Windsor, CA (windsor) · Member since 2018 · 21 posts · 6 votes
You always hear "buying a house is the best investment you can make" "Renting is like throwing your money away". What if everyone starts to listen and renting becomes a thing in the past? Now you're stuck with a property with no cash flow coming in. You think this is possible BP?
@Steven Coppola while it makes better sense to buy, it just isn’t always possible... for instance, when I moved due to my job, I went from the relatively affordable Las Vegas market to one of the most expensive markets in the world. Although I have several investment properties, I couldn’t afford to buy here without pretty much selling all of them. The other day, I decided to calculate how much I’ve spent on rent in these past 6 years and the answer was truly horrible... nearly 150k in money lost. This is even though I moved from a 4500 sq ft house with a yard into a mere 1400 sq ft condo.
But... that wouldn’t even be enough for a down payment for my apartment (50% down for foreign buyers) which is probably worth about 1.5 million, Price to rent ratios here are horrendous. So... even for those who ‘can afford it’ and ‘know better’, there are still circumstances for renting. It hurts me to rent, but a mortgage on one of these properties would greatly reduce my investment capacity.
Renting will NEVER die. With more and more baby boomers coming of age and the younger generations NOT looking forward to owning a home but looking for freedom, renting will always be a great solution. Not to mention that younger people coming up now are generally lazy and do not want to work load or responsibility of owning a home. So get those leases ready!
An experienced, multi-millionaire investor explained this to me once while we were driving around town looking for properties.
He said: The majority of Americans live pay check to pay check. That will never change. Therefore, renting will always be a thing.
Another very experienced investor told me he did have issues with tons of vacancy at one point. It was under Bill Clinton, when it was cheaper to put a downpayment on a home than it was to put down a security deposit. As we know, that ended in the almost collapse of the entire world's economy. Hopefully we have learned from that mistake that not perhaps not every American should own a home. If we do repeat the mistakes of the past and it does once again become cheaper to buy than to rent, then all we as investors have to do is sell our rentals to the buyers, wait for the market to once again burst, buy back the rentals at 40c on the dollar, and start renting them again.
I don't think it will ever die. Just because people want something (i.e. to buy a house) doesn't mean that everyone will go out there and do the work to be able to or will want to assume the risk of buying. There will also always be that handful of people that feel more comfortable renting because of the flexibility it allows the tenant as far as when there can pick up and leave and move to the next town.
To put a finer point on my earlier comment. As one gets into the higher end of the rental market, you get more and more for what you pay, for every increase in $100/month, what you can rent is shocking. Here in the Seattle area, you can rent a 1 million dollar house for 3400/month, 4000/month and you are in 1.5, 5000, probably close to two million. Not only can you get more, but if you are self-employed, it is nice to have the flexibility of being able to downsize, if your business takes a downturn. What's more, by having investment property, one remains in the real estate market.
@Steven Coppola we are moving more towards a rental society. Not only housing, but everything in life. It is the "subscription model" life style (music, books, cars, etc.) People continue to place less value on possessions and more on experiences. Add to that, Millennials grew up witnessing the housing crash and has left many with the belief that it will happen again. On top of that we have a changing work environment. Many baby boomers had one job in their life. They settled down in one city and worked at the same company for 30 years. Compare that to Gen X and Millenials, who move not only from company to company, but around the country. That nomadic life style makes home ownership less appealing.
It is also getting more difficult to attain home ownership. Prices have increased in many places around the country. Starter homes are getting to be a thing of the past as condos and townhomes become the only affordable entry level option. Add to that all the big money investment in single family homes. Large funds continue to move towards real estate, which moves more of the supply towards "leased" homes.
@Dennis M.
I think you are dead on. In the comIng years baby boomers will likely prefer townhouses, apartments, and CCRCs and will also likely be long-term commitment averse. (Also will probably be great tenants :))
@Steven Coppola The real question is: "Will homeownership ever die?" Mass homeownership is the newer concept of the two. The concept of feudalism meant that you "rented" your home from the "landlord"; he was literally the lord of the land. There's more of a threat to ownership of anything if communism or even socialism ever seriously take hold around the world. Threats to nationalize EVERYTHING, including land, are only a pen stroke away. And do we ever own anything? Your land and the buildings upon it will always be taxed so we're all really just renting our homes from the government anyway. Feudalism never really died, it's just been renamed. And, let's be honest, the concept of ownership is fleeting. None of us own anything. We're only renting it until we die... Cheerio!
Buying a local modest home closer to work needing about $375-400K saving as down payment and about $9000-12,000 monthly mortgage for 30 years these days here. Majority of Americans do not have the STEM education, skills, prime age to get high paying jobs but alone with the stellar savings for downpayment. Renting one of these tract modest homes is a fraction of what owners pay today. There will always be school teachers, city workers, cooks, sale clerks and they need a place to live. If the interest rate goes up for every 1% interest rate increase 10% less will be eligible for a home.
I do not think that renting will ever die. Everyone is not always ready or equipped for the responsibilities that come with purchasing and maintaining a home. Sometimes, it is easier to rent and let someone else worry about upkeep. I also feel that people are more transient than before and it can be easier to get out of a lease versus selling a home.