rent vs. buying.

[909punk]

I'm not buying into this whole concept of renting for a year. Let's do some math.
If I rented a apt for say $2000 a month. (rent for areas I have been looking)
2000x12=$24,000 yr
I'm no tax guy, but I do recall having a big write every year because I have a decent mortgage.
$6600 (i think that is the number on my returns)
So right off the top I am going to piss away:
24000 + 6600 = $30600 to rent for year.
I'm sure there are other costs I'm not factoring...
So now take in account of purchasing this time period.. If the market is going to go down another 10-15% then I think that offering a seller 10-15% off the asking price should balance out close to what market will adjust to.
So instead of pissing away 30k+, I have a write off, bought it at 2004 prices, and I can move on with my life.
Tell me what you think about that.

[totenhosen]

The proper comparison would be, the homes that you are looking at to rent for $2k a month would cost how much to purchase? Knowing a little about AZ real estate I would assume that is approx. $500k+ house. So assuming you have 20% down you'll have a loan for $400k at 6%. You would ahve a P&I payment of $2398 or so. Assuming a property tax rate of 1.25% or $521 a month. Total payment is $2918mo. Now add in your interest tax deduction of $24k. With that compare the cost of owning the home vs. renting.

[TheCarDudes]

It all depends on when and where you buy. I sold our home in Simi Valley at the tail end of the good market. But, I also bought a home in Thousand Oaks at the same time. We were seriously contemplating renting for a year as we could not fine exactly the home we wanted. We just knew that we wanted to sell our home in Simi while the market was semi-hot. We got all the money for it.
If we would have gone with the rent for a year option, I would have come off as a financial real estate genius. A home we looked at that was 1.9m and way out of our price range sold for 1.4 last month on a short pay. I would have been all over it at that price.
Have we hit bottom? Don't know, don't care. This is just a missed opportunity. Nothing more, nothing less. Being self employed allows me to control entirely what happens to me and my family financially.
In a market drop like we are having, if you sell at the right time, renting does make sense. You need a friggin crystal ball to catch another opportunity like this though.
In most cases, it never makes sense to rent vs. owning. Mostly tax related reasons but obviously for the long haul, you just can't build equity while renting.

[rodnjen]

Say an entry level house in my neigborood cost $600K
20% down is $120K
Then your mortgage is $2,863/mo for p&i
Taxes & Ins. are $7,500/yr or $625/mo.
Your total monthly is $3,488 plus your "out-of-pocket" of $120,000 down payment.
I've done the math but decide for yourself. If you want to buy and CAN buy then go ahead and plan on it being a very long term commitment.
If you can't come up with the down then now is a great time to rent. Just like anything else, it depends on what your needs are, where you are in your life and what your resources are.

[buzzaro]

I'm not buying into this whole concept of renting for a year. Let's do some math.
If I rented a apt for say $2000 a month. (rent for areas I have been looking)
2000x12=$24,000 yr
I'm no tax guy, but I do recall having a big write every year because I have a decent mortgage.
$6600 (i think that is the number on my returns)
So right off the top I am going to piss away:
24000 + 6600 = $30600 to rent for year.
I'm sure there are other costs I'm not factoring...
So now take in account of purchasing this time period.. If the market is going to go down another 10-15% then I think that offering a seller 10-15% off the asking price should balance out close to what market will adjust to.
So instead of pissing away 30k+, I have a write off, bought it at 2004 prices, and I can move on with my life.
Tell me what you think about that.
You need to look at how much interest your paying on your loan also, and then take your tax write-off and subtract it from that. So your probably paying near 20k in interest a year, non-tax though so its closer to 15k in interest. Dont forget property tax, prolly another 5k which puts it up to 20k. Digging deeper youll find a lot more expenses which add up quickly..........you have mello roos?

[Outnumbered]

909, I commented on this in your other thread. If you are going to buy in the very high demand areas then buy now. The are not making any more beach property and the people who can afford $2mil+ homes are not as affected by the correction. Yes, these properties will depreciate but at a lower rate then the inland stuff. If you are going to buy a more entry level home then wait a little bit. Don't be fooled by all the high list prices out there. Most of these properties are sitting forever and if you low-ball enough of them you will get a bite.

[Mandelon]

As with anything there are pro's and con's.
Sellers are desperate and you could score a total deal. But..... prices are still declining, several thousand dollars a month.
What is your time frame for staying in the house? If you aren't there for at least 5 to 7 years, you are probably better off renting.
There's going to be zero or negative appreciation for the next 3 to 5 years. You can normally rent a house cheaper than making the payment. (assuming you had to buy it at current prices). If you sell sooner you've got that commission to pay off, it will be years before you even build up that much equity.
The first years of a loan barely even touch the principle. No maintenance
costs if you rent. Free weekends, with no repairs to do.
Then again, no pride of ownership, no custom features that you designed....

[909punk]

I'll be liquid in 12 days. I just can't think of paying someone's mortgage for them. Does nothing for me. Seems like what I'll save in monthly would be about the same I would have with my write off.

[Mandelon]

Do what makes you happy. Go get a great agent and start looking for deals!

[909punk]

909, I commented on this in your other thread. If you are going to buy in the very high demand areas then buy now. The are not making any more beach property and the people who can afford $2mil+ homes are not as affected by the correction. Yes, these properties will depreciate but at a lower rate then the inland stuff. If you are going to buy a more entry level home then wait a little bit. Don't be fooled by all the high list prices out there. Most of these properties are sitting forever and if you low-ball enough of them you will get a bite.
Yeah dude.. They are not making any more beach property. I looked at the foreclosure market in Malibu there were like 10, La Jolla has more.
I guess if I stated that I was moving to the beach in this first post it would help a bit in trying to figure out my thinking.. If I was moving inland, then yeah.. I'll rent. Parts of San Diego have huge amounts of foreclosures where the beach doesn't.

