Buying is more expensive than renting in ALL 50 states...........

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

according to CNBC, however in my market with the current low interest rates I don't see it that way. What does your market tell you?

http://www.cnbc.com/2017/04/07/heres-how-much-more-it-costs-to-own-vs-rent-a-home-in-every-us-state.html

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Justin Fox

Software Developer · Vidor, TX · Member since 2015 · 922 posts · 639 votes

To me it's more about time. Renters save sooooo much time, especially when living in a SFH. No yard maintenance, not having to schedule and meet repairmen, not having to remember to pay septic service contracts, not having to remember to pay warranties, or insurance, or taxes, not having to remember to pay the mortgage and not having to remember to change the air filter.

If they want to move to another city or area? Just give notice, pay a moving service and they're done. Don't have to worry about selling the home or worrying about how long you're going to have to foot the mortgage until it's sold.

I aspire to become a renter with rentals one day.

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Anthony Angotti
Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes
9y
Hey @David Krulac
Once you factor in maintenance costs on a home and everything else it can be more expensive than buying. Especially because most homeowners use the contractors in the commercials and pay way more than they should for work on their house.
You also have to deal with the maintenance and some people don't want to.
I see both sides of it and it depends on what kind of house people are buying. Not as many buyers want a house that requires fixing a lot of deferred maintenance day one. And to buy something like that they have to pay.....often a lot more than what rent would be.
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Justin Fox
Software Developer · Vidor, TX · Member since 2015 · 922 posts · 639 votes
9y
To me it's more about time. Renters save sooooo much time, especially when living in a SFH. No yard maintenance, not having to schedule and meet repairmen, not having to remember to pay septic service contracts, not having to remember to pay warranties, or insurance, or taxes, not having to remember to pay the mortgage and not having to remember to change the air filter.
If they want to move to another city or area? Just give notice, pay a moving service and they're done. Don't have to worry about selling the home or worrying about how long you're going to have to foot the mortgage until it's sold.
I aspire to become a renter with rentals one day.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
9y
It's not that way here, yet. Matter of fact I have lost a few renters who became owners precisely because of current rates+price points. To be fair, most homeowners underestimate the amount of money it takes to maintain and/or upgrade a home that they own. I have had more than one renter tell me in conversations later "I never realized it was so expensive keeping up a house".
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Bob Okenwa
Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
9y
The article failed to mention that most people buy homes that are larger than the apartments and homes they rent, so it would be natural that mortgages and utility costs are higher. Also the starter home is a dying species as those are being converted to rentals to and home builders are building larger and larger homes on average. Makes sense why it could cost more to own. And as far as yard maintenance goes and air filters, I rented a house and that was my responsibility so there was no time saved there.
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Austin Fruechting
Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes
9y
Not comparing apples to apples. Of course on average a 50-year old engineer that buys a home is probably going to spend more per month than a college student renting. They will be in very different types of places. I know if my renters bought the houses they are renting from me they would spend less... otherwise I wouldn't be renting them!
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Chris Purcell
Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
9y
Originally posted by @Justin Fox:

To me it's more about time. Renters save sooooo much time, especially when living in a SFH. No yard maintenance, not having to schedule and meet repairmen, not having to remember to pay septic service contracts, not having to remember to pay warranties, or insurance, or taxes, not having to remember to pay the mortgage and not having to remember to change the air filter.
If they want to move to another city or area? Just give notice, pay a moving service and they're done. Don't have to worry about selling the home or worrying about how long you're going to have to foot the mortgage until it's sold.
I aspire to become a renter with rentals one day.
????
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@David Krulac Even here in our area this would not have been the case 3 years ago. but rents have gone up 30 to 50% making homeowner ship at the 250 to 400k level same or cheaper than rent.. not including on going maintenance just talking rent V mortgage but then you have to factor in write offs as well and mortgage paydown.. Mortgage paydown in most markets is quite valuable in areas were houses don't really rise and maybe fall over time not so much. Right now we are at 350k for starter homes.. GOVMIT has permitted us to death..
right now in our area to take a raw chunk of dirt and create lots with city sewer water etc. you will pay about 80 to 100k per lot just in building the infrastruce and the permits.. then you add cost of land and cost to build.. ergo no starter housing under the 300k range basically.
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Mike Flora
Investor · Menifee, CA · Member since 2015 · 534 posts · 216 votes
9y
In my area of Southern California it seems to be very close to the same, of course other factors you guys mention can make a difference on what your buying/renting. Went to the Bruce Norris seminar February 4th and got some great info on more and more people renting in California rather than buying.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
9y
I have believed for decades that home ownership, being a lifestyle choice, is a liability. I have advised new investors to rent rather than buy to allow them to accumulate savings faster. Home ownership is a money pit.
Personal home ownership will, during a life time, cost more than a home will ever be worth except in very special markets or unique situations.
Owning a home is far more expensive than renting for so many more reasons than people can imagine.
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Ryan Scott Isacksen
Property Manager · Castro Valley, CA · Member since 2016 · 212 posts · 110 votes
9y
@Thomas S. I agree that the cost is more than people realize. I think a lot of people rent out SFH at a little bit of a loss when you factor in the big items that have longer life. Thus, renting a house can be cheaper than owning.

