an enclosed area with limited water circulation.

http://www.latimes.com/local/lanow/la-me-ln-beach-report-card-20170615-htmlstory.html
Long time Sunset Cliffs (San Diego) surfer Barry Ault contacted a massive staph infection and died within a few days of surfing after a major rain event.

Chris O'Connel had a cut on his arm and went in Mission Bay, San Diego after a rain event. His arm became infected with the Streptococcus bacteria and he almost died. Three operations and two and half weeks in the hospital saved his life.

Mike Rhodes, another long-time Surfrider Legal Issues Team member, developed a massive ear infection and build-up of fluid in the inner ear after surfing in Del Mar, CA after a rain.

A young surfer was reportedly diagnosed with Bell's Palsey after surfing in the Cardiff, CA area shortly after a rain event.

Surfer Timmy Turner nearly died after an aggressive staph infection attacked his brain.

http://www.beachapedia.org/Health_Threats_from_Polluted_Coastal_Waters
The study, by researchers from the University of California Berkeley, the Southern California Coastal Water Research Project and the Surfrider Foundation, provides a better statistical understanding of the risk beachgoers take when they swim during bacteria advisories.

The research proved what was mostly anecdotal before — swimming in water after rains comes with an increased risk of gastrointestinal illness.

The risk of getting sick after swimming in the ocean is about 25 per 1,000. That number increases to 30.2 per 1,000 following rainy conditions, the study found.

The data was gathered during the winters of 2013-14 and 2014-15, for those that surfed at Tourmaline and Ocean Beach.

Most surfers went out roughly twice a week.

http://www.sandiegouniontribune.com/news/data-watch/sd-me-surfer-study-20161021-story.html

NuttBoxer says

$0 meaning I no longer have to maintain my home, or pay property taxes?

Maintenance fine, but it's disingenuous to say you're not paying property taxes as a renter. Property taxes are built into EVERY landlords calculations. You pay them whether you understanding you're lying to yourself or not.

NuttBoxer says

Rents are based on salary, mortgages are based on salary + government subsidies + interest rates + NRA scams. I never paid anywhere close to $2,000 until the past two years. My story isn't uncommon in any way except that I haven't closed my mind off to renting as a good financial decision. Doesn't sound like you've entertained that possibility for a long time

I'm not sure where you live, but I call BS unless you're living in a 1 bedroom apartment or condo rental. And that's fine if you don't want a house. I'm all for living frugally. You apparently didn't read my previous post where I said renting is fine and I've mostly done that. I now have had a mortgage with PITI of $975/mo. Median house price where I'm at is $225k. A renter cannot even come close to what I have on a monthly basis. I beat it by 30% easy and I get the "government subsidies." Even if I move next month after only 4 years, I'm WAY ahead of the renter. Doesn't sound like you've entertained the possibility of owning ever. Or probably can't and seem a little bitter about it.

I've rented and will likely rent in the future. You seem to have a chip on your shoulder about owning a home. I'm not sure why.

NuttBoxer says

It's all dependent on market whim. Yes, starting your own business often takes serious up front debt as well, but at least the success of that investment is tied directly to the work you put in.

What business is completely disconnected from the market? Everything is connected to some market or another. Any business can fail regardless of how much work is put in based on that specific market going down. Working harder does not lead to more success. Working smarter does. I know this will rub some here the wrong way, but if you work more than 60+ hours a week, you're an idiot.

NuttBoxer says

Third, the house itself is a giant money pit, continually depreciating, requiring upkeep.

It sounds like you haven't owned or don't know how to maintain a home. Please tell me what entails a money pit? Furnace? $3k installed, lasts 20-30 years if you treat it well. Only last 5 years if you treat it like a renter. Water heater? $1k installed by licensed plumber. 15 years if you maintain it. Renter 6 years. Roof? 30 years and depending on size of house, probably $20k max out of pocket. Likely closer to $10k for most houses. Most the country has hail, so probably likely $1k deductible to get a roof replaced for 75% of the country. Over a 15 year period these maintenance items, and these are bigger ones, are MAYBE $100/mo. If you know how to maintain a home it's likely closer to $50/mo.

Regarding depreciation. Outside of a ghetto, can you find me one market (mid to major city, 500k plus residents) that for any 10 year period has lower home values at the end of 10 years compared to the beginning. Tip, you won't find it. Again, we're not talking shit holes. Very few places start out nice and 10 years later have turned into a shit hole. It has happened, but I don't think you'll find an example.

NuttBoxer says

Fourth, there are much better investments outside of housing and stocks, so your view is too narrow.

What are these investments that are better? You're literally dismissing the most likely forms of wealth generation for 99% of people and saying there's something better. I'd love to know what I'm missing.

It really depends on each person's situation but I did too @nuttboxer.

In 2007 I'd been renting cheaply in the bay area for 10 years. Single with no kids and had paid down debt and made modest gains in the stock market with savings. I had about 150K in savings/etrade and maybe 200-250K in company stock I could sell. I could have bought something on the peninsula after the crash but if I had I'd still be in debt paying down a mortgage in a town I haven't lived in for the past 5 years - assuming I kept the place.