[bigq]

Get your numbers right first and here is a great calculator for helping. Don't forget the upkeep. and interest HOA dues.
Rent and interest are the same kind of thing. They are what you pay to use something -- either to use a house, or to use money. Interest is the rent paid on borrowed money. To know whether to buy, you just have to compare one rental option to the other. Buy the house for $250,000 and don't pay any rent.
Invest the $250,000 at 5%, and pay $1,000 rent per month to live in a house.
. Owning outright means giving up interest rather than paying interest, a different kind of loss, but a loss nonetheless. In the second case, you're getting $12,500 in interest income from your CD's, but paying out $12,000 in rent. $12,500 income - $12,000 rent = $500 So you would be $500 better off in the coming year as a renter. It all depends are your numbers though.
Also people think RE is a great investment, but on the average over the long haul it performs badly compared to stocks and or bonds. Obviously there are areas better then others.
We are getting closer to where i am looking forward to a buy, but when you look at fundamentals it still is way out of wack.

[bigq]

Yeah dude.. They are not making any more beach property. I looked at the foreclosure market in Malibu there were like 10, La Jolla has more.
.
Apparently they can't sell anymore either:confused:
I hear the same thing about land in Havasu " they aren't making anymore land"..uh have you seen the inventory of lots below 100k now?

[Legal Chemistry]

I've gone through the same equation as well another dimension to add: that 150k you're putting down can be making you money in a cd, saving, mutual, money market... etc.
personally pride of ownership has the best of me, maybe not the financially best though.

[Magic34]

The big thing today is are you able to make a move with cash when the deal is right?
If you have a lot of cash, and cant go get a killer deal on something, do a 6 month lease as I said in the other thread. Every day, keep looking for that amazing deal that is too good to be true and if you are renting and have cash ready to go, you can make that deal which in 5 years could change your entire financial future.
There is at least 12 more months of down market time before any light starts to appear at the end of the tunnel. Some great homes at amazing prices will pop up in that time.

[YeLLowBoaT]

Something else to think about, if you own and something breaks, you fix it( or pay for it to be fixed)... you rent you just make a phone call. Last month I had to give home owners the bad news about something that is broken/wrong and its going to cost them several thousand to fix.

[CBadDad]

My divorce finaled and I cashed out of my old home in Nov '04. I paid off all of my debt and put $100K into the bank (invested at about 5%- not much but it keeps me liquid).
I decided not to buy a house. I figured if I put that money down on a $600K home, I would've had to make a mortgage payment of about $3500/month. Instead I'm renting a house for $2300/month that in '04 was worth at least $850K.
There is no way in hell that I would've made up the difference between what I'm paying for rent in tax return. Not to mention the HOA's that I am not paying and that I live in a nicer home than I could afford.
Fast forward three years and if I would've bought a home I would have lost my down payment in equity. I totally thought I would've bought a home by now, but this is working out great. By '09, I will probably be able to afford to buy this house (or it's equivalent).
I've mentioned this to my tax guy and he's in agreement.
Finally, it is hard as hell to live in somebody elses home. There are a lot of things I'd like to do to it, but like some one else already mentioned, when the dish washer took a dump, I just made a phone call and got a new one in a couple of days. :D

[SB]

My divorce finaled and I cashed out of my old home in Nov '04. I paid off all of my debt and put $100K into the bank (invested at about 5%- not much but it keeps me liquid).
I decided not to buy a house. I figured if I put that money down on a $600K home, I would've had to make a mortgage payment of about $3500/month. Instead I'm renting a house for $2300/month that in '04 was worth at least $850K.
There is no way in hell that I would've made up the difference between what I'm paying for rent in tax return. Not to mention the HOA's that I am not paying and that I live in a nicer home than I could afford.
Fast forward three years and if I would've bought a home I would have lost my down payment in equity. I totally thought I would've bought a home by now, but this is working out great. By '09, I will probably be able to afford to buy this house (or it's equivalent).
I've mentioned this to my tax guy and he's in agreement.
Finally, it is hard as hell to live in somebody elses home. There are a lot of things I'd like to do to it, but like some one else already mentioned, when the dish washer took a dump, I just made a phone call and got a new one in a couple of days. :D
Yeah, look at rent cost. In my area rents are down 10-50%. Very nice to rent now while taxes and insurance are still going up while prices are still dropping.
Please don't get hypnotized by the tax deduction. The deductability of interest is already factored into the price.
If you need a place to live, and you find a place you like and can afford, go ahead and buy it. Timing the market is very tough.

[wright27]

I just went through all of these same thoughts. I decided to rent, and I might just rent for the rest of my life. :D
To buy the house I am living in, the mortgage would have been PITI $3477.00 a month. The interest was about $28,560 a year, which by my figures would give me about $8,000 back at tax time.
My rent is $2200 a month, which means I save monthly $1277.00. $15,334.00 saving for the year over owning. In my pocket $7334.00
If something breaks, it is not my problem to fix. I just make a call.

[rodnjen]

I just went through all of these same thoughts. I decided to rent, and I might just rent for the rest of my life. :D
To buy the house I am living in, the mortgage would have been PITI $3477.00 a month. The interest was about $28,560 a year, which by my figures would give me about $8,000 back at tax time.
My rent is $2200 a month, which means I save monthly $1277.00. $15,334.00 saving for the year over owning. In my pocket $7334.00
If something breaks, it is not my problem to fix. I just make a call.
Not to mention the down payment you would have had to come up with. If a person is disciplined enough to invest all or part of it and max out 401k's and the like, then you would be in very nice shape.