There are tax advantages to the house, money comes back in the form of equity, and payments can remain stable in a rising market, but at risk of losing a lot of money in a place where the market drops.

A house:
- provides a quality of life that an apartment cannot.
- provides stability that an apartment cannot.
* a SFH owner can decide to move back to their house giving a renter the boot
* rents can be increased where mortgages are currently fixed
- It does take a chunk of capital that could otherwise be invested.
- You can't ever pay off an apartment ( though tenant groups in my area probably will figure out a way to have the city allow that)
- Tenants can vote for all the taxes they want and not see the direct effect of those votes
- Homeowner has more liability than a tenant does and a landlord has more than both
My venture in home-ownership:
1. Currently I am in a market that has appreciated greatly over the last few years. This could change before I ever sell my place, but it does give me access to equity that I can use if needed.
2. I have equity due to the market rise that I have access to that I would not as a renter.
Had I rented rather than bought, the money saved from the down payment and the money I have spent on the house would be about 1/8th of what I currently have access to.
3. I have chickens in my backyard that would be unlikely an option as a renter.
4. I have poured a concrete slab that I can practice martial arts as a personal outdoor dojo that I could not have done as a renter.
5. My payment has gone down (Removal of PMI and refinance at lower interest) and I now have a payment that is not close to the cost of renting a SFH in my area.
(Yes, at some point that roof, new at purchase, will need to be replaced, water heater, furnace, etc.)
Those costs will bring the place closer to the cost of renting, but I bet I get a bigger deposit back when I move out. :)