Instead I made over $2 million in the market (mostly from the startup I worked at - didn't take off until 2014) and now have 3 "homes" I rent out of state. Mortgages on 2 of them but I could pay those off with pocket change if I wanted to.

I still have a plenty of cash on the sideline for the market, making loans, buying more rentals, ... whatever other revenue I may find my way to ... and I continue to rent cheaply.

So yeah, there are smart reasons not to buy if you're in certain situations. Glad I held my cards and didn't sell that company stock just to buy a crap shack in the bay area.

just_passing_through says

So yeah, there are smart reasons not to buy if you're in certain situations. Glad I held my cards and didn't sell that company stock just to buy a crap shack in the bay area.

From my point of view I'd never advocate selling off an investment to buy a primary residence. Ever. So hopefully what I'm saying is not coming across that way. If I had it my way and there was a litmus test for being allowed to own a home, you'd have to have saved 20% down payment all while maxing out a 401k every year in the process. That's an over exaggeration, but if you can't save the 20% down while saving for at least something for retirement, you need to rethink your plan.

If I were king I'd implement your litmus test.

Everyone's situation is different. Some people are crappy savers and it's a good way to at least 'get them to save'. Others have wives that might leave if they don't buy. On and on...

I've been pretty lucky but also was very certain that company would take off and do extremely well. I had plenty of co-workers who sold too soon.

NuttBoxer says

joeyjojojunior says

Renting does offer more flexibility, but almost always costs more over longer time frames.

It hasn't caught up to me until year 16. I've only started paying something close to a mortgage this past year.

The correct analysis is what are you paying relative to a mortgage from 16 years ago? I bought 13 years ago, and paid more in rent for the first 7 to 8 years. Now at year 13 my payments are $600 less than current rent.

Again, if you're into the flexibility of long-term renting then that makes sense. And the owners will always have costs of taxes and maintenance which never go away. However, compare your monthly rent costs for the next 50 years relative to a mortgage that would have stayed flat then dropped to $0 in 14 more years and the difference can be staggering.

Yes, everyone should consider avoiding acquisition of an asset that has consistently increased in value over time. Especially in very desirable markets. It makes no sense whatsoever to purchase a home for your family. And no, you are not being overly paranoid about losing your job. Everyone is getting laid off these days. The labor market is absolutely terrible. Unemployment is rising very fast. The new presidential administration does not want to focus on economic nationalism, jobs, growth, or any of that. This admin wants to ship all of the jobs to China, who they have claimed is a very fair trade partner.

just any guy says

I feel like I should be living a better lifestyle given where I'm at in my career, but CA just squashes that.

As a rule of thumb, I tend to think that CA = higher cost of living (mostly housing costs), but also usually higher salary. Depending on a person's job, I have this gut feeling that a person who makes decent money (not struggling) might actually accumulate net worth faster in CA than in other states due to the typically higher wages, and that a good portion of the higher living costs go into your home equity, which is still your money if you choose to unlock it one day. CA RE seems to appreciate faster too. I haven't run any numbers to back that up, though. And, I think it's clear that if you currently have a much higher paying job offer there, that it makes sense to take it and at least rent for now.

says

Yes, everyone should consider avoiding acquisition of an asset that has consistently increased in value over time. Especially in very desirable markets. It makes no sense whatsoever to purchase a home for your family. And no, you are not being overly paranoid about losing your job. Everyone is getting laid off these days. The labor market is absolutely terrible. Unemployment is rising very fast. The new presidential administration does not want to focus on economic nationalism, jobs, growth, or any of that. This admin wants to ship all of the jobs to China, who they have claimed is a very fair trade partner.

Life Sucks!
What do we do guys? What do we do?

ThreeBays says

However, in a rising property environment, which is the majority of the time in CA, you are in a race to save 20%. When prices are rising $100k a year, it makes sense to prioritize buying asap, then focus on your other goals.

That's a hard one. Best case you can get mommy and daddy money for help with the down payment. If you're in the price point where it's rising $100k a year, you're going to be chasing for a while unless you've got low cap gain income. If you're a W-2 employee with high wages it makes this even more difficult. Or put another way, are you going to pay the federal government 28, 33, 35 or 39.5 percent to get after tax dollars for the down payment?

If you can't get your 20% down and still max out a 401K, you're chasing the wrong dream then most likely. Just keep saving and renting. Or you could very likely get a comparable salary, likely less of course, in flyover country where you can get way more for your money. Or at least the down payment is affordable. At some point the cap gains on a house gets maxed out. My guess would be a $600k purchase price at age 32 and you sell at 59 with close to $500k in gains, tax free. Once you get over that amount of cap gains for real estate, you can get similar tax rates with stocks or other investments. And I always go back to a house not being a burden on you. The lower the payment the better in my book. So after a certain point, trying for a high appreciating house gets risky.

Most people won't see it the way I do. They want to own a home. I don't have a problem with this to be honest. It's just not that logical in most circumstances. I didn't do it logically to start with myself, so I don't have much of a pulpit to preach from.

ThreeBays says

After buying I built a more aggressive portfolio. Also got a lot more money into Roth retirement accounts and HSA.

That's the way to do it. Forgot about HSA's as well, good point.