Owning vs renting.

5 Replies

Hi guys,

I am fairly new to bigger-pockets. I wanted to know your opinion on owning your own house vs renting an apartment? What makes sense? And why ?

Your opinion matters.

@Stanley H.  There are lots of factors to the equation that make the answer different for different situations.  One question is, how does the cost of rent compare to the cost of owning in your market?  The answer can be very different in different markets. 

What is your long term employment like?  Is there any chance that you might be moving in the near future?  If you might be moving soon, you may not have time to recover any savings (if any exists) in home ownership compared to renting because of the cost of acquisition (closing costs) and sale (commissions) of the property you would buy.

What is your family situation?  Could you live in a low cost apartment and save to be able to invest or have a good down payment to buy a home faster if you sacrificed a year or two before making your big purchase?  Is your family likely to grow anytime soon and need more space than an apartment offers?

Those are the first three areas that come to mind for me and hopefully that gives you some food for thought.  Only you know the right answer for your situation and I hope these questions help you find it!

@stanley 

@Stanley H.  I would expand your option list to include living in your own multifamily property (2 - 4 units) and renting out the other units. And, then I'd choose that option. 

But to answer your question, it just depends on where you can make a better return that fits your investing goals. 

@Stanley H.  

Q: I like the concept of MFH investing, where should I start?

Short Response:

1. Eliminate your rent/mortgage payment
2. Bring all deals to the BP community (and be humble when doing so)
3. Stick to the returns you want

Long Response:
Learn everything you can about multi family investing. Every day you should answer a few questions and write down several new ones.

The general theory is that you need to drive costs out of your life and/or add new revenue. If you live with your parents, and they don't charge you rent, good. I'd then start forcing yourself to put $500-700 away each month as a "rental" payment towards some real estate.

If you pay rent of any kind, to your folks or to another landlord, find a way to eliminate it from your life. My suggestion is to find a 3 or 4 family property that you can purchase. FHA loans are a good way to go, but be wary of the additional percentage points you have to pay each month as PMI. Homepath loans are great as they have no PMI. VA loans are even better, but require you to have served in the US military.

Run every deal you find through the BP community. Some of the responses are harsh, but they are eye opening. There are people on this site that have been buying and selling 4x as long as I have. When I find answers to my daily questions, I can almost always find the answers here at BP.

Last one for the moment: stick to your numbers. It bears repeating: stick to your numbers. If you want $200/month and a 12% Cash on Cash return for your investment, stick to that number. If you pick 12%, 9% is not good enough, nor is 11.7%. Make your offers accordingly.

I'm going to echo what @Aaron Montague  & @Joe Fairless  had to say.

Simply put, in most markets I have come in contact with, there is no better way to live/rent (whatever you want to call it) than to buy a multi-family property, and live in one of the units. This means living in one unit, and letting the other 1, 2, or 3 units pay your mortgage, and then maybe cash flow a little. It's not the norm, and that's why it's awesome.

In today's economic landscape, there is a loan through FHA that you can get by putting 3.5% down, and secure up to a 4-unit building. There is an excellent article written by Brandon Turner of this site, here:

http://www.biggerpockets.com/renewsblog/2013/11/02/hack-housing-get-paid-live-free/

It seems that this is a growing option among us younger guys especially, but like I said, it seems pretty hard to beat. Just my two cents.

RENTING IS THE RIGHT CHOICE FOR MANY, such as for:

Those who can not afford to pay ALL of the costs of home ownership.

Those who don't want to be bothered with ongoing maintenance, repairs, taxes, and mortgage payments.

Those who do not expect to be in one place for very long or want the flexibility to move easily when they are ready for a job change or change in family make up.

Those who don't mind not being able to remodel and decorate without the approval of the property owner.

Those who don't mind giving up some of their desires for use of the home as pertains to home businesses, guests, pets and making noise.

Those who do not have aptitude for REI.

Those who do not have the interest in REI.

Those who are not mentally or physically capable of home ownership.

Those who want to downsize and relax and travel and let someone else handle the details of keeping a sound roof overhead. :-)

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