I don't think there is a right or wrong answer. Timing, which regular home owners don't think about, has a huge effect in how much of a financial impact it is to buy a house.
The NY Times recently wrote an article about how things are stacked so unfairly in the advantage of a house / building owner: https://www.nytimes.com/2017/05/09/magazine/how-ho...
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
9y
Owning in the DC area is considerably cheaper than renting. Im not sure I could afford to pay some of the rents my own tenants are paying.
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Chris MasonPro Member
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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
9y
Article is implicitly assuming that rent doesn't go up.
The 3 br I live in now has a PITI that is $150 lower than what the 1 br apartment that my wife and I previously rented currently rents for, and it's been less than 5 years.
Fast forward that another 5 or 10 years, with my PITI holding basically constant (thanks, California Prop 13!), while that old 1 br apartment keeps going up year after year, and the spread will be even larger.
Appreciation is going to get you, one way or the other. Owners capture that appreciation in the form of equity (and/or charging increased rents), renters pay for that appreciation in the form of paying increased rents.
If all you can think about is monthly expenses & living paycheck to paycheck, yes renting is cheaper at that little picture scale, and folks still at a point in their lives where they are living paycheck to paycheck should probably continue to rent.
If you've got some sweetheart rent control deal going on, it may make sense to continue personally renting as well, while simultaneously making other investments (which could include real estate in nearby cities that lack rent control).
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Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
9y
that's bull. A friend of mine wanted to get started in investing so I found a place for him to buy. Just a generic MLS home in Houston. He paid $74k. It rents for $900. He cash flows nicely on the deal. So by definition it would be cheaper for the guy renting to buy.
My buddy lives in California and never even saw the place. It's just mailbox money for him. A nicer return (% wise) on his investment. And due to leverage the property doesn't have to increase much to double his money.
I try to get everyone I can to invest in RE. It's been so good to me that I want to see my family and friends have that same success.
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Justin B.
Investor · Gaithersburg, MD · Member since 2013 · 660 posts · 441 votes
9y
I didn't read the rest of the responses so apologies if I repeat anything. It's hard to tell from the article itself, but I think they left out (they may have said this, but hard to be sure) those "benefits" they mentioned in their calculations. Those include Interest deduction (which "could" be useless if the house is small enough to where you don't get above the standard deduction), Appreciation, refinancing, etc. I think a better article would be comparing a longer term. I think short term (a few years), it probably does make more sense to rent. But if you look at a longer term (15-30 years), I think owning would probably be cheaper in that long run, mainly because of the paid off mortgage and appreciation. The hook there is it takes 30 years to realize that, but the article didn't say what period of time they were trying to measure.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
9y
Owning is a life style choice. It is not a investment, it is not a financial asset aside from forced savings in the pay down of a mortgage.
The financial reasons to invest in a multi unit as opposed to a SFH is a proven example. Yes there are exceptions but when home owners add up every tiny and big expense associated with owning a SFH over their life time the numbers defiantly support renting.
Anyone ever read Rich Dad Poor Dad....the advice to rent goes way back in time in this business.
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Marian Smith
Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
9y
Buying in todays market is more expensive than rent maybe...and maybe it will remain more expensive to have bought in todays market. But inflation is a risk and I would take the inflation hedge bet myself. Besides, data probably doesn't count paid off homes...something renting never achieves. However, 5 year horizon only. Renting is definitely cheaper than buying and selling.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Thomas S. really depends on where your at in the country and were your at in the investment cycle. Anything bought 20 years ago in the bay area ( SF Penninsula particularly) has gone up 3 to 5X) there is more money made in appreciation in those assets than in most drip income assets at the same price point.
I think the other reason for homeownership is
1. stability no one can say your lease is up and you have to move.
2. as you state pride of ownership you own it not someone else
3. you can do what you like to the home no one giving you rules.
I think this is the foundation of ownership.. Just think of Vancouver BC
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
9y
( SF Penninsula particularly) has gone up 3 to 5X)
I always try to include the statement "except in special circumstances".
There will always be special exceptions to everything and that market and a very select few others buck the trend (for now).
Your point are all relevant specifically to lifestyle choices and I agree. The foundation of home ownership must be life style because, in the majority of markets, financially it makes no financial scenes to own.
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Bryan Reid
Real Estate Agent · Lexington, KY · Member since 2017 · 68 posts · 44 votes
9y
"Its on the internet, so it has to be true, right?"
Seriously, though - CNBC should be ashamed to be linked with an article that makes such an obviously ridiculous claim. In an era where traditional outlets are routinely derided as "Fake News" one would hope they would be a bit more cautious with headlines like these.
That isn't to say buying cannot be more expensive than renting if you cherry-pick the properties and data, but when you compare apples-to-apples (ie: buying vs renting for a typical rental property) renting is almost always going to be more expensive.
If that wasn't true, landlords everywhere would be losing money every day. By definition, if a property produces positive cash flow, the monthly costs of ownership are less than the costs of renting.
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Stewart Wyne
Rental Property Investor · Atlanta, GA · Member since 2015 · 41 posts · 31 votes
9y
Definitely depends on your market. My neighbors just rented their house in Atlanta for 25% higher than my mortgage, and I bought 2 years ago.
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Joseph Weisenbloom
Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes
9y
The rent/buy debate is not as simple as that article is making it out to be. This is a decision that varies widely based in the market and has many variables at play. This is the best article I have found that breaks down this issue.
http://affordanything.com/2015/11/24/is-renting-be...
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Jaquetta T Ragland
Real Estate Agent · Winston Salem, NC · Member since 2014 · 486 posts · 303 votes
9y
From my experience in NC, I have found owning to be cheaper especially in the short term. Can't really answer for the long term since I haven't had too many maintenance issues, extra expenses as I haven't been in my home that long.
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James Barnhart
Rental Property Investor · Ocala, FL · Member since 2016 · 226 posts · 140 votes
9y
I see some good points on both sides.
But, I have definitely made a lot of money in residential real estate. If I had been a renter, I would not have any of it. I also would have paid a lot more income tax.
And, in the past three years, two of my good tenants have left to buy their own homes. I say good for them.
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Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
9y
Originally posted by @Stewart Wyne:
Definitely depends on your market. My neighbors just rented their house in Atlanta for 25% higher than my mortgage, and I bought 2 years ago.
Totally. A condo I own in Honolulu rents for 220% of the mortgage PITI! :)
That said, I now rent (by design) and it's a lot easier.
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Account Closed
Johnson City, TN · Member since 2014 · 586 posts · 705 votes
9y
No one has mentioned the opportunity cost of buying under certain circumstances. Suppose you bought in 2005-6. 2010 your dream job becomes available 100 miles away. You don't take it because you are underwater on your mortgage and can't pay for two mortgages. What is the cost of that? I love real estate and have a farm and house that are both too big for me. I take a lot of pleasure from my property but with it comes a lot of responsibility. I think many Americans are so in love with the idea of home ownership and being landlord free, they don't consider the true cost.
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