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The real cost of owning a home

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Re: The real cost of owning a home

#71

Post by too_pricey »

malfist wrote: post #11

This is nonsense. The person counts the 12 month escrow prepayment during closing as "cost to get a loan" It's not. It's the cost of 12 months of taxes and insurance on your property. Also notable is the "1 year insurance premium" either they're double counting the escrow, or this 1 year insurance premium is mortgage insurance where the bank makes you take out insurance to protect them. This can be prepaid, split pai…

They also neglect the Mortage Interest Tax Deduction and State and Local Tax Deductions, whcih reduce the cost of both by your marginal tax rate, and is a big benefit towards owning.

More importantly, this neglects that buying a home is locking in the price for the long term for the majority of your housing cost. Buying usually is similar all in the first year, but after 5 years your mortage payment is the same while rent has probably gone up significantly.

Re: The real cost of owning a home

#72

Post by bluGill »

cmiles8 wrote: post #62

Over short term windows it’s very possible for renting to make more sense. Over the long term it’s very difficult for renting to come out ahead. If you’re talking about the same town over say 20 years then the chances of renting coming out ahead is near zero. In the US at least the tax system is also heavily setup to favor home ownership. Mortgage interest and real estate taxes (which are baked into rent) are tax ded…

Only if you really stay. You never know when you will lose your job and the only thing to find requires on site in a different city.

Renting and buying tends to work out the same in the long run if renters invest the difference on the early years - but which they rarely do

Re: The real cost of owning a home

#73

Post by SoftTalker »

If you have some spare cash flow, you can pay extra principal on your loan. Since early years are mostly interest, this can make a big difference in ultimately paying off the loan early if you plan to live there that long.

Re: The real cost of owning a home

#74

Post by jandrewrogers »

cosmic_cheese wrote: post #12

On the other hand, renting comes with hidden (and some not so hidden) costs too. The main one for me is the inherent precariousness that comes with renting. You don’t know how much longer you’re going to be able to stay in your apartment, whether that be due to rent hikes or the landlord deciding that they want to give the apartment to their nephew or any number of other things. The constant low level stress of knowi…

I prefer corporate rentals precisely because there is less idiosyncratic risk. They boringly have a strong incentive to keep you renting the same place as long as possible.

The cost of owning absolutely does increase over time. The mortgage payment is just one part of the fully burdened cost. Furthermore, there is a real risk of an unexpected $20k expense that you have to pay for. Owning is less predictable than renting because the liability and risk surface area is much larger.

Re: The real cost of owning a home

#75

Post by tetromino_ »

someuser54541 wrote: post #3

Aren't quite a few of these concerns alleviated by owning a condo?

Condos may, and quite often do, have enormously expensive maintenance issues that the condo owners are quite unaware of until the last moment and will have to shell out for via special assessment from the condo association. Example from personal experience: very soon after moving into my condo, cracks were discovered on the other side of the building. They were investigated and it turned out that the building was made from substandard concrete. All exterior facing concrete needed to be replaced or the building would fall down. To pay for the fix, there was a special assessment that I needed to pay into, and to add insult to injury, for 2 years I could not use my theoretically beautiful view from the balcony and windows - it was all jackhammering and concrete dust.

Re: The real cost of owning a home

#76

Post by specproc »

cosmic_cheese wrote: post #12

On the other hand, renting comes with hidden (and some not so hidden) costs too. The main one for me is the inherent precariousness that comes with renting. You don’t know how much longer you’re going to be able to stay in your apartment, whether that be due to rent hikes or the landlord deciding that they want to give the apartment to their nephew or any number of other things. The constant low level stress of knowi…

I'm the UK at least, it's also common for the renter to pay council tax, which is analogous to property taxes in other countries.

I imagine this is also likely passed through in the cost of rent in other places.

That said, it's totally possible to have a legal and fiscal framework that makes renting affordable and safe.

The government, particularly in Western countries with insane pressure on the rental market, needs to act as a homebuilder and landlord of the last resort. It keeps supply up, prices and risk down.

We've had a couple of generations locked into the housing market as an investment, and it's causing demand crunches which have artificially inflated prices and are choking and dividing our societies.

I'd happily spend my life in a rental if it was affordable and safe, and part of a considerably more fair society.

Re: The real cost of owning a home

#77

Post by bluGill »

jeremy151 wrote: post #49

I am a DIY-er by nature with construction experience, I enjoy it, so when we wanted a bit more outdoor space, we moved from a suburban cul-de-sac to a slightly more rural property on some acreage, and chose an aged luxury home, feeling comfortable generally in my ability to be able to rehab it over time. After all, we're not in any sort of rush, and wanted the kids to experience putting work into the place where they…

> Septic is another ticking clock. When that goes, you're in for 5 digits.

But for the length they last it is less than my city sewer bill. Though if my septic fails I'll connect to the city system was the quote I got to do that was about what a new septic costs.

Re: The real cost of owning a home

#78

Post by cosmic_cheese »

whywhywhywhy wrote: post #41
kylehotchkiss wrote: post #23

Earlier quoted context omitted.

If you rent from an apartment complex (corporate owned), how big is the risk of being kicked out if you pay your rent?

They tend to just keep increasing it until you leave then just dial it back a little and get someone else in. Far worse than individual landlord that if you're a good easy tenant is gonna prefer you to an unknown, corporate don't care about that.

Yep. This was exactly my experience. You have to leave eventually just to keep monthly rent under control.

Re: The real cost of owning a home

#79

Post by throwaway894345 »

elicash wrote: post #25
mholm wrote: post #6

Beyond the financials, the psychological impact of both being able to make greater-than-superficial changes, and having extremely predictable payments for years without worrying about substantial rent increases, is substantial. I redid/improved the bathroom to exactly what I wanted. I renovated the kitchen. I added paneling to the walls. I added a few outlets to rooms that needed more. I wouldn't do these things in a…

> I redid/improved... We are extending the fence in our backyard. However, getting rid of the parking means the project will likely detract from the value of the home. But since we don't have a car, let alone two, it makes sense for us to do the project anyway. Despite the warning of our realtor when we purchased the home. I've noticed a lot of folks are afraid to personalize their homes because of concern about the…

Yeah, I agree with this. We have one car and no kids and every time we talk about some remodel. For example, we're talking about remodeling our kitchen and getting rid of our wildly oversized (read "normal American") appliances in exchange for more storage, counter, and floor space but the first thing friends and family talk about is resale value.

Firstly, my home isn't principally an investment vehicle.

Secondly, I'm pretty sure I can find a buyer who can conceive of popping over to the grocery store around the corner a couple times a week rather than pretending like they're living off the grid and have to drive 100 miles to the nearest town to buy their monthly provisions for a family of 13. :)

Re: The real cost of owning a home

#80

Post by ticulatedspline »

You experience more than 100% of all of these costs as a renter, while you have none of the up-front costs and less liability you also have no agency and no equity. It can be a trap though, as selling isn't free and if you didn't have enough equity built up you can end up losing money to move. Some housing ends up as rentals because of this, makes more sense to not sell and to rent it.

Renting is definitely the better option for certain people, if you intend to move often, or want to live in an apartment your overall costs are likely to be lower. If you want a single-family home and don't want to move often (or be moved out) Buying is worth it. Even setting aside the satisfaction of home ownership if you can mange to pay off your property you pretty much can't live cheaper at the same scale.

that said I've rented, I've owned, and I've been a landlord and I'd take home ownership in a heartbeat. It's not all rosy, and being responsible for maintenance is no joke but not being subject to the affairs or whimsy of someone else's finances along with the pride and sense of actual ownership is is wonderful.

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