patrick.net

Patricks calculator actually takes all of those things into the account.

X times annual rent is simplified just ballpark figure to get the conversation started.

so, poster, make an offer to your LL. That was easy.

ChrisLA says

Patricks calculator actually takes all of those things into the account.

A few points.

1. I frequently read an article in the news media that uses the "X times annual rents" as a good metric -- 15 is the number that comes up a lot. It irks me because this is such a rough estimate that it isn't worth a whole lot. Sure, if a house costs 38 times annual rents, then it's a clear loser, and if the price is only 6x annual rents then it's probably a winner....I think a calculator like what Patrick has is a *much* better way to approach the question...but that's too complicated to squeeze into casual conversation or print articles. Maybe I'm just bitching. Maybe a simple disclaimer "assuming 5% interest" would go a long way.

2. The difficulty with rent vs buy calculators is in the inputs. The maintenance is a big one, as I mentioned the value of a property is sometimes dominated by the land value, which doesn't require much maintenance. Try getting an agreement from people on what a reasonable value for maintenance is.

Bap33 says

so, poster, make an offer to your LL. That was easy.

a. I'm probably not in a position to buy a house at the moment.
b. My offer would be about 50-60% of his listing price -- I doubt he would accept.

swebb says

Owning and renting aren’t equivalent. Owners and renters aren’t equivalent neighbors. I’m sure different as a renter than I was as an owner.

We rent and we have by far the best lawn on the court. (I do have a lawn business though)

Renters being bad neighbors is really BS. it's usually the Landlord who is at fault. ie the don't watch the property or screen the tenants well or just don't care.

swebb says

The difficulty with rent vs buy calculators is in the inputs.

I definitely agree with you there. You can make the results come out any way you want just by changing the assumptions.

Especially appreciation. The reason we got all this bad lending and high prices was because people were assuming appreciation higher than the salary-inflation rate.

Katy Perry says

Renters being bad neighbors is really BS. it’s usually the Landlord who is at fault. ie the don’t watch the property or screen the tenants well or just don’t care.

I guess we will just have to disagree on this. I'm saying that, as an owner, I was a better neighbor...not that I'm particularly bad as a renter, but I just don't have the same vested interest in the property or the neighborhood. It's not intentional, but I tend to prioritize other things. I'm a member of the neighborhood association, and I went to the one meeting that they have had, but really..it's different being a renter, for me anyway.

I know it's a touchy subject, especially on these message boards, but I really do think that as a whole renters are not as good neighbors as owners...of course there are exceptions (including you), but on average someone who has the means and the commitment to buy a house makes a better neighbor than someone who doesn't have the means or commitment to do so... Other neighbors certainly perceive an owner differently -- they have basically signed a 30 year lease with an onerous exit clause...they show more commitment to staying put than a renter. Sort of like a contract worker, a substitute teacher, a travel nurse...I don't know, I think it's just human nature to see them differently. Again, I'm a renter and likely to be one for some time to come...

Ha ha It's is funny . I say to all my neighbors, "yes I rent, but don't hold that against me." they still do I think.

but what I really want to say is
"look I do rent and own zero of this house but in real numbers I own more of this house than you own of yours. Zero is a larger number than any Negitive number I know of,...right."

I'm really surly lately.

so this ties into my post a few days ago....

How DO you determine when to buy?

In my area, prices are from $85 sq/ft to $230 sq/ft......rents are anywhere from $800 to $1600. How am I supposed to determine what/when is the right purchase

UAVMX says

How DO you determine when to buy?

I'd buy when looking over the 20 year horizon it would be cheaper to own than to rent.

There's just too many variables in this forecasting to make a cut-and-dried case either way.

You'd think buying in 1980 would be a no-brainer, but money not spent on principal paydown but put in the stock market in 1980-1990 would have done pretty well 1990-2010, making the buy-vs-rent decision harder.

As far as market timing goes, it's better to buy a bit too late than to buy too early. Don't worry about catching the bottom; I think the macro situation is still way to unsettled for any bottom to come any time soon.

One danger is that the Fed does have one more trick up its sleeve -- direct purchase of mortgage debt, to fund home buyers at a "below market" interest rate. This is the Japan model, where interest rates are 2-3%. If they do that here then it would have been better to have bought before this major game changer, maybe.

Credit is already so cheap they can't effectively push it much lower. They already have the GSE's doing what amounts to near sub prime loans with looser credit tolerances and down payments, only 3-5% is the norm now and you can even get near 0% down if you can get a SFDPA loan. Of course their defaults have sky rocketed too which is why the GSE's keep needing to get bailed out each month billions at a time.

In many areas still 0% rates are still to expensive vs. wages, and that is before debt (credit card, school, car, etc.) is even considered.

Short of them going full retard and doing government sponsored NINJA loans you won't see the declines stop for years. And that would only produce another bubble which would fail in the end anyways.

What I do expect them to do is more stalling. More foreclosure moratoriums, new revamped versions of HAMP and HAFA, rule bending or out right failure to enforce rules to allow banks to slide and stay in business, etc.