Renting v. Buying

True, but how many people have the cash equivalnet to their house laying around? Smart investing is also a tricky business....Sounds good in theory, but your 200k could also evaporate in 2 years.....

Bought my house 5 years ago when I was single for $140,000 and amazingly enough it appraised exactly at $140,000 (I wonder how it hit the exact dollar amount in our purchase price agreement!)

Now I am married and have a kid and the house is too small for my growing family.  We are trying to sell it and have it under contract for a purchase price of $117,600 (we will have to pay about $25,000 to sell the place after realtor fees and closing costs).  Anyways we got the appraisal back today and it appraised for $105,000.  So I assume we are screwed and my realtor told me that appraisal will show up for the next 6 months and even if we got it under contract again we wouldn't be able to sell it for anything over 105,000. 

Oh and also I HAD TO PAY THE APPRAISER $450 to SCREW ME!!!!  What a fucked up system this is!  Now I just need to convince my wife that we should rent the rest of our lives. 

Besides the obvious tax breaks, buying a house always makes more sense than renting.  Most people don't have discipline and paying a mortgage is forced savings.  There are many people that only have a house and its equity to show for- if it wasn't for the decision to buy a home, they would only have the shirt off their back. 

Even the fact that it's ignorant to have a big tax return at the end of year is only for disciplined people's thinking.  Average person is better off paying more in taxes and getting a big chunk back at end of year.  For one, they will be living below their means and two, they will have a nice tax return that they can either blow away or put into a savings. 

Just because reading or doing something makes sense doesn't mean it's always practical to do.  Many people are undisciplined and doing whatever it takes to help them save is better than worrying about a few dollars you are gonna lose getting there.

not sure why people think that buying a home @ 225 K and then paying $450k in payments on a house that after 30 years may have a vakue of $500k is a solid investment. You couldn't find a way to make 50k in 30 years?

Tell people who live in Vegas who bought their homes in the early 2000 or 2001's for 500 K and now their house is worth 145 K. Or they bought a smaller house for 200k and it is now worth 70K Tell them that buying a house is the american dream.

There are so many better ways to accrue Money rather than buying a home. Unless you are a prospector. Even in the example that was given on page 1, that person bought at the low end of the market or bought a fixer upper and sold it after a few years at just the right time.

Think of the interest payment on a mortgage as juice on a bet. If you pay it for too long(make too many losing bets) it eats up all your profits.   

I'm not saying you're wrong, but maying rent is like betting a 50 team parlay....that money is lost before the bet is made...

If you have the cash for it up front, than buying a house right now is a good investment. However with a mortgage you pay double what the house is valued at. There is almost no way to recoup those monies through the house's value.

The basic question to many people is this.... Do you want all your equity tied into your house, or in other investments??? How is your investment portfolio created???

Say you only have 500k in your investment portfolio, but 350k is in your mortgage/house. That's a bad ratio for the individual. Basically you only have 150k that is working for you to make you cash equity. The only way you use the house money is through selling your home. Unless you are thinking of home equity loans, but that's just not a good idea b/c of the interest rates you have to pay on those.

Land has been valueable ever since they stopped making it.

Last year I purchased a 18 year old 5 bedroom raised bungalow with a lot just under an acre for 181k. It was appraised for 200k (good deals are out there if you search hard enough)

I now rent a two bedroom apartment in the basement to a buddy of mine. His rent is a bargain for him at 500 dollars a monthfor 800 square feet. which is just under half my mortgage payment. and myself and the lady have the 3 bedrooms upstairs to ourselves.

I have rebuilt a shed outside and I'm currently re landscaping the entire lawn (The lawn was a disaster when purcahsed). I am also looking at installing a metal roof. So I am quite confident if I do decide to sell this place it's value can only go up from what it was.If i DO infact decide to sell it. I'll let yas know how I made out.

Quote Originally Posted by be easy:





Hutch, where are these 8+% annual returns you speak of? Or better yet the 10-20% annual gains i think you mentioned. Please, do tell

Petrohawk Energy

Tyco International

Comcast

Just to name 3.  Look at their performance over the last 6 months to a year. 

You have to know someone who knows what they are doing and pay them accordingly.  I do. 

Oh, and I'll give you one more:  Electronic Arts, Inc.  15 to 24 in a year. 

OK, one more.  Chesapeake Energy Corporation

20 to 36...less than a year.

OK, one more.  DEO (Diageo plc).  55 to over 80 in 2 years.

Quote Originally Posted by be easy:





Hutch, where are these 8+% annual returns you speak of? Or better yet the 10-20% annual gains i think you mentioned. Please, do tell

By the way, be, weren't you the one yelling, "the sky is falling" back when the down was below 10K?  You might have missed the boat. 

I guess that's probably true.  I read somewhere that less than 50% of people who are OVER the age of 40 have saved more than $25K for retirement. 

But nonetheless, you're much better off investing in anything other than a house these days.....if you're getting good advice.  I have a gal I go to for massages.  Her house is almost paid off.  That's great, but now they have an asset that is worth 20% less than it was 5 years ago.  If they had invested that same money in the market (wisely), it likely would have doubled.  It's just the facts. 

Doubling your money is great, but when do you stop? Nobody quits after they double.....they stick it out until the gains end and reverse and then hang on some more. Its gambling and most people cant win because A) they suck or B) cant quit while ahead.

So you doubled your money and are renting. What are you going to do with the money? My guess is you buy lots of "toys" big screen,atvs,new vehicles,vacations.....and you come back to a place that doesnt belong to you....

I actually own KP3.  And I think it's a good idea to own (tax advantages and your house can certainly appreciate), but if you can make more money investing than you are paying in interest on your home loan (percentage-wise), it is insane to make extra payments on your house.  I have talked to the guy who makes my investment calls and he knows that I'm ready to sell in a SECOND if the market starts going south. If that does happen, I'll go all to cash and invest again when I think the market hits bottom.  I'm not in it for the action like a lot of gamblers are.  It is all about expected value and I think there was HUGE expected value when the market tanked. 

My money market does about 1.5%.  Yippeee.  I'll take a calculated risk in the market if it is warranted. 

Like I said, I'm not against owning at all.  I'm against paying down an asset that is a turd vs. investing (in an informed manner) in the market.

And my investment money is my investment money (retirement money)...period.  I have not taken 1 dollar out of any of those  accounts in 21 years.  I could live for 2 years with my current obligations without 1 dollar of income from anywhere else.....and still not having to touch my retirement income.