Buying vs Renting, makes more "cents"

9 Replies

With interest rates low, and inventory high,

Now is a great time to stop renting, and buy!

I have been a Professional Realtor in Southern California
for well over a decade. Right now, in most cases, rental
amounts are higher than your mortgage would be if you purchased.
If you, or someone you know, is looking to buy, sell, or have their
property managed, I would appreciate the introduction.

Sounds like a radio ad.

Daniel, is that a compliment, or a dig?

That blanket statement is untrue. Even if your mortgage payment is less than your rent, its not necessarily better to buy.

1. You need substantial cash to put down to buy. Even if you can get a 3.5% loan you shouldnt.

2. Maintenance is now your problem. New furnace in winter? New roof when it rains? On you. If you dont have the reserves, dont buy

3. You are stuck with the house. Lost your job? Tough. New job 100 miles away? Too bad. If any of that happens in the first five years, very likely you will lose money to get out of the house.

There are many good reasons to rent. All my investment homes are rented out at rates that are probably 50-200% more than the mortgage payments. And yet they are all occupied! Go figure.

Anish,

Please look up the definition of "blanket statement", and then realize what I wrote, is not.

I only put approximately a 1/2 blanket over everyone. :)

I said "in most cases". There are tax benefits, and also the house itself, to resell, to recoup your money, or possibly make a profit off of. Sure, there might be repairs needed, but when I represent a home buyer, I pay for a 1 year home warranty as a gift to them. If they renew that warranty each year, they will usually only have to pay $50-$100 for the total repair needed each time. Plus, if they are represented by an ethical Realtor, such as myself, they will be highly encouraged to get a home inspection, before moving further in their escrow. If the house is in need of repairs, we request the repairs to be made, request a credit, or walk away from the deal. 

@David Burg  I am obviously not against home ownership..I own 11 of them including my residence. Nor am I against realtors who have helped me in my own purchases. But you are really understating the risks of ownership. Most people buy more home than they can afford because they are sold the same kind of logic from realtors about the "tax benefits" and "resale" values. Lets look at the facts.

1. To buy a home for "tax benefits" is to pay $1 to get back $0.30. It never ever makes sense. 

2. No home warranty will really pay off. Think about it. If it did, they would be out of business. Once you get past the service charge, parts costs, and exclusions, you would be better off just fixing it yourself. And in any case thats only for small things like appliances. Not major issues. And its no substitute for having reserves

3. Home inspection is good but many miss major structural issues. And unless you are going to get an engineer to look at every home, thats a risk you take. May not be big but still a risk.

4. Resale will almost never make sense in the first 5 years. Selling cost is at least 10%, closing costs when you bought is probably 5%. So you need 15% appreciation to just break even. Can that happen in a short term? Sure in a crazy time and market (like CA in the last few years) but in most places, not likely at all for at least 5 maybe 7 years in a normal market. Even in the Bay Area if you bought in 2007 and wanted to sell in 2010 you would be eating a big loss. 

If you buy a house within your means and have the ability to hold on for over 5 years, have reserves for emergencies and dont live in a structurally declining market, you will probably be okay. But others are probably better off renting (from people like me :-)_

@David Burg

Hi David

Buying a home is a personal decision based on each person's specific situation in life.  Where I live in New York, taxes crush you and renting sometimes makes sense, due to the fact that appreciation in the market is pretty nonexistent.  On the other hand, there is a special feeling when you can turn the lights on and call it home.

Live by the rich dad mantra, your home is not an asset, unless you uncap the equity and use to invest.  Risky proposition unless you have a sound strategy to invest.

Demographics are starting to point towards more people renting because they want the freedom to move whenever and not to have any hassles with home ownership

Gino

The main benefit to buying in my opinion is to be able to have what you want. Remodel bathroom? No problem. Paint your living room? No problem. You're less likely to find the "niceties" in a rental that you might want in your home. You might not have the best lot, best curb appeal, etc. when living in a rental. I know it's generalizations and not always the case, but it's more likely the case than not.

I think it also is a "forced savings plan" for some as it forces you to build a net worth, eventually, that you might not otherwise get. Similar to a 401k. If we didn't have home ownership and 401ks,  then those families with a zero net worth or worse would probably be greater than the nearly 50% that it is.